Retail real estate tier II and III cities see higher investment than tier I metro cities; see reason why

Published On: 02, Dec 2017 | Source:

The retail real estate sector in tier-II and tier-III cities has witnessed higher investment of $6,192 million between 2006 and 2017, compared with $1,295 million garnered by tier-I metro cities during the same period, a joint report by CII and JLL India said. “Factors like lack of available space in retail malls in metro cities, increasing lease rentals in metro malls, and high land prices in tier-I cities have made it difficult for retailers to own real estate in these cities. These factors have become a deterrent for expansion and growth of malls in big cities,” the  report said. The report identifies 20 cities including tier-II cities such as Lucknow, Jaipur, Chandigarh, Kochi, Patna, Bhubaneshwar, Indore and Nagpur as the next retail destinations in the country.

“Factors like international airport connectivity across cities such as Lucknow, Kochi, Bhubaneswar and Nagpur to name a few and rising levels of disposable income have prompted various global and local brands to plan their expansion plans in these cities,” the report said. According the report, good quality malls across cities have been performing well, whereas less superior malls are being withdrawn or converted. A total of 8.9 million square feet of mall space was withdrawn across the Delhi-NCR, Mumbai, Pune and Chennai from 2015 to September this year. The report also points out that suburban malls are fast catching up with their prime city counterparts in terms of overall performance and rental value appreciation across tier-I cities.