India’s data centre industry to drive 9.1 million sq ft real estate demand during 2023-25

Mumbai, April 12, 2023 – JLL's Data Centre Update: H2 2022 report predicts that the increasing use of digital technology, the migration of IT infrastructure to third-party providers, and the growing usage of data from new and existing channels will result in the addition of 678 MW to the digital transformation industry between 2023 and 2025. This expansion will necessitate a demand for 9.1 million sq ft of real estate space, requiring a total investment of USD 4.8 billion in both the data centre infrastructure and real estate of the data centre sector.

During the second half of 2022, the industry added 71.8 MW resulting in total supply of 171 MW during the 2022 – a robust 31% growth over previous year. As a cost optimization and revenue-boosting strategy, digital transformation is expected to gain wider acceptance and drive higher absorption in the coming quarters. Mumbai leads the absorption pie, accounting for 43% of the share, with Delhi NCR witnessing a substantial hyperscale precommitment being delivered.

The supply growth in the market has been impressive, with a remarkable 36% year-on-year increase and a noteworthy addition of 85.1 MW. This supply addition has been carefully planned and executed, thanks to pre-commitments that make up a significant portion of the demand. Data center operators have been prioritizing faster delivery times to entice additional hyperscale pre-commitments, resulting in a consistent growth of supply. Notably, Mumbai and Delhi NCR have been leading the way, representing a significant 74% of the total supply added during the second half of 2022.

Rachit Mohan, Head - Data Centre Advisory, India, JLL said, “The future looks promising for India’s data centre industry, thanks to the pre-commitment of 350 MW by hyperscalers. Hyperscalers public cloud services have been scaling up their requirements significantly and is expected to grow further. This demand is fueled by the rising digital adoption across sectors and the outsourcing of IT infrastructure to third-party players. With this pre-commitment, the industry is set to experience growth and expansion, creating exciting opportunities for all stakeholders involved. It is expected that the 350 MW absorption will be delivered by 2025.”

Dr. Samantak Das, Chief Economist, and Head of Research & REIS, India, JLL said, “India’s data centre industry has been on a remarkable growth trajectory, doubling to 722 MW in 2022 from 350 MW in 2019, registering a robust CAGR of 27%. This growth shows no signs of slowing down, thanks to the high pace of India's digital transformation. In 2022, the industry saw an all-time high absorption of 160 MW, resulting in a total occupancy of 660 MW, which is 32% higher than the previous year. To meet the increasing demand, data centre operators added 171 MW of supply during the same period, primarily from hyperscalers.

“This growth is being driven by the expanding operations of leading global hyperscalers, who are increasing their pre-commitments across established and emerging data centre hubs in response to the growing adoption of public cloud services,” added Dr. Das.

India’s data centre industry is set to witness continued growth, with strong pre-commitment pipeline expected to result in a supply addition of 678 MW over the next three years, taking the industry's capacity to 1400 MW by the end of 2025. Mumbai (including Navi-Mumbai) is expected to see the highest capacity addition, requiring 4.7 million sq. ft. of real estate, followed by Chennai at 2.3 million sq. ft. and Delhi NCR at 1.0 million sq. ft. The investment in real estate and data centre infrastructure required for setting up data centres will require a capital outlay of USD 4.8 billion by 2025. Data centre operators are expected to tap global investors or form alliances to fund the supply additions.

This robust growth has attracted both global players and new entrants to be part of the industry's growth story. Most players have adopted a land banking strategy to garner hyperscale demand, while setting up captive facilities by hyperscalers through self-build is also gaining ground. This industry is receiving policy support from various states and central government draft personal data protection laws, which will provide further support for its growth. With these factors in play, the industry is expected to create demand for 9.1 million sq. ft. by 2025, representing a significant opportunity for investors and stakeholders alike.