Tier-2 Cities To Drive Massive Growth In Indian Retail Sector: Report

India's tier 2 cities are emerging as key players in the country's retail sector, with Lucknow commanding an 18.4 per cent share of gross leasable area, according to a report by Knight Frank India.

The report highlights that the growth of tier 2 cities as retail hubs is fuelled by factors like economic growth, employment opportunities, rising disposable incomes and the increasing reach of ecommerce 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 have 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, Knight Frank India.

The report notes that the development of shopping centres in tier 2 cities has followed a different trajectory compared to tier one markets. Tier one cities saw the establishment of shopping centres in the 1990s while tier two cities witnessed their emergence only in the early 2000s. Consequently, many tier 2 cities are populated with relatively smaller shopping centres.

While 16 tier 2 cities still have shopping centres sized below 0.1 million square meters, only five tier 2 cities have centres exceeding this threshold. This indicates a shift towards larger and retail infrastructure in tier 2 cities.

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.