MUMBAI: Tier-III cities are emerging as attractive destinations for retail real estate primarily due to development of infrastructure and increasing purchasing power of consumers in these markets, according to property consultant Jones Lang LaSalle (JLL).
Cities like Ahmedabad, Chandigarh, Surat, Amritsar, Vadodara, Nagpur, Coimbatore, Lucknow, Jaipur, Ludhiana, Kanpur and Raipur are emerging as high potential markets for retail development.
“High immigration, excellent infrastructure, increasing per capita income and propensity to consume are key drivers for high market potential in the Tier III cities. Besides, growing office market is another important factor for retail development in such markets,” the report said.
According to JLL, while Ahmedabad, Chandigarh and Surat have already emerged as high potential markets, cities such as Kanpur and Raipur are slowly moving up in their market potential and retail maturity index.
“While leading cities of Mumbai, Delhi and Bangalore have the highest level of market potential and retail maturity; rising income, consumption and infrastructure scenario in other cities make Tier III cities high potential markets for retailers and developers in future,” JLL Managing Director – Retail Services Shubhranshu Pani said.
Cities like Mumbai and Delhi have witnessed an influx of big-box, fast-fashion and high-end retailers, it said.
Other leading cities such as Bangalore, Pune and Chennai have seen reasonably good absorption of retail spaces on the back of high consumerism supported by strengthening IT-ITeS sector and the strong auto, manufacturing and biotech sectors.
“Improvement in infrastructure, city expansion and the right supply of retail malls have been primary reasons for growth over the recent past,” the report said.
Chandigarh, Kochi and Nagpur have levels of real estate transparency similar to Tier I and II cities.
The growth of the office markets across Tier III cities is being driven by cost advantages in real estate and labor.
While these cities may have robust and diverse economies, the charge in the commercial real estate market is often led by domestic IT & ITES companies which have already moved en masse into Tier III cities such as Chandigarh, Jaipur, Ahmedabad, Kochi and Thiruvananthapuram. With affordability and talent pools high on the agenda, many southern cities such as Coimbatore, Kochi, Thiruvananthapuram, Mysore and Mangalore, as well as Ahmedabad, Jaipur and Chandigarh are attracting attention.-PTI
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