Occupiers are increasingly adopting decentralised expansion strategies to tap the talent pool and optimise costs. And, infrastructure upgrades, rising rentals in metros, and shifting workforce preferences are driving companies to look beyond the top-tier markets, said industry executives and consultants.
Cities such as Coimbatore, Kochi, Jaipur, Ahmedabad, Indore and Bhubaneswar are the preferred choice for realtors today.
“Office leasing in these markets has steadily increased over the last three years, with activity in FY25 almost doubling that of FY24,” said Peush Jain, managing director (MD), commercial leasing and advisory, Anarock Group. He added that operating expenditures in Tier-II cities are lower, occupiers’ earnings before interest, taxes, depreciation and amortisation (Ebitda) margins rose significantly, and leasing costs remain 30-50 per cent lower than in Tier-I markets.
Occupiers are “strategically diversifying their footprints” as Tier-II hubs emerge as large talent bases, supported by improving connectivity and relatively lower cost of living, said Anshuman Magazine, chairman and chief executive officer (CEO) for India, South-East Asia, West Asia and Africa at CBRE.
Technology companies, banking, financial services and insurance (BFSI) firms and flexible workspace operators continue to dominate demand across these markets.
According to Anarock, information technology (IT)/ IT-enabled services (ITeS) companies account for around 27 per cent of the absorption nationally and remain the largest occupiers in Tier-II locations as well, followed by flex workspace operators and consulting firms.
Global capability centres (GCCs), which account for more than 40 per cent of nationwide gross leasing, are also expanding selectively into cities such as Coimbatore, Kochi, Vizag and Jaipur.
Flex workspace operators are increasingly aligning expansion plans with enterprise occupiers’ decentralisation strategies. “The momentum across India’s Tier-II cities is real and accelerating,” said Amit Ramani, chairman and managing director, Awfis Space Solutions. The company’s Tier-II seat count has grown about 10 per cent Y-o-Y as enterprises seek geographic diversification and lower occupancy costs.
According to Vestian, a real estate consultancy firm, Tier-II cities accounted for over 575 centres and 8.8 million square feet of flex stock. This represents nearly 29 per cent of the nation’s total flex centres and over 9 per cent of pan-Indian flex stock.
About a 10th of flex centres in Tier-II cities cater to GCC-led operations.
Flex spaces in Tier-II cities deliver cost arbitrage of up to 50 per cent compared to the metros.
Industry participants say rising rentals in metros are accelerating the shift.
Umesh Uttamchandani, MD, DevX, noted that rentals on Gurugram’s Golf Course Road have climbed from about ₹100-110 per square feet two years ago to ₹170-180 now. Mumbai’s Bandra Kurla Complex has seen rents rise to ₹350-600 from ₹180-250 earlier.
“In comparison, Tier-II cities are available at nearly half the cost of metros,” he said.
Beyond cost savings, access to local talent is emerging as a key driver. Companies are increasingly setting up satellite offices in smaller cities to reduce employee relocation pressures and widen hiring pools. “Earlier, talent would migrate to metros, but that trend has reduced,” Uttamchandani added.
Flexible workspace operators such as Table Space are following client-led expansion into these markets. “Companies are also using Tier-II cities so that employees do not have to move to Tier-I cities,” said Karan Chopra, chairman and co-CEO, Table Space, which operates a centre in Bhubaneswar.
However, supply constraints remain a key challenge. Limited availability of institutional-grade assets continues to restrict large-scale expansion in several markets.
“Grade-A asset scarcity continues to be the main issue in Tier-II markets,” Jain said.
Even so, the outlook remains positive as infrastructure spending and hub-and-spoke strategies gather pace.
Arvind Nandan, MD, research and consulting at Savills India, said Tier-II cities are “gradually emerging as alternative technology and services clusters.”
They are expected to play an increasingly important role in India’s evolving office real estate landscape over the next few years.
“Over the next two-three years, we should see Tier-II cities enter a more meaningful growth and maturity phase. The office sector would begin to take off in a more structured way,” said Arun Narayan, cofounder, BHIVE Workspace.
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Tier-II cities — Coimbatore, Kochi, Jaipur, Ahmedabad, Indore and Bhubaneswar — see a rise in demand for office leasing -
Cost advantage of 30–50% versus Tier-I cities & metros a key attraction point -
Supporting factors: Large talent bases, improving connectivity and lower cost of living -
Developing infrastructure improving accessibility, satellite offices being set up, upside over next 2-3 years expected -
Tier-II cities host over 575 flex centres across 8.8 mn sq ft, nearly 29% of India’s total capacity, according to Vestian
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