Retailers, mall developers eye growth beyond metro cities, says report

With an increasing focus on the expansion of metro, rail & road networks, airports and developing commercial clusters, most tier-II cities have recorded a growing presence of domestic as well as global brands across various categories.

Retailers and mall developers are looking to leverage the buying power of the increasing populace in tier-II cities as these cities are poised to be the new growth vectors in India in the coming years as these cities are large talent bases, said CBRE report.

According to the survey, most tier-II cities have established high-street locations with a few having emerging ones. Moreover, the 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.  

The survey was conducted across 10 key tier-II cities. The key cities were Chandigarh, Jaipur, Ahmedabad, Kochi, Thiruvananthapuram, Lucknow, Indore, Bhubaneshwar, Visakhapatnam, and Coimbatore.

Business clusters across tier-II cities offer a mix of non-Special Economic Zones(non SEZ) and SEZ establishments with average quoted rentals ranging from as low as Rs 30-40 per sq ft per month to about Rs 60-80 per sq ft per month.

Chandigarh has enabled growth in two adjacent satellite cities - Mohali and Panchkula, which are collectively known as ‘Tricity’. Average rentals in Chandigarh start from Rs 100-200 per sq ft per month for MC and Rs 100-150 per sq ft per month for HS, said the report. The micro-market in the city also houses Dhillon Plaza - an organised retail high street that includes athleisure, hypermarkets, multiplex, fashion & apparel brands, along with drive-through QSR formats.

However average rentals in some of the micro-markets in Jaipur start from Rs 175-250 per sq ft per month for MC and Rs 150-250 per sq ft per month for HS. Key brands present in the city include Zara, FabIndia, Shopper Stop, Mother Care, Marks & Spencer, Starbucks, Mango, Forest Essentials, etc.

Growing internet usage has whetted the appetite for quality products in these cities and has given a fillip to e-commerce too.

The report finds that 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, said the report.

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 report said.

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 and smaller cities and this is evidenced by the entry and expansion of flex operators and the increasing footprint of industrial establishments.” 

He also said that the growing urban sprawl is likely to spread beyond tier-I cities and for this, the government started undertaking measures to plug in the prevailing infrastructure and business gaps that would boost the development of these cities. 

“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.” said  Ram Chandnani, managing director, Advisory & Transactions Services, CBRE India.

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, Chandnani said. 

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.