Tier 2 cities becoming growth drivers of retail in India

New Delhi [India], May 12 : India's Tier 2 cities are emerging as key players in the country's retail sector, with Lucknow particularly standing out, commanding an 18.4 per cent share of gross leasable area, according to a report by Knight Frank India, a property consultancy firm.

The report highlights that the growth of Tier 2 cities as retail hubs is fueled by factors like economic growth, employment opportunities, rising disposable incomes, and the increasing reach of e-commerce to smaller markets. As a result, these cities are becoming crucial growth drivers for the real estate sector, attracting investments and development projects.

Apart from Lucknow, other Tier 2 cities that significantly contributed to the shopping centre stock were Kochi, Jaipur, Indore, and Kozhikode.

"India's retail landscape is a fascinating amalgamation of factors, 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," said Shishir Baijal, Chairman and MD of Knight Frank India.

However, the report states that the development of shopping centers in Tier 2 cities has followed a different trajectory compared to Tier 1 markets. While Tier 1 cities saw the establishment of shopping centers as early as the 1990s, Tier 2 cities witnessed their emergence only in the early 2000s. Consequently, many Tier 2 cities are populated with relatively smaller shopping centers.

Despite this, there are signs of growth and progress. While 16 Tier 2 cities still have shopping centers sized below 0.1 million square meters, only 5 Tier 2 cities have centers exceeding this threshold. This indicates a shift towards larger and more robust retail infrastructure in Tier 2 cities, reflecting the sector's next phase of growth in India.

In recent years, the retail landscape in India has undergone significant transformations, marked by trends like revenge shopping, influencer marketing, and Generation Z-focused strategies. These trends have reshaped brick-and-mortar shopping experiences, creating unique and immersive environments for consumers.

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

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