Data Centre Boom to Generate Demand For 10 MSF of Real Estate

With a projected addition of 791 MW capacity by 2026, the data centre expansion attracting USD 5.7 billion of investments, will drive massive real estate demand amounting to one crore sq ft of realty space.

Source: JLL Research

The exponential growth in computing power and the resulting new applications are expected to drive strong demand for DC industry over the medium term.

Cloud Service Providers (CSPs), who essentially offer IT infrastructure systems primarily for data storage and computing power accessible through the Internet, have realigned their requirements to factor in AI-led demand. The CSPs have also announced higher investments to scale up AI-led growth.

“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”, says Rachit Mohan, APAC Lead- Data Centre Leasing and Head -Data Centre Advisory, India, JLL. 

During the second half of 2023, there was a 12 percent  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 brief hiatus during 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 USD 5 trillion GDP by 2027 with digital economy contribution of 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 USD 5.7 billion and approximately 10 million square feet of real estate,” according to Dr Samantak Das, Chief Economist and Head of Research& REITs, 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%.India’s focus on AI is evident through the India AI mission, aimed at fostering innovation, upskilling the workforce, and ensuring responsible and ethical deployment of AI technology. With a large user market, talented workforce, and thriving startup ecosystem, India presents a significant opportunity to emerge as a global data hub, driven by sustainable practices. The country’s DC sector expanded from 350 MW in 2019 to 854 MW in 2023, in line with the increasing digital usage trends.