RetailGrowth – Tier 2 Indian Cities Drive New Wave of Retail Expansion
RetailGrowth – India’s smaller cities are steadily transforming into powerful retail destinations, with several Tier 2 urban centres now surpassing larger metropolitan regions in attracting global brands and developing premium shopping infrastructure.
A recent study by Knight Frank India revealed that many Tier 2 cities are witnessing stronger organised retail growth than some traditional Tier 1 markets. The report highlighted that these developing urban centres now offer a higher share of Grade A retail spaces, indicating better-quality shopping infrastructure and improved investor confidence.
Chandigarh Leads in Retail Performance
Among all the cities assessed, Chandigarh secured the top position in international brand penetration. Despite having a relatively modest population of nearly 1.3 million residents, the city outperformed several larger urban centres in terms of premium retail availability, consumer spending potential, and the presence of international labels.
The report pointed out that Chandigarh’s organised retail ecosystem has evolved rapidly over the past few years, making it an attractive destination for global retailers looking to expand beyond metro markets.
Mangaluru Records Highest Brand Density
Mangaluru emerged as the country’s most brand-intensive Tier 2 market. According to the findings, the coastal city has more than 102 international brand outlets for every one million residents, nearly twice the concentration seen in Chandigarh.
The growing presence of global retailers in cities like Mangaluru reflects changing consumer behaviour in smaller urban regions, where rising disposable incomes and increasing digital exposure are influencing shopping preferences.
Lucknow Shows Strong International Brand Presence
The report also identified Lucknow as the leading Tier 2 city in terms of unique international brand availability. The Uttar Pradesh capital currently hosts 112 international brands spread across approximately 5.6 million square feet of shopping centre space.
Analysts noted that Lucknow’s expanding urban population, improving infrastructure, and rising demand for premium shopping experiences have contributed significantly to its growing retail appeal.
Infrastructure Gap Limits Some Cities
While cities such as Surat, Jaipur, and Nagpur possess strong consumer markets and large populations, the report stated that the absence of sufficient Grade A retail developments remains a major challenge.
Researchers observed that these cities already have substantial consumption capacity, but the limited availability of high-quality retail spaces is slowing the entry and expansion of international brands.
Rapid Growth in Grade A Retail Space
The study evaluated 24 Tier 2 cities using several indicators, including consumption strength, retail readiness, brand diversity, and store concentration. One of the key findings showed that since 2020, Tier 2 India has added nearly 5.9 million square feet of Grade A retail space. This expansion is reportedly more than three times the retail space added across Tier 1 cities during the same period.
The data indicates a broader shift in India’s retail landscape, where smaller cities are increasingly becoming central to long-term commercial growth strategies.
American Brands Dominate Expansion
The report further stated that companies from the United States account for nearly 46 per cent of international retail stores operating in Tier 2 Indian markets. Their dominance is especially visible in the food and beverage segment, where American quick-service restaurant chains make up almost 91 per cent of international presence.
Retail groups headquartered in the United Arab Emirates also hold a significant position, contributing close to 79 per cent of the department-store footprint across these cities.
Premium Malls Changing Urban Retail Landscape
According to the study, the development of a single large institutional-grade shopping mall can significantly influence a city’s retail status. The report described this as the “marquee asset effect,” where a premium retail project measuring between 0.8 and 1 million square feet can reshape consumer activity and attract global brands.
Shishir Baijal, Chairman and Managing Director at Knight Frank India, said India is witnessing the rise of a parallel retail economy in smaller cities driven by younger consumers, higher aspirations, and stronger digital connectivity. He added that India’s retail sector continues to offer major growth opportunities as organised retail expands simultaneously across markets at different stages of development.