India's Data Centre to pull USD 5.7 billion investments by 2026: JLL

NEW DELHI: India's data centre industry is to attract an investment of USD 5.7 billion by 2026 amid the growing demand for AI (Artificial Intelligence), said a report by real estate and investment management company, Jones Lang LaSalle Incorporated (JLL).

The report highlights that India's Data Centre (DC) industry is set to witness remarkable growth, adding 791 MW capacity by 2026. This expansion will reportedly lead to a demand for 10 million sq. ft of real state space.

A data centre is a facility that centralises an organisation's IT operations and equipment to store, process and transfer data and applications.

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

The expected demand of the industry is to reach 650-800 MW during 2024-26. The surge in demand for data centres is primarily fuelled by the increasing adoption of AI.

The report states that Cloud Service Providers (CSPs), which essentially offer IT infrastructure systems 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" said Rachit Mohan, Head of Data Centre Advisory, India, JLL.

According to the report in the second half of 2023, there was a 12 per cent increase in absorption to 81 MW compared to 72 MW during the same period last year. This growth can be attributed to CSP 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," said Dr Samantak Das, Chief Economist and Head of Research & REIS, 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 per cent.

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.