The Evolving Landscape of Data Centre in India

As we move further into the digital era, the importance and integral role of data centres continues to grow. These facilities play a crucial role in supporting the world's digital infrastructure, enabling everything from online shopping and social media to cloud computing and artificial intelligence. Given the demand of digital services continues to surge, the data centre market is evolving at an unprecedented pace.

The Indian data centre industry is expected to reach a market size of $4.5 billion by 2025, growing at a CAGR of 12%. This growth is being fueled by the government's Digital India initiative, which aims to transform India into a digital economy, as well as the growth of the e-commerce sector. Also, according to the India Brand Equity Foundation (IBEF), the e-commerce market in India is expected to reach $200 billion by 2026, up from $38.5 billion in 2017.

Mumbai is the biggest DC market in the country, accounting for over 40% of total capacity. Apart from leasing by colocation operators, hyperscale cloud providers have been acquiring land for development. Despite weaker overall demand, investor interest in emerging markets strengthened in 2022. Investment demand will be increasingly focused on greenfield development of prime assets, such as data centres with higher floor loading and/or sustainability certification.

Sufficient uninterrupted power supply is becoming a crucial factor in determining the preferred location for data centres. With inadequate power infrastructure, data centre operators are now prioritising powered data centres or those located in industrial parks that can offer ample power supply. As a result, core + shell projects are increasingly expected to provide greater flexibility and incentives to attract operators.

The trend of enhancing Environmental, Social, and Governance (ESG) performance in data centres is also gaining momentum. However, in India, the availability of grid-connected renewable energy remains limited. As a result, data centre operators and hyperscalers are seeking partnerships with renewable energy firms to address this issue. A recent example of this trend is Amazon's commitment to purchase wind and/or solar power in India and Indonesia.

As the need for digital infrastructure expands across various sectors, data centres are becoming an increasingly significant and larger real estate asset class. Along with the Reserve Bank of India's data regulation norms for the BFSI sector, there is also a surge in demand for OTT media services, which is expected to drive the demand for data centres in tier II and III cities as well. Investors are recognizing the attractiveness of data centres as a preferred real estate alternate option, and we anticipate heightened growth in this sector. In the coming years, we can expect to see various trends emerging across stakeholders as the landscape of the data centre market in India continues to evolve.

In conclusion, the data centre market in India continues to evolve and grow, with new trends emerging and existing trends intensifying. As demand for digital services and infrastructure continues to surge, the data centre market will remain a crucial contributor of the global economy. It will be interesting to see how this market evolves over the coming years and what new technologies will take center stage.