Rising Office Space Demand Signals Shift Towards Tier-II Cities in India’s Real Estate Landscape
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Office space demand in India’s Tier-II cities is seeing a notable rise, marking a shift from traditional metropolitan hubs. Cities like Coimbatore, Mysuru, and Bhubaneswar are increasingly attracting businesses, thanks to a blend of skilled local talent, cost-effective operations, and supportive policies.
The increasing popularity of hybrid and remote work has also encouraged companies to adopt a hub-and-spoke model. In this model, firms maintain a central office in a metro city while opening satellite offices in smaller cities. This shift is prompting established companies and flexible workspace providers to explore real estate opportunities beyond the metros.
Several multinational corporations have already made significant investments in Tier-II markets. In Coimbatore alone, over 10 lakh square feet of office space has been leased over the past few years. This includes major deals like State Street Corporate Services’ lease of 2.1 lakh sq ft, valued at ₹126.24 crore, and Bosch Global Software Technologies’ two leases totaling 3.25 lakh sq ft. Infosys, Deloitte, Amazon, Accenture, and Cameron Manufacturing India have also acquired sizeable office spaces in the city.
Startups are playing a pivotal role in this transition. Nearly half of India’s new startups now emerge from smaller cities, particularly in tech-driven sectors. The growing demand for flexible and Grade A office spaces is a result of these startups seeking affordable, well-equipped locations.
The expansion of flexible office infrastructure in these cities supports this momentum. According to industry reports, the demand for coworking and adaptable office setups in Tier-II and Tier-III cities grew by 12% in 2024. Simultaneously, the available supply increased significantly between 2020 and 2024.
Lower rental and operational costs make these locations especially appealing. Office rents in cities like Coimbatore, Indore, and Kochi are generally 30–50% lower than those in metros. In Coimbatore’s central business district, for instance, 2024 rental rates ranged from ₹50–70 per sq ft, with even lower rates in peripheral areas. Such affordability benefits both companies and employees, with residential property prices also being 20–30% less than in Tier-I cities.
The pandemic further influenced this trend by accelerating reverse migration. As professionals moved back to their hometowns seeking safety and better quality of life, businesses adapted by setting up operations in non-metro cities. This led to a surge in hiring and office space requirements in locations like Kochi, Jaipur, and Coimbatore, where hiring reportedly rose by 11% in 2024.
Infrastructure hubs such as MIHAN (Nagpur), Mahindra World City (Jaipur), Technopark (Trivandrum), and InfoCity (Bhubaneswar) have successfully attracted IT companies, while upcoming destinations like Vizag’s Fintech Valley and Coimbatore’s TIDEL Park are gaining attention.
Despite the promise, these cities face challenges. Limited Grade A office supply, underdeveloped infrastructure, and inconsistent urban amenities remain concerns. Additionally, slower internet connectivity in some regions hampers IT sector growth. The government’s National Broadband Mission 2.0 aims to address this by improving digital infrastructure.
Experts emphasize the need for consistent project delivery and quality by developers to sustain the growth of the commercial real estate market in these cities. With the right investments and infrastructure support, Tier-II cities could play a crucial role in shaping India’s future business landscape.
