In view of the declining demand in metros, mall developers are now looking for business in smaller cities. They are looking to capitalize on the growing consumption in the emerging Tier-II, III and IV sectors. Be it Ahmedabad, Surat, Chandigarh, Jaipur, Coimbatore, Tirur, Perinthalmanna or many other centers like Varanasi, Gorakhpur, Vijayawada, Amravati and Kanpur, in the coming times, glittering malls of big brands will be seen in them.
Companies like Lulu Shopping Malls, Nexus Select Trust, Phoenix Mall, Brigade Group are eyeing such malls in medium cities which are not able to do business properly. These companies are planning to re-develop them and introduce them in the market according to the new era.
Industry experts have cited the change in consumption along with many other reasons as the reason behind the rapidly increasing trend of mall developers towards smaller cities. Currently, local developers in Tier-II and III cities are building small malls, often on family-owned land, or by expanding into the retail sector. These goods are either not meeting the changing consumer preferences or are not able to meet the needs. To take advantage of this, big companies associated with this industry are entering these cities with aggressive strategies.
Saurabh Shatdal, managing director (capital markets and head-retail India), Cushman & Wakefield, said, ‘Big malls are being built in tier II and III cities. “Social and consumer preference changes such as rising income levels, improving urban infrastructure and aspirational consumption behavior in these markets are creating space for mega malls.” A major reason for big mall companies to bet on small cities is the availability of land at competitive rates, lack of premium malls and increasing demand for domestic and international retail brands.
How big companies are implementing aggressive expansion plans can be gauged from the fact that K Raheja is planning to build a 6,00,000 square feet mall in Vizag. Similarly, Phoenix Mills has acquired 7.22 acres of land to develop a 10 lakh square feet mall in Surat. Apart from this, Lulu Group is going to launch Lulu Mall in Lucknow, Ahmedabad, Vizag and many cities of Uttar Pradesh. Lulu Group is focusing on building smaller-format malls completely tailored to local needs.
Shibu Phillips, director of Lulu, said, ‘We recognized the potential of small markets early on. The company launched its first mini mall in Thrissur, Kerala in 2019. Taking it forward based on its success, we are going to open similar malls in Tirur and Perinthalmanna by the end of 2025. Apart from this, mini malls are also being expanded in small cities in Uttar Pradesh. In the coming time, their mini malls will be seen in Varanasi, Gorakhpur, Vijayawada, Amravati and Kanpur. Brigade Group, which already operates malls in Mysuru, Kochi and Thiruvananthapuram, is also chalking out expansion plans beyond metros.
Sunil Munshi, senior vice-president (retail), Brigade Group, said, ‘Relatively small cities are currently experiencing growth and urbanization. This is the reason why it has emerged as a very attractive center for developers like us.
Anuj Kejriwal, MD and CEO (Retail), Anarock India, lists many more reasons for the expansion of the mall. “Local developers are building smaller malls, while brands like Nexus and Phoenix are entering the market in smaller cities with larger malls ranging from 8,00,000 to 20 lakh square feet in area,” he said. This disturbs the local retail market scenario.
The government’s Household Consumer Expenditure Survey 2023-24 shows an increase in discretionary spending. Demand for durable goods, packaged food and entertainment is increasing in the market. By giving tax relief to the middle class in the Union Budget 2025-26, savings or disposable income is increasing in small and medium cities. Its direct effect is visible in the form of increase in consumption. Due to increase in demand and infrastructure development, emerging cities and markets are becoming preferred destinations for mall developers.
Blackstone-backed Nexus Select Trust, which operates 10.4 million square feet of retail space in 18 malls across the country including Select City Mall in Delhi, expects small and medium cities to grow at a faster pace than big cities in the times to come. The company’s COO Jayan Nayak said, ‘Malls in tier II and III cities may see a growth of around 12 to 14 per cent year-on-year, while in bigger cities the growth has stagnated and is currently in single digits.’
He said that the company is looking for such Grade-A malls which can also be developed afresh. Apart from this, it can be made a center of retail investment for the surrounding areas of 30 to 50 kilometers.
First Published – April 14, 2025 | 10:31 PM IST
