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The Rise of Tier-2 Cities in Commercial Real Estate

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For decades, when people thought about commercial property in India, their minds immediately went to the big four: Bengaluru, Mumbai, Delhi-NCR, and Hyderabad. But the dynamics of the commercial real estate market are shifting. Tier-2 cities such as Indore, Coimbatore, Lucknow, Bhubaneswar, and Jaipur are emerging as serious contenders, attracting both occupiers and investors alike.

This transformation is not a passing trend — it’s rooted in economic rationale, infrastructure upgrades, and a growing appetite for office space in Tier-2 cities.


Why Are Companies Shifting Towards Tier-2 Cities?

1. Unmatched Cost Advantage

Rental rates in prime business districts like Bengaluru’s Outer Ring Road or Mumbai’s Bandra-Kurla Complex can soar as high as ₹130–₹280 per sq.ft/month. In contrast, cities like Indore, Lucknow, or Bhubaneswar offer modern commercial office space at just ₹35–₹60 per sq ft — a staggering 60–70% cost advantage.

For companies establishing back-end operations, development hubs, or flexible workspaces in the post-pandemic era, this real estate efficiency directly impacts their bottom line.


2. Access to Skilled Talent Without the Premium

Tier-2 cities are home to prestigious institutions like NITs, IIITs, and top private engineering colleges. These cities increasingly retain skilled graduates due to improved quality of life, lower cost of living, and better infrastructure.

This results in a win-win: companies enjoy access to a strong talent pool while avoiding the high salary and housing costs associated with metro cities, all while benefiting from higher employee retention rates.


3. Government Support and Planned Commercial Ecosystems

State governments are actively encouraging commercial real estate development through IT parks, special economic zones (SEZs), and tax incentives. Examples include:

  • Coimbatore’s TIDEL Park
  • Lucknow’s IT City and CG City
  • Bhubaneswar’s Infovalley and IT SEZ

Supportive policies, clear land titles, single-window approvals, and public-private partnership models make it easier for real estate developers in India to enter these markets with confidence.


4. Flexible Office Space Providers Are Expanding

The rise of co-working and managed office spaces has played a critical role in the commercial growth of Tier-2 cities. Leading providers like Awfis, 91Springboard, Smartworks, and MyHQ are setting up operations beyond the metros.

Their presence is a strong validation of existing demand, not just from startups but also from mid-sized IT companies and Global Capability Centres (GCCs) that are now opening satellite offices in Tier-2 locations.


Spotlight on Emerging Tier-2 Cities

1. Indore

  • India’s cleanest city for several consecutive years
  • Operational SEZs like Crystal IT Park
  • Upcoming Smart City corridors and industrial zones
  • Strong demand for commercial space for rent in Indore

2. Lucknow

  • Home to IT City and CG City with integrated commercial zones
  • Metro rail and expressway connectivity fueling growth
  • Institutional interest from private equity and REITs

3. Coimbatore

  • TIDEL Park and KGISL IT SEZ attracting tech occupiers
  • Strong industrial legacy means consistent SME leasing
  • High rental yields due to low capital investment

4. Jaipur

  • Mahindra World City: A large integrated business zone housing IT and manufacturing companies
  • Proximity to Delhi NCR via Delhi-Mumbai Industrial Corridor (DMIC)
  • International airport and expressway connectivity
  • Government support through RIICO (Rajasthan Industrial Development Corporation)
  • Increasing demand for office space in Jaipur across IT, education, and tourism sectors

5. Bhubaneswar

  • Home to InfoValley and other IT SEZ projects
  • Ranked among the top cities for ease of doing business
  • Part of India’s Smart City initiative with robust civic planning


Conclusion

India’s commercial real estate landscape is expanding — and fast. As Tier-1 cities become saturated and expensive, Tier-2 cities are becoming the new growth frontiers for occupiers, developers, and investors.

These cities are no longer Plan B. For many, they are Plan A.

At The Office Address, we’re already witnessing a noticeable shift in demand, with companies increasingly asking, “What’s next?” More often than not, the answer lies in Tier-2 commercial real estate markets.