Data centre business to double by 2024, demand to help real estate: Reports

Investments in data centres expected to surpass $20 billion by 2025, with smaller cities gaining too

Data centre companies will double their business by 2024 and increasing need for their services will help real estate, said two reports on Tuesday.

Data centre capacity was at 637 megawatt (MW) in the first half of 2022: a 16 per cent rise compared to 551 MW in 2021, said a report by JLL. Mumbai, Bangalore and Chennai comprise 75 per cent of India’s data centre market. The rest is in Delhi-NCR, Pune, Hyderabad, and Kolkata.

Mumbai is expected to lead storage addition, followed by Bangalore, Chennai, and Delhi-NCR. Data centre (DC) investments are expected to cross $20 billion by 2025.

“Mumbai, on account of the highest share of capacity addition, would entail a demand for 4.6 million sq ft, followed by Chennai at 1.9 million sq. ft and NCR-Delhi at 0.7 million sq ft," said Samantak Das, chief economist and head of research & REIS at JLL India.

Data usage and higher commitment by cloud service providers will drive DC growth, leading to demand for 7.8 million sq. ft real estate space in the next 2.5 years, said JLL.

Big DCs dominated investments in 2018-2021, with a share of about 77 per cent—a trend recorded in the first half of this year, said a report by CBRE. West Bengal leading got the largest share of such investment, followed by Uttar Pradesh, Telangana, and Tamil Nadu .

More than half the investments in colocation DCs was in Tamil Nadu, Maharashtra, West Bengal, Uttar Pradesh, and Telangana. The rest of such investments was nationwide.

The CBRE reported expected DC capacity to almost double by 2024, with more than 400 MW currently under construction. “Tier II and III cities are also expected to see a rise in demand. As a result, we anticipate heightened DCs growth and continued interest from investors looking to capitalise on the attractiveness of DCs as an alternative real estate investment option,” said Anshuman Magazine, chairman and CEO, India, South-East Asia, Middle East & Africa, CBRE.

DC operators are building capacity based on pre-commitments by cloud players. As a result, overall occupancy for DCs stood at 92.5 per cent of supply. Mumbai and Chennai together accounted for 83 per cent of the supply in the first half of 2022, said the JLL report.

Few DC operators in India have installed renewable energy sources due to a lack of standard norms, said JLL. In 2016, the Indian Green Building Council (IGBC) created a pilot version of 'Green Data Centre Rating System’ to address this issue.

The IGBC has made a ‘Renewable Energy Standard for DCs in India’ in collaboration with the Uptime Institute to encourage operators to invest in renewable energy. In addition, AI and Machine Learning are transforming the traditional DC industry to ensure cost-effective sustainability.