India’s Data Centre Industry to Expand with $5.7 Billion Investment and 10 Million Square Feet of Real Estate

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Investment Surge and Real Estate Demand India’s data centre industry is on the brink of significant growth, requiring an additional 10 million square feet of real estate and attracting investments totaling $5.7 billion, according to a report released on Friday.

This expansion is driven by the increasing adoption of artificial intelligence (AI), which is set to boost data centre capacity by 791 megawatts (MW) by 2026.

Rising Demand Fueled by AI

The report from real estate consultancy JLL highlights that the demand for Indian data centres is expected to reach between 650 and 800 MW in 2024-26, due to the rising usage of AI. This surge in computing power and emerging applications is anticipated to drive robust demand in the near future.

“Cloud service providers (CSPs) are adjusting their strategies to accommodate AI-driven demand and are committing to increased investments to support this expansion,” JLL stated.

Industry Insights

“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.

Recent Growth Trends

In the second half of 2023, there was a 12 % 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, with Mumbai seeing absorption nearly double as CSPs renewed their pace.

Economic Implications

Samantak Das, Chief Economist and Head of Research & REIS, India, JLL, noted, “India is poised to be the third-largest economy, with a projected $5 trillion GDP by 2027, with the digital economy contributing around 20 %. 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.”

Supply and Vacancy Rates

During the second half of 2023, supply addition was lower at 75 MW, as the available supply from the first half was utilized to meet the demand. This resulted in tighter vacancy levels of 5.5%.

JLL India is one the country’s largest professional services firms specializing in real estate. It operates in 10 major cities and over 130 tier-II and III markets.