With expanding middle-class populations eager to engage with premium brands and modern retail formats, cities like Nagpur, Chandigarh, Lucknow, Jaipur, Udaipur, Ahmedabad, Surat, Coimbatore, Kochi, Bhubaneshwar and Indore are evolving into consumer hubs. This trend is attracting interest from shopping center developers, brands and investors alike.
two weeks ago, K Raheja CorpInorbit’s Inorbit Malls has acquired a 6.5 lakh-sq-ft commercial property in Hubballi, Karnataka, for over Rs 400 crore. The same day, Phoenix Mills won tenders for two land parcels in Mohali, Punjab, for Rs 891 million. One month before, Phoenix Mills had acquired a 9-acre plot in Coimbatore for Rs 370 crore.
“India’s Tier II and III cities have become a major area of focus for investors and developers in recent years, driven by urbanizationincreasing disposable income and changing consumer behaviors. Malls are also gaining prominence as lifestyle hubs, offering a mix of retail, entertainment and dining options,” said Rahul Arora, Head of Retail Services Advisory and Office Leasing, Senior Managing Director (Karnataka, Kerala). India, JLL.
However, he also added that the development of transportation and urban infrastructure will be crucial for the successful establishment of commercial spaces in these cities.
“Rapid urbanization has also helped smaller cities grow; We see better education and health infrastructure in these cities, with social networks that connect citizens from around the world. consumer behavior In these cities it has evolved, becoming more aspirational and looking for experiences like in metropolitan cities,” said Rajneesh Mahajan, CEO, Inorbit Malls. This change, according to him, makes these markets attractive for investment, since the latent demand is significant. However, the supply of quality retail infrastructure is limited, presenting opportunities for brands and developers to enter these markets. The company’s recent foray into the Hubballi market exemplifies this trend. Nexus Select Trust, backed by Blackstone Group, has also taken into account promising Tier II cities in its growth plan.
“Our focus for acquisitions will be to consolidate presence in 14 cities where we are already present. Then we will consider state capitals and tier II cities where consumption is showing robust growth,” Dalip Sehgal, CEO, Nexus Select Management , manager of the REIT, had told ET in an earlier interaction.
Large world-class shopping malls and prominent high streets are rapidly developing in these Tier II cities, reflecting the retail environment traditionally seen in metropolitan areas. Unlike the saturated markets of Tier I cities, Tier II regions offer the opportunity for new developments, lower land costs and a more welcoming regulatory environment.
He retail real estate The landscape is constantly evolving, with over 30% of institutional retail assets or around 9.12 million sq ft now located in India’s 12 tier II and III cities, JLL India data showed. These cities are experiencing an increase in new retail offering, with 25 million square feet of commercial developments expected to come online in the next five years.
Consumers in these regions now seek the same levels of engagement with global and national brands that their counterparts in metropolitan areas enjoy.
From luxury brands like Zara and H&M to local giants like Reliance Trends and Decathlon, many retailers are already making inroads into these emerging markets. Investors are also flocking to Tier II cities as they offer significantly higher returns compared to the overcrowded Tier I markets.
Retail real estate in these cities is relatively affordable and, with rapid urbanization, better infrastructure and better connectivity, these regions are becoming increasingly viable for the long term. retail investment.
The availability of space at a relatively lower cost allows for large-scale developments, attracting both national and international brands eager to serve this growing consumer base.
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