Data centers, which recently acquired ‘infrastructure’ status in India are growing from strength to strength.
Mumbai, the financial capital of India continues to wear the crown of ‘top data center’ destination in the country, which is the fifth largest economy in the world, according to data put out by JLL. This growth is resulting in many data center players to build new facilities in the region. Dr Samantak Das, Chief Economist and Head of Research & REIS at JLL India said:
“Mumbai on account of the highest share of capacity addition would entail a demand for 4.6 million sq ft, followed by Chennai at 1.9 million sq. ft and NCR-Delhi at 0.7 million sq ft. Regulatory approvals and construction period would lead to a 3–4-year time frame for the DC capacity to become operational. Some players are opting for the conversion of existing industrial buildings to DC facilities by using retrofit options to meet technical parameters.”
The expected supply addition would entail an investment of USD 4.6 billion during H2 2022-2024. Mumbai will require USD 2.7 billion with a major share of expansion expected in the Navi-Mumbai region. Chennai would require USD 1.1 billion investments while NCR-Delhi would need USD 0.6 billion added Das.
Mumbai witnessed the highest absorption across APAC during H1 2022, the report said. Take the case of NTT Ltd. In May, NTT Ltd. in India has announced the launch of its new hyperscale data centre campus in Navi Mumbai with the first data centre – NAV1A. Rachit Mohan, Head, Data Centre Advisory India, JLL commented:
“Indian DC market has been at a high growth trajectory with 18% growth in occupancy from 500 MW as of the end of 2021 to 589 MW as of June 2022. Mumbai has been leading the DC hub in India and has witnessed absorption of 58 MW during H1 2022, which is also the highest across major Asia Pacific markets. Mumbai has an edge due to assured power supply, cable landing, large user market and safety from any natural hazards.”
The sustained and growing pace of digitalisation has been one of the positive impacts of the pandemic. With government digital initiatives and support from various stakeholders, a significant transformation has been witnessed in sectors like education, healthcare, e-commerce and life sciences. This has led to strong growth for data centre storage and computing which is reflected in the continued growth of the Indian Data Centre (DC) industry.
An increasing amount of data usage in the financial, entertainment and retail domain and higher commitment by cloud service providers will drive Indian Data Centre (DC) industry growth leading to demand for 7.8 million sq. ft real estate space in the next 30 months, according to JLL’s report Data Centre Update: H1 2022. This will entail an investment of USD 4.6 billion and the industry is expected to double in the next two and half years to 1318 MW from the existing 637 MW capacity, JLL said.
“The increasing pace of digitisation of the economy would translate to higher data and compute requirements. This will lead to strong growth for the DC industry over the next few years.” he added. In many ways, all this points to the fact that the government, together with the industry has been actively advocating that data centers need to be seen in the same light as highways, roads, ports etc.
The data center industry witnessed robust demand growth with estimated absorption of 89 MW during the first half of 2022, as against 47 MW during H1 2021. The delivery of pre-committed supply to cloud service providers has led to sharp growth in absorption.
Mumbai continues to lead the demand pie with a 65% share of absorption since cloud players continue to increase their footprint as the migration to the cloud has been gaining pace. Pune accounted for a 10% share due to periodic space taken by cloud service providers while Chennai took up a 9% share of total absorption. Pre-commitments drive 86 MW supply delivery – 67% increase over H1 2021 supply.
The supply growth has been in sync with absorption trends as 86MW supply addition has been estimated during H1 2022. Operators have been following the strategy of building capacity based on pre-commitments by hyperscale cloud players with a minimal speculative capacity build.
As a result, overall occupancy stood at 92.5 % of the supply. Mumbai and Chennai together accounted for 83% of the supply during the first half of 2022.
Cloud Provider’s Ambitions
Apart from colocation supply, self-build ambitions by Cloud service providers (CSPs) are visible in some DC hubs. Hyderabad has been successful in attracting CSPs to set up self-build capacities by offering regulatory incentives and a proactive approval process by the state government.
NCR-Delhi has been able to attract colocation operators to set up dara centers in the region. Colocation data centre offers space on rent to third parties to maintain their servers or other network equipment. Companies such as Yotta, NTT Ltd. have set up data centers in Noida.