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Business News/ Companies / Large retailers rush to tier-II markets to tap consumers
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Large retailers rush to tier-II markets to tap consumers

Over 30 major domestic and international retail brands entered 14 tier-II cities between January and September last year

Several domestic and international retail brands, including Croma, Armani Exchange, Malabar Gold & Diamonds, Reliance Smart, Tanishq, H&M, Marks & Spencer, GAP, Starbucks, Pizza Express, Under Armour, expanded their retail footprint in tier-II cities. REUTERSPremium
Several domestic and international retail brands, including Croma, Armani Exchange, Malabar Gold & Diamonds, Reliance Smart, Tanishq, H&M, Marks & Spencer, GAP, Starbucks, Pizza Express, Under Armour, expanded their retail footprint in tier-II cities. REUTERS

Greater reach of e-commerce as well as growing aspirations and a surge in discretionary spends are driving up demand for retail spaces in tier-II cities in the country. According to a report released by real estate consulting firm CBRE, over 30 major domestic and international retail brands entered 14 tier-II cities between January and September last year, highlighting the growing appeal of large non-metros among organized retailers.

These 14 cities include Chandigarh, Jaipur, Indore, Goa, Mangalore, Kochi, Lucknow, Patna, Ranchi, Guwahati, Bhubaneshwar, Vizag, Mysore, and Coimbatore.

The total retail space supply recorded in these 14 cities stood at 2.4 mn sqft during the January to September period leading with cities such as Chandigarh, Jaipur and Lucknow. Meanwhile, total retail absorption of spaces across the 14 cities led by Kochi, Jaipur, and Goa. Absorption rate is the rate at which retail spaces are sold during a set time. 

As per the report, several domestic and international retail brands, including Croma, Armani Exchange, Malabar Gold & Diamonds, Reliance Smart, Tanishq, H&M, Marks & Spencer, GAP, Starbucks, Pizza Express, Under Armour, expanded their retail footprint in these cities.

The total retail stock in these 14 cities stood at 29 million square feet as of September 2023, with Jaipur, Lucknow, and Chandigarh each boasting retail stock ranging between 3 and 7 mn sqft, according to the report.

Anshuman Magazine, chairman & CEO, India, Southeast Asia, Middle East and Africa, CBRE, said a combination of greater reach of e-commerce as well as growing aspirations and a surge in discretionary spends is driving up demand for retail spaces in these markets.

“Investment-grade developers are setting up large-sized contemporary malls in these cities, which are seen as an entertainment destination and not just as a place to shop. Most non-metro cities are established trade and business hubs and are now witnessing multinational corporations and startups setting up offices as well. Growing population in tier-II cities are further propelling demand for a diverse range of retail offerings," he said.

“Tier-II cities have recorded a massive surge in retail developments over the last three years. India’s first retail REIT has encouraged developers to aggregate and upgrade their existing facilities, apart from developing new malls. Moreover, domestic and international fashion brands are looking to expand in non-metro cities, fuelled by a well-aware and well-travelled consumer set," said Ram Chandnani, managing director, advisory & transactions services, CBRE India.

Cities like Chandigarh, Jaipur, Goa, Indore, Lucknow have seen an influx of retail development over the last few years.

“Owing to the presence of an affluent consumer base, well-planned infrastructure, economic growth, tourism, and the presence of domestic and international retail brands, Chandigarh has grown to become a prominent retail market in Punjab. Chandigarh, alongside its sister cities, Mohali, Panchkula, and Zirakpur, has emerged as a prominent retail destination, offering a thriving market for growth and development," it said. 

The city already hosts brands such as Zara, Uniqlo, Lifestyle, Shoppers Stop, Marks & Spencer, The Collective, Nike, Adidas, Skechers, Puma, Frontier Raas, Taco Bell, Ritu Kumar among others.

Meanwhile, lower operating costs, a good talent pool, and proximity to Delhi-NCR have aided Jaipur’s retail development. The Lucknow retail real estate market, on the other hand, is witnessing robust growth driven by several factors, such as rapid urbanization and a growing middle class, increasing consumer spending, the emergence of new shopping malls and high-street retail formats and expansion of domestic and international retail brands.

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ABOUT THE AUTHOR
Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 16 Jan 2024, 05:14 PM IST
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