Tier II cities dominating retail sector growth in India: Knight Frank India

Tier II cities are dominating the growth in India’s retail sector, with Lucknow capturing an 18.4 per cent share of the gross leasable area, as reported by property consultancy firm Knight Frank India.

According to the report, the rise of Tier II cities as retail hubs is being driven by factors such as economic growth, increased employment opportunities, rising disposable incomes, and the expanding reach of e-commerce into smaller markets. Consequently, these cities are becoming significant growth catalysts for the real estate sector, attracting investments and development projects. In addition to Lucknow, other Tier II cities making substantial contributions to the shopping centre inventory include Kochi, Jaipur, Indore, and Kozhikode.

Shishir Baijal, Chairman and MD, Knight Frank India, notes, a fascinating amalgamation of factors, India’s retail landscape is shaped by its vast population, strides in digital literacy, and economic expansion. These elements converge to propel the growth of the retail sector, with particular emphasis on the evolution of retail spaces into multifaceted hubs of commerce and entertainment.

The report further notes, the development trajectory of shopping centers in Tier II cities differs from that in Tier II markets as shopping centers in Tier II cities began emerging only in the early 2000s, resulting in lower number of shopping centers than in Tier I cities.

Although 16 Tier II cities still have shopping centers smaller than 0.1 million sq m, five Tier II cities now boast shopping centers exceeding this size. This trend indicates a move towards larger and more robust retail infrastructures in Tier II cities, reflecting the sector’s next phase of growth in India.

Marked by trends such as revenge shopping, influencer marketing and Generation Z-focused strategies, India’s retail landscape has undergone significant transformations in recent years. These trends have reshaped the brick-and-mortar shopping experience, creating unique and immersive environments for consumers.

Despite the challenges posed by the pandemic, the retail sector is emerging stronger, characterised by a diverse landscape and a widespread geographic presence of brick-and-mortar stores across the country.