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Tier-II cities fast emerging as growth frontier in office and retail sector: CBRE

October 19, 2022: CBRE South Asia Pvt. Ltd, on Wednesday announced the findings of its latest report, ‘Tier-II cities: Coming of Age’. The report has been based on the analysis of 10 key cities, viz. Chandigarh, Jaipur, Ahmedabad, Kochi, Thiruvananthapuram, Lucknow, Indore, Bhubaneshwar, Vishakhapatnam, and Coimbatore. 

As per the latest CBRE research report, tier-II cities would continue to play a vital role in the country’s growth story. The report highlighted that these cities are poised to be the new growth vectors in India in the coming years – driven by their progress in the real estate landscape, work environment, quality of life, and sustainability. These cities are large talent bases, taking offices closer to talent holds the potential to be alternative centers of growth, fueling innovation and growth for office occupiers. Hence, it is increasingly critical for these cities to sustain the current pace of infrastructure development and strengthen skill development.

The widening economic base and access to a skilled talent pool are prime influencing factors for occupiers to consider expanding in tier-II cities. The various business clusters across tier-II cities offer a mix of non-SEZ and SEZ establishments with average quoted rentals ranging from as low as INR 30-40 / sq. ft. / month to about INR 60-80 / sq. ft. / month. Most cities have also recorded a growing presence of flexible space operators, industrial hubs and malls.  According to the report, the quality of life in these cities is well supported by the relatively affordable cost of living compared to tier-I cities, along with an increasing presence of healthcare facilities and educational institutions. There is also rising investor interest over recent years, with various plans announced by domestic and global firms to establish their footprint in these markets.

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “The implementation of focused policy reforms and strategic infrastructure initiatives by the state/central government has resulted in consumer preference leaning towards suburbs / smaller cities. This is evidenced by the entry and expansion of flex operators and the increasing footprint of industrial establishments. 

The growing urban sprawl is likely to spread beyond tier-I cities, so that tier-II cities take on the mantle of the future. Recognizing this need, the government started undertaking measures to plug in the prevailing infrastructure/business gaps that would boost the development of these cities.”

Ram Chandnani​, Managing Director, Advisory & Transactions Services, CBRE India, said, “Major tier-II cities are key to the imminent real estate boom, now boast of flourishing central and secondary business districts, with some even having established peripheral business clusters. Prominent developers are now making a beeline for these cities, propelled by demand from domestic and global corporates, flexible space providers, start-ups, ed technology firms, etc.”​

Office Market in top tier-II cities: 


Increasing number of firms aim to tap more talent and benefit from the infrastructural advantages of these locations. 

  • According to the report, the location agnosticism of talent opened a world of opportunities for both global/domestic corporates, as they were no longer constrained by geographical limits. Now that corporates are looking for their workforce to return to work, many of them are also venturing into these tier-II cities to be in proximity to the talent. While tier-I cities would continue to remain the most preferred choice currently for office occupiers, in the medium- to long-term, CBRE expects a rise in office space take-up in tier-II cities as well.
  • Occupiers are further encouraged by the quality infrastructure as well as affordable land cost and operations in these locations. While some are leasing space to set up their operations, others also opt for the flexible space route. Chandigarh, Jaipur, Kochi, Ahmedabad, Lucknow, and Indore have more than five flex operators as of H1 2022, while Bhubaneshwar, Visakhapatnam and Thiruvananthapuram and Coimbatore have 2-5 flex operators in the city.  
  • Chandigarh, Kochi, Thiruvananthapuram, and Ahmedabad are cities with relatively higher stock as of H1 2022, while cities such as Jaipur, Coimbatore, and Indore have seen a relatively higher spurt in activity in the past six months, both in development completions as well as space take-up. 
  • CBRE’s ‘Cost of Living Index – 2022’ indicates cities such as Kochi and Coimbatore are much more affordable than others. On ‘Health & Wellbeing’ and ‘Education Quality’, most cities either emerged as ‘Front runners’ or ‘Performers’. 
  • Innovation and resilient infrastructure are key drivers of economic development. The report highlights cities such as Ahmedabad, Bhubaneswar, Visakhapatnam, and Coimbatore are ‘front runners’ on this front and most others are ‘aspirants’. A few cities are catching up on ‘Decent Work & Economic Growth’, indicating that heightened focus on job creation would be required in the coming years.
  • Sustainability and climate action have globally become social mores in business circles. The report highlights cities such as Coimbatore, Visakhapatnam, Thiruvananthapuram, Indore, and Chandigarh to be relatively more sustainable. 

Retail Market in top Tier-II cities: 

Most tier-II cities have recorded a growing presence of domestic as well as global brands across various categories

  • With an increasing focus on the expansion of metro, rail & road networks, airports and developing commercial clusters, the residential sector too is booming in these cities as the dream of owning a house, is now becoming a reality in these locations. As a result, retailers and mall developers are looking to leverage the buying power of the increasing populace in these cities. Growing internet usage has whetted the appetite for quality products in these areas, thus giving a fillip to e-commerce too.
  • Most tier-II cities have established high-street locations with a few having emerging ones as well. Well surrounded by residential catchments, these shopping destinations cater to a wide audience providing a diverse mix of brands across athleisure, fashion & apparel, F&B, department stores, hypermarkets, fine dining restaurants, car showrooms and electronics.
  • Each of these cities also houses malls by some key developers with a varied presence of brands across different categories. The central business district across these cities and their peripheral locations is the most preferred choice for these developments.

Chandigarh: Chandigarh has also enabled growth in two adjacent satellite cities – Mohali and Panchkula, which are collectively known as ‘Tricity’.

  • Nexus Elante Mall, one of the leading malls in Chandigarh houses several prominent global and domestic brands
  • Key micro-markets of Chandigarh are located at Sector 17 and 35 – Madhya Marg in Chandigarh, Phase 3B – 2, Sector 82, Sector 70, Phase 7 in Mohali and Sector 8, Sector 9 and Sector 20 in Panchkula. The Ambala – Chandigarh Expressway, VIP Road in Zirakpur too is emerging as a micro-market wherein, Cosmo Mall, well-known for its factory outlet stores is located. The micro-market also houses Dhillon Plaza – an organised retail high street that includes athleisure, hypermarkets, multiplex, fashion & apparel brands, along with drive-through QSR formats
  • Average rentals start from INR 100-200 / sq. ft. / month for mall clusters (MC) and INR 100-150 / sq. ft. / month for high street (HS)

Jaipur: A gateway of tourism in Rajasthan, it is a part of the ‘Golden Triangle Tourist Circuit’, along with Delhi-NCR and Agra.

  • Key retail micro markets in Jaipur include Malviya Nagar, C-Scheme, M.I. Road and Vaishali Nagar. 
  • Average rentals in some of these micro-markets start from INR 175-250 / sq. ft. / month for MC and INR 150-250 / sq. ft. / month for HS
  • Key brands present in the city include Zara, FabIndia, Shopper Stop, Mother Care, Marks & Spencer, Starbucks, Mango, Forest Essentials, etc. 
  • Key malls in the city are World Trade Park Mall and Triton Mall
  • In February 2022, launched a jewellery manufacturing unit in Jaipur with a capacity to process over 250 kilograms of gold per month
  • In December 2021, Biba opened its 300th store in the country in Jaipur

Lucknow: known as the ‘City of Nawabs’, it is an important center of governance, administration, education, commerce, culture, tourism, music and poetry in North India.

  • Key retail micro markets in Lucknow are Gomti Nagar, Hazratganj and Ashiyana & Alambagh
  • Average rentals in these micro markets start from INR 90-150 / sq. ft. / month for MC and INR 90-110 / sq. ft. / month for HS
  • Key brands present in the city include Uniqlo, Decathlon, Lulu Hyper, Shopper Stop, Spencer, PVR, The White Crow, Skechers, Nike, Croma, etc. 
  • In July 2022, Lulu Group opened its first mall in North India in Lucknow

Coimbatore: The city is well-known as the ‘Manchester of South India’ due to the significant presence of cotton and textile industries. It is also referred to as the ‘Pump City of India’ as it contributes to nearly half of India’s requirements of motors and pumps. 

  • Key retail micro-markets in the city are Central Coimbatore: Peelamedu, RS Puram, Cross Cut Road: Peelamedu, Saravanapatti, West Coimbatore and Thudiyalur – Metupalayam Road
  • Average rentals in these micro markets start from INR 140-160 / sq. ft. / month for MC and INR 90-110 / sq. ft. / month for HS
  • Owing to the presence of several tech companies in West Coimbatore, the zone of Avinashi Road and Peelamedu houses many F&B outlets along with fashion & apparel brands
  • Thudiyalur is an emerging high street in the city which primarily houses fashion & apparel players

Kochi: The city includes areas of Fort Kochi, Mattancherry, mainland Ernakulam, the suburbs in the north-east (Edapally, Kalamassery and Kakkanad) and Tripunithura in the south-east. It is the second largest urban agglomeration in Kerala and a key commercial destination.

  • Key retail micro-markets in the city are M G Road, Marine Drive, Vytilla Bypass and Kakkanad
  • Broadway – a prime high street is located at Marine Drive
  • Average rentals in these micro markets start from INR 200-300 / sq. ft. / month for MC and INR 80-100 / sq. ft. / month for HS
  • Key brands present in the city include Cinepolis, Tanishq, Kalyan Jewellers, Malabar Gold, Raymond, McDonalds Allen Solly, Pothys, Seemati, etc. and key malls are Lulu Mall and Oberon Mall

Thiruvananthapuram: Located at the southern end of the state’s coastal line, it is popularly known as ‘The Evergreen City of India’. The city is a key hub for ayurvedic research in the country and well known for its educational institutions, information technology firms, mineral-based industries, commerce and tourism.

  • Key retail micro-markets in the city are MG Road, Pattom Kesavadasapuram and Trivandrum Bypass
  • Mall of Travancore and Lulu Mall are the key prominent malls in the city
  • Average rentals in these micro markets start from INR 250-350 / sq. ft. / month for MC and INR 80-100 / sq. ft. / month for HS
  • Key brands present in the city include Shoppers Stop, Carnival Cinema, Pizza Hut, KFC, Domino’s, Reliance Trends, Max, etc. 

Visakhapatnam: A key administrative centre and a commercial hub, the city is well-known for heavy industries, shipbuilding and fishing.

  • Key retail micro-markets in the city are Central, South and North Vizag
  • Central Vizag houses few prominent high streets and is dominated by fashion & apparel brands
  • Average rentals for HS start from INR 100-120 / sq. ft. / month
  • Key brands in the city include Westside, Shoppers Stop, Pantaloons, BlueStone, Superdry, Tommy Hilfiger, Puma, Nike, Levi’s, Croma, Lifestyle, Zudio, Raymond etc. 
  • In July 2022, K Raheja Corp leased 17 acres of land at Saligramapuram to set up a new mall in Visakhapatnam; the lease agreement was signed with the port authorities for INR 125 crore

Ahmedabad: Known for its excellent infrastructure and favorable policy environment – the city has attracted investments across pharmaceuticals, textiles, automobile, and technology sectors. 

  • Key retail micro-markets in the city are Central, East, West and North Ahmedabad
  • Central Ahmedabad – Navrangpura, Vastrapur, has prominent high streets in Gujarat, well-known for ethnic fashion & apparel players
  • Key brands in the city include Tanishq, Manyavar, Jade Blue, Fabindia, Bestsellers, Nike, Puma, Adidas, Decathlon, Aditya Birla Brands, Marks & Spencer, H&M, Lifestyle, Shoppers Stop, Westside, Cinepolis, Fun City, Aldo, Charles & Keith, Rolex, Sephora, Armani exchange, etc. 
  • Average rentals start from INR 200-300 / sq. ft. / month for MC and INR 150-200 / sq. ft. / month for HS
  • In June 2022, Phoenix Mills announced plans to open its new mall Phoenix Palladium in Ahmedabad before the end of the year. Similarly, Lulu Group announced plans to expand its mall portfolio in India by setting up a new mall in Ahmedabad.

Indore: The city is one of the first 25 cities to be developed under the central government’s ‘Smart City Mission

  • Key retail micro-markets include AB Road, Central Indore and Sapna Sangeeta
  • Key brands present in the city are Westside, Pantaloons, The White Crow, Bluestone, Tanishq, Tasva, Farzi Café, H&M, Fab India, Starbucks, Croma, Zudio, Inox, hamleys, MORE, etc. 
  • Average rentals start from INR 100 – 200 / sq. ft. / month for MC and INR 100 – 200 / sq. ft. / month for HS
  • In April 2022, Aditya Birla Fashion’s TASVA launched its maiden brand outlet in Indore

Bhubaneswar: Well-known as ‘Temple City of India, the city is also emerging as an IT and education hub in eastern India over last few years. 

  • Key retail micro-markets in the city are Central: Janpath Road, East: Cuttack Puri Road – Rasulgarh, NH 5, West: Patrapada, North: Patia Road and South: Kalpana Square
  • Key brands present in the city are Pantaloons, Westside, H&M, Tanishq, Carat Lane, Kalyan Jewellers, Malabar Gold, Joyalukkas, Inox, KFC, MP Jewellers, Khimji Jewellers, etc.
  • Average rentals start from INR 100-250 / sq. ft. / month for MC and INR 150-200 / sq. ft. / month for HS
  • In April 2022, Big Basket announced its expansion plans in Bhubaneswar. The company has declared plans to increase its revenue from INR 1.6 crore per month until Q1 2022 to INR 5 crore per month by end of 20221