$ 10 bn investments to be deployed in data centres

12 Oct 2023 CW Team

India?s data centre stock is likely to double to 23 mn sq ft, translating to a total investment potential of $ 10 billion over the next 3 years across the top 7 cities, according to the Colliers? latest report ?India Data Centres: Entering Quantum Growth Phase?. The report was unveiled at the Second Edition of CII Conference on Tech in Real Estate today at Taj Lands End, Mumbai. Colliers was the Knowledge Partners for the event. ?Significant expansion of the Indian economy by 2047, will be powered by Real Estate. A multifold economic expansion will boost demand across all the asset classes - residential, commercial, warehousing, industrial land developments, etc. - will grow at a multiplier rate to accommodate the growing needs of the economy and consumption needs of the individuals. In recent years, the global real estate sector has witnessed a paradigm shift in its approach to sustainability, with the growing recognition of the Environmental, Social, and Governance (ESG) factors. Environmental, Social, and Governance (ESG) standards have emerged as crucial factors for analysing the long-term viability and ethical practices of businesses in a variety of industries, including real estate.?, said Dr K Nandakumar, Chairman, CII Maharashtra State Council & Chairman and Managing Director, Chemtrols Industries. Driven by quantum growth in data consumption and cloud adoption, data centres have witnessed significant growth post pandemic with total capacity growing two-fold since 2020. As of August 2023, the data centre capacity across the top 7 cities stands at 819 MW, spread across 11.0 million sq feet. Led by exponential increase in data consumption, improving regulatory framework and robust investments in the sector, the data centre capacity is likely to double up faster in the next phase of growth, crossing 1,800MW by 2026. With the Digital Personal Data Protection Bill 2023 being passed by both houses of the legislature and set to become a law soon, the Data Centre story in India has all the markings to embark on a hitherto unseen success narrative. "Indian data centre market propelled by tail winds of digitization, on premise to Colocation shift, data localisation and Generative AI demand will see a quantum leap in the construction, delivery and absorption of Data Centre space. Data Centre as an asset class is proving to be a play with high yield and lower risk once stabilised, with sticky customers which enables patient institutional capital to write larger cheques.? said Ramaiy Kapoor, Managing director, Data Centre, Colliers, India Tier I cities see accelerated growth; Tier II cities likely to see steady ascent Mumbai continues to remain a relatively matured data centre hub, hosting half of the data centre capacity of the country. Chennai, Bengaluru and Delhi-NCR are already relatively established markets, while Kolkata remains an emerging hub catering to the zonal data requirements of the region. In the next three years, Mumbai is expected to account for about half of the new additions, owing to the presence of submarine cable connectivity, landing stations and internet exchanges. Along with Mumbai, Chennai and Hyderabad are also likely to witness increased growth owing to strong support infrastructure and encouraging regulatory framework. While Tier I cities are preferred locations for data centre expansion, Tier-II cities are also witnessing steady growth. Currently, Tier-II cities hold only 4% of the total data centre capacity in India. However, key data centre operators are eyeing multiple cities such as Ahmedabad, Jaipur, Kochi, Nashik, Vijayawada and Bhubaneshwar as potential locations for setting up Edge data centres and as disaster recovery sites. Increased internet penetration, hybrid working, establishment of start-ups and Technology hubs in these cities will further drive data centre growth across these locations in the next phase of growth.

Robust investments fuelling data centre growth Investors, sparked by data localization efforts in the country and drawn by the prospect of stable income and better yields are capitalizing on the India data centre growth story. Since 2020, data centres have received cumulative investments of USD7.0 billion from global data centre players real estate developers, and private-equity funds who are looking to expand in India. About 11% of the total investments in data centres since 2020 were in land, and the quantum is expected to rise further in near future, as data centre operators continue to scale up their operations across geographies. A growing recognition of the significance of India?s data centres as lucrative high-yield options is quite evident, especially amongst foreign investors and is expected to gain further momentum in the coming years, as the market grows broader. Since 2020, the sector has received about USD1.1Bn of institutional inflows, 93% of which were from foreign investors. ?India has emerged as a vibrant hotspot for data centre expansion amidst increased cloud adoption & digital penetration, robust demand from hyperscalers & relatively lower real estate costs, attracting both domestic and foreign investments. Over the next 3 years, the sector is likely to see $ 10 bn of investments, resulting in doubling of the data centre capacity to 1800 MW. Interestingly, 30-35% of the total investments will translate into business opportunity for real estate players in the data centre space including land and construction.? said Vimal Nadar, Senior Director & Head of Research, Colliers India.

India?s data centre stock is likely to double to 23 mn sq ft, translating to a total investment potential of $ 10 billion over the next 3 years across the top 7 cities, according to the Colliers? latest report ?India Data Centres: Entering Quantum Growth Phase?. The report was unveiled at the Second Edition of CII Conference on Tech in Real Estate today at Taj Lands End, Mumbai. Colliers was the Knowledge Partners for the event. ?Significant expansion of the Indian economy by 2047, will be powered by Real Estate. A multifold economic expansion will boost demand across all the asset classes - residential, commercial, warehousing, industrial land developments, etc. - will grow at a multiplier rate to accommodate the growing needs of the economy and consumption needs of the individuals. In recent years, the global real estate sector has witnessed a paradigm shift in its approach to sustainability, with the growing recognition of the Environmental, Social, and Governance (ESG) factors. Environmental, Social, and Governance (ESG) standards have emerged as crucial factors for analysing the long-term viability and ethical practices of businesses in a variety of industries, including real estate.?, said Dr K Nandakumar, Chairman, CII Maharashtra State Council & Chairman and Managing Director, Chemtrols Industries. Driven by quantum growth in data consumption and cloud adoption, data centres have witnessed significant growth post pandemic with total capacity growing two-fold since 2020. As of August 2023, the data centre capacity across the top 7 cities stands at 819 MW, spread across 11.0 million sq feet. Led by exponential increase in data consumption, improving regulatory framework and robust investments in the sector, the data centre capacity is likely to double up faster in the next phase of growth, crossing 1,800MW by 2026. With the Digital Personal Data Protection Bill 2023 being passed by both houses of the legislature and set to become a law soon, the Data Centre story in India has all the markings to embark on a hitherto unseen success narrative. Indian data centre market propelled by tail winds of digitization, on premise to Colocation shift, data localisation and Generative AI demand will see a quantum leap in the construction, delivery and absorption of Data Centre space. Data Centre as an asset class is proving to be a play with high yield and lower risk once stabilised, with sticky customers which enables patient institutional capital to write larger cheques.? said Ramaiy Kapoor, Managing director, Data Centre, Colliers, India Tier I cities see accelerated growth; Tier II cities likely to see steady ascent Mumbai continues to remain a relatively matured data centre hub, hosting half of the data centre capacity of the country. Chennai, Bengaluru and Delhi-NCR are already relatively established markets, while Kolkata remains an emerging hub catering to the zonal data requirements of the region. In the next three years, Mumbai is expected to account for about half of the new additions, owing to the presence of submarine cable connectivity, landing stations and internet exchanges. Along with Mumbai, Chennai and Hyderabad are also likely to witness increased growth owing to strong support infrastructure and encouraging regulatory framework. While Tier I cities are preferred locations for data centre expansion, Tier-II cities are also witnessing steady growth. Currently, Tier-II cities hold only 4% of the total data centre capacity in India. However, key data centre operators are eyeing multiple cities such as Ahmedabad, Jaipur, Kochi, Nashik, Vijayawada and Bhubaneshwar as potential locations for setting up Edge data centres and as disaster recovery sites. Increased internet penetration, hybrid working, establishment of start-ups and Technology hubs in these cities will further drive data centre growth across these locations in the next phase of growth. Robust investments fuelling data centre growth Investors, sparked by data localization efforts in the country and drawn by the prospect of stable income and better yields are capitalizing on the India data centre growth story. Since 2020, data centres have received cumulative investments of USD7.0 billion from global data centre players real estate developers, and private-equity funds who are looking to expand in India. About 11% of the total investments in data centres since 2020 were in land, and the quantum is expected to rise further in near future, as data centre operators continue to scale up their operations across geographies. A growing recognition of the significance of India?s data centres as lucrative high-yield options is quite evident, especially amongst foreign investors and is expected to gain further momentum in the coming years, as the market grows broader. Since 2020, the sector has received about USD1.1Bn of institutional inflows, 93% of which were from foreign investors. ?India has emerged as a vibrant hotspot for data centre expansion amidst increased cloud adoption & digital penetration, robust demand from hyperscalers & relatively lower real estate costs, attracting both domestic and foreign investments. Over the next 3 years, the sector is likely to see $ 10 bn of investments, resulting in doubling of the data centre capacity to 1800 MW. Interestingly, 30-35% of the total investments will translate into business opportunity for real estate players in the data centre space including land and construction.? said Vimal Nadar, Senior Director & Head of Research, Colliers India.