Office Space Demand in Tier 2 Cities

For decades, India’s office space story revolved around the big four — Bengaluru, Mumbai, Delhi-NCR, and Hyderabad. These cities were magnets for global corporations, tech giants, and startups looking for high-end workspaces. But as the corporate landscape evolves, a quiet revolution is brewing in the country’s tier-2 cities. Places once seen as secondary business centers are now emerging as serious contenders for office expansion.

From Coimbatore to Chandigarh, Indore to Kochi, demand for modern office spaces has started to rise steadily. This shift isn’t just about lower rent it’s about access, affordability, talent, and the changing way India works.

Until recently, tier-2 cities played a supporting role in India’s business ecosystem. Companies often set up back-end or support offices there, while major decision-making hubs stayed in metros. That script is changing fast.

Several reports show that more companies both Indian and global are exploring smaller cities for large-scale expansion. A joint survey by JLL and Awfis found that nearly half of office occupiers with operations in tier-2 cities now prefer flexible workspaces, while a CBRE study showed that demand for Grade A offices has risen by over 20% in smaller cities in just two years.

The numbers tell a clear story: the traditional concentration of offices in metros is breaking up, replaced by a more distributed and balanced setup.

What’s driving this shift toward tier-2 cities? Several interconnected forces are at play.

1. The Cost Equation

The most obvious reason is cost. Office rentals in metro cities like Mumbai or Bengaluru can be five to six times higher than in smaller cities. For businesses looking to scale or open satellite branches, this difference can translate into significant savings.

A company can rent a large, modern workspace in Ahmedabad or Lucknow at the same cost as a small floor in a prime Mumbai location. This cost flexibility has become even more appealing post-pandemic, as firms seek leaner and smarter real estate strategies.

2. The Rise of Local Talent

Tier-2 cities are no longer short on skilled professionals. With better education facilities, remote work culture, and a desire for work-life balance, many employees are choosing to stay closer to home.

Companies, in turn, are following the talent. Instead of forcing migration to expensive metros, they’re setting up offices where their workforce already lives. Cities like Jaipur, Mysuru, and Bhubaneswar are witnessing a surge in hiring for IT, finance, design, and digital roles.

3. Infrastructure Catching Up

Infrastructure has always been the Achilles’ heel for smaller cities. But that’s changing. Government investment in smart city projects, better airports, highways, and metro networks has made several tier-2 locations more business-friendly.

Business parks, co-working hubs, and IT corridors are springing up, supported by reliable internet and power supply. In Coimbatore, for instance, new IT parks have already attracted major outsourcing and engineering firms.

4. The Hybrid Work Revolution

The pandemic permanently altered how companies think about offices. With hybrid work models now mainstream, not every employee needs to be in the same city or even the same state.

This shift has opened the door for companies to distribute their operations. Many firms are using co-working and flexible office spaces in smaller cities to test markets before making long-term commitments. The flexible office segment alone leased over 1.6 million square feet across tier-2 cities in 2024, according to industry estimates.

A few cities are emerging as leaders in this office space transformation:

Ahmedabad: A strong industrial base, business-friendly policies, and rising startup activity make it a favorite among corporates. The city now accounts for the largest share of flexible workspace supply among tier-2 cities.

Chandigarh and Mohali: With proximity to Delhi and a highly educated workforce, the Tricity region is drawing tech startups and IT service firms.

Indore: Consistently ranked high for cleanliness and governance, Indore is attracting companies in logistics, e-commerce, and finance.

Kochi: Its strong connectivity and IT infrastructure are making it a preferred destination for technology and back-office operations.

Jaipur and Lucknow: Affordable real estate and improved connectivity are turning these North Indian cities into attractive corporate destinations.

Each of these cities combines low real estate costs with growing amenities and a capable workforce — a mix that’s hard to ignore.

Developers have started to respond to this growing demand. New commercial projects, co-working hubs, and business districts are being launched across smaller cities. Real estate firms that once focused only on metros are now allocating significant investment toward tier-2 markets.

However, challenges remain. Not all cities have the same pace of infrastructure growth. Some still face power, transport, or regulatory bottlenecks. Also, while demand is rising, the supply of premium office space is still limited compared to metros. Developers must therefore focus on building high-quality, tech-enabled spaces that meet modern corporate standards.

For investors, the appeal lies in better yields and lower competition. In cities where real estate costs are still moderate, the potential for appreciation is higher. With demand now spreading more evenly, the office market in India looks more balanced than it has in years.

What’s happening in India’s tier-2 cities is not a temporary trend it’s a deeper realignment of how and where business is done. The pandemic acted as a catalyst, but the momentum continues because the economics make sense.

The next decade could see a more decentralized corporate landscape, where talent and opportunity are spread across a wider geography. If infrastructure keeps pace, tier-2 cities could evolve into self-sustaining business ecosystems, reducing pressure on metros while generating local employment and growth.

India’s commercial real estate story is no longer just about glass towers in Bengaluru or Gurgaon. It’s also about the co-working hub in Indore, the tech park in Kochi, and the business center in Jaipur.

The quiet boom in tier-2 cities is redefining what it means to go to work and where that work happens.