The formation of market relations in Georgia and integrating its economy with the world economy have further enhanced the relevance of the solution of the problem of allocating the country's economic space unit and institutional organization. The difficult period of market relations formation is inseparable from the processes of transformation of cities, which is accompanied by the formation of a specific urban environment. The economic, financial and demographic development potential of society is significantly concentrated in cities. After gaining independence, the transition to the market system essentially changed the characteristics of the economic and social situation for both regions and individual territorial units. These changes significantly affected the cities, which faced with many challenges and as a result, a difficult socio-economic situation was formed in these cities.