Data centres in India to drive 10 mn sq ft real estate demand: Report

Sector likely to get $5.7 bn investments by 2026, it says

The data centre industry in India is set for expansion, requiring an additional 10 million square feet of real estate space and attracting investments totalling $5.7 billion, according to a report on Friday.

Data centre capacity is projected to increase by 791 megawatts (MW) by 2026, according to the real estate consultancy JLL. The surge will be due to the rising adoption of artificial intelligence (AI), leading to higher power consumption.

As AI usage gains pace, the demand for Indian data centres is expected to be in the range of 650-800 MW in 2024-26.

JLL said the increase in computing power and emerging applications will fuel robust demand for the data centre industry shortly. Cloud service providers (CSPs), offering information technology infrastructure for data storage and computing power via the internet, are adjusting their strategies to accommodate AI-driven demand. They are also committing to increased investments to support AI-driven expansion.

 

“The exponential growth in processing power and data volumes, driven by AI, necessitates the development of new data centres capable of meeting energy, processing, and cooling needs. The anticipated expansion and progression of diverse AI disciplines are projected to create additional demand for data centres, expanding their capacity requirements and advancing their capabilities,” said Rachit Mohan, APAC Lead – Data Centre Leasing and Head - Data Centre Advisory, India, JLL.

The report said that during the second half of 2023, there was a 12 per cent increase in absorption to 81 MW compared to 72 MW during the same period last year. This growth can be attributed to CSPs gaining momentum after a pause in the first half of 2023. In Mumbai, absorption nearly doubled during this period as CSPs renewed their pace of absorption.

“India is poised to be the third-largest economy, with a projected $5 trillion GDP by 2027, with the digital economy contributing around 20 per cent. This digital expansion is anticipated to propel the growth of India's data centre industry, projected to increase from 853 MW in 2023 to 1,645 MW by 2026. This increase in capacity will require an investment of $5.7 billion and approximately 10 million square feet of real estate,” said Samantak Das, chief economist and head of research & REIS, India, JLL.

There was a lower supply addition of 75 MW during H2 2023 as the available supply from the first half was utilised to meet the demand, resulting in tighter vacancy levels of 5.5 per cent.