Over the next five years, these cities are expected to witness the addition of more than 25 million sq. ft. of new retail space, driven by increasing consumer demand, evolving shopping preferences, and the expansion of national and international brands.
The Changing Dynamics of Retail in Emerging Cities
For years, metro cities dominated the organized retail sector, but rising real estate costs, saturation of retail spaces, and evolving urbanization trends have shifted the focus towards smaller cities. These markets now present enormous opportunities due to:
- Rising disposable incomes: The aspirational middle-class in Tier-2 and Tier-3 cities now has greater spending power, fueling demand for branded shopping experiences.
- Growing appetite for organized retail: Consumers in these cities are moving away from traditional shopping formats towards modern malls that offer a mix of retail, entertainment, and dining.
- Expanding infrastructure and connectivity: Improved road networks, metro expansions, and better urban planning have made these cities more attractive for retail investments.
Retail Expansion Across Regions
As developers tap into this demand, retail growth in smaller cities is unfolding at an unprecedented pace. Some key markets witnessing a surge in organized retail developments include:
- Northern India: Cities like Ludhiana, Jaipur, and Lucknow are leading retail expansion, offering large-scale shopping destinations that cater to both local consumers and nearby satellite towns.
- Southern India: Retail hubs are developing rapidly in Coimbatore, Thrissur, and Trivandrum, fueled by a mix of local and national retailers.
- Western India: Cities like Ahmedabad, Surat, and Goa are attracting premium retail developments, offering high-end shopping experiences for aspirational consumers.
- Eastern India: Guwahati is emerging as a retail hotspot, leading new mall developments in the region.
Large-Scale Malls: A Game Changer for Small Cities
Unlike in the past, where smaller cities had limited access to large, well-planned retail spaces, upcoming developments are introducing malls with an average gross leasable area of approximately 375,000 sq. ft., with some projects exceeding 1 million sq. ft. These large-scale developments are redefining the retail landscape by:
- Attracting international brands looking to enter high-growth, underserved markets.
- Introducing experiential retail, blending shopping with entertainment zones, food courts, and leisure spaces.
- Offering better tenant mixes, with a combination of fashion, electronics, grocery, and lifestyle brands under one roof.
Retailers’ Growing Confidence in Emerging Markets
With the rise of modern retail spaces in these cities, premium and bridge-to-luxury brands are expanding beyond metros. Several global brands have already launched their first Indian outlets in these locations, reflecting the increasing confidence in these untapped markets.
Additionally, developers are now focusing on strategic land acquisitions in prime city locations to construct large-scale retail destinations. Many of these projects are part of mixed-use developments, integrating retail, offices, hospitality, and entertainment under one roof.
Institutional Investments Fueling Retail Growth
Apart from developers, institutional investors are also shifting their focus towards Tier-2 and Tier-3 cities. While metro cities remain key investment hubs, a substantial portion of retail investments is now directed towards emerging urban centers.
Today, over 30% of institutional retail assets are located in smaller cities like Amritsar, Chandigarh, Ludhiana, Surat, Indore, Mysuru, and Bhubaneswar. This trend reflects the growing recognition of the long-term potential of these markets.
The Future of Retail in Smaller Cities
With robust economic growth, increasing urbanization, and changing consumer preferences, Tier-2 and Tier-3 cities are set to drive the next phase of India’s retail expansion. The lower real estate costs, rising aspirations, and availability of larger retail spaces provide the perfect environment for retailers and developers to thrive.
As these cities continue to evolve, they are no longer just secondary markets—they are becoming major retail destinations in their own right. The resurgence of malls in these cities marks the beginning of a new era in India's retail growth, one that is driven by inclusivity, accessibility, and innovation.
