Data centre investment commitments in H1 2023 top $21 billion: Report

The data centre market in India has attracted investment commitments of about $21.4 billion in the first six months of 2023, or more than 60% of the proposals received in five years, as the country’s growing digital infrastructure, increasing technology penetration and regulatory push make it an attractive destination for both global and domestic investors in the sector, according to a report.

Since 2018, the segment has received investment commitments worth $35 billion, real estate consultancy CBRE said in its report, with most of that coming in this year.

Hyperscale data centres (DCs) dominated most of the investments with a share of about 89%, with colocation data centres accounting for the rest of 11%. Maharashtra, Tamil Nadu, West Bengal and Uttar Pradesh dominated in attracting the investment commitments.

“Increasing population, enhanced use of technology, social media and online streaming platforms, rising need for data localisation and fast improving digital infrastructure would continue to boost demand for data centres in India. This, in turn, is likely to result in the country becoming one of the largest DC destinations across APAC over the next decade,” said Anshuman Magazine, chairman & chief executive – India, Southeast Asia, Middle East & Africa – at CBRE.

According to the report, India’s data centre capacity is expected to cross 1,300 MW by the end of 2024 from 880 MW spanning over 13 million sq ft in June 2023. It estimates the capacity at the end-2023 at 1,048 MW.

“We also anticipate heightened interest from investors looking to capitalise on DC’s attractiveness as a preferred alternate real estate option in the country. Multiple state governments in India have been giving an enormous push to the DC segment in the country, with dedicated policies/incentives introduced to attract both global and domestic investors,” said Magazine.

The DC segment growth is likely to continue over 2023-24, with nearly 500 MW currently under construction across several cities. Mumbai, Chennai and Bengaluru will collectively dominate DC stock with an 80% share by the end of 2024.

“Over the last 2-3 years, our country has positioned itself to emerge as a global hub for data centres, harnessing technologies such as artificial intelligence, machine learning, and analytics. As the need for digital connectivity continues to grow, especially with the imminent rollout of 5G and the increasing utilisation of IoT-linked devices, the demand for data centres is expected to escalate further,” said Amit Sarin, managing director at real estate firm Anant Raj Limited.

Anant Raj recently operationalised the first phase of its data centre at Manesar in Haryana. The company is now in an advanced operational stage with plans for the next phase.

As per the CBRE report, Mumbai, Chennai, Bengaluru and the National Capital Region accounted for about 87% of the country’s DC stock as of June 2023. Overall, DC occupancy levels in India stood at about 75-80%, which is likely to improve by the end of the year.

Mumbai continues to be the most prominent DC market in the country, accounting for more than half of the total stock (52%). The city is expected to lead the supply addition with a 46% share of the upcoming 500 MW between June 2023 and end-2024.

“Investor interest in the Indian DC market remains elevated despite the recent economic headwinds. Technology companies, along with corporates from sectors such as BFSI, cloud services and OTT platforms will continue to drive DC demand in India,” said Ram Chandnani, managing director, Advisory & Transactions Services, at CBRE India.

DC operators are also likely to expand in tier-II markets to capture the growing demand among financial services firms and online streaming platforms to establish DC facilities closer to the consumption hubs.