CBRE expects regulatory support to augment the Data Centre demand in India.

India will be a key DC market across APAC and our current capacity of 500-520 MW may double by 2025.

- Ram Chandnani Managing Director, Advisory & Transaction Services, CBRE India

CBRE, a Fortune 500 and S&P 500 company is the world's largest commercial real estate services and investment firm.CBRE has managed more than 800+ data centers including enterprise, colocation and hyper scale models across 50+ countries represented with a global network of deep experience. Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE Indiain an exclusive interview with Construction Times speaks about the current and expected market trends in the data centre space in India. Excerpts from the interview…

How do you assess the growth trends of Data Centres? What are the growth drivers and key verticals that are driving the growth?

India holds enormous potential to become the 'next destination' for data centers propelled by policy initiatives, widening customer base and increasing corporate requirements for data storage. With growing digital consumption patterns such as online gaming, online education, streaming, e-commerce, total internet hits etc., DC operators are expected to see a huge demand for data center space.

CBRE insights highlight that data centre capacity is expected to grow 2X times by FY25 from the current 500-520 MW and markets across Mumbai, Chennai, Bangalore, Kolkata, Hyderabad, Pune and NCR are expected to witness supply addition of upto 40% in 2020.  Out of this, Mumbai currently leads with 41% data centre capacity, followed by Bangalore (17%) and Delhi (16%).

The key sectors expected to boost demand for the Data Centre market are large technology companies along with corporates from sectors such as fintech, pharmaceuticals &healthcare, manufacturing, retail, hospitality, e-commerce, media, education and large cloud service providers. Technology and automation provide a significant opportunity to make steep changes in terms of how data center operations evolve as we move forward in the next 3-5 years. In India, data centres will continue to enable the digital world, which has been more crucial than ever during this time.

What is your take on the regulatory and policy framework supporting the growth of the data centres?

In the era of the fourth industrial revolution, CBRE expects regulatory support to augment the Data Centre demand in India. Policy impetus such as the National E-commerce Policy, Personal Data Protection Bill, proposed policy on Data Center Parks and digital initiatives by the government will accelerate demand. The proposed Personal Data Protection Bill includes restrictions on the cross-border transfer of data, which will support data centre demand from foreign companies in India. The proposed regulatory body and stricter rules for e-commerce will act as a catalyst for data protection. CBRE expects the new bill will make India competitive in the area of taxation, cost of power, quality and nature of power, fibre capacity as well as space for data centers, further being identified as the key export service for India.

How do you assess the move towards Tier IV category due to the growth in rack power density and critical applications?

With the increasing focus on building highly efficient and reliable data centers, the investment in Tier IV facilities is expected to grow. Most DC facilities are designed as per Tier III standards with minimum N+1 redundancy and can be reconfigured with up to 2N redundancy as the demand arises, with the incorporation of flexible designs. Many new operators are expected to move to the Tier IV category based on the growth in rack power density and critical applications. In terms of colocation, these facilities will cost more on a per rack basis than the Tier III facilities. Most modern facilities are built based on the ASHRAE data center cooling guidelines and the Uptime Institute's tier standards for redundant design. All serious customers, however, know what they want out of a Tier-III or a Tier-IV facility and emphasize more on operational excellence over a Tier design.

Could you brief us on the investment scenario in the data centre space?

CBRE expects that global players will continue to take interest in investing in the country, with a focus on backing leading operators or funding prominent developers to foray into the DC segment in 2020. Further, against the backdrop of the Covid-19 situation in India, corporates would be inclined towards investing in the cloud segment as business moves online and both employees and employers prefer the work from home option. The current situation will further propel the next wave of growth in the sector and most importantly, the proposal to give Data Centres the coveted 'Infrastructure status' will place them high on global investor radar.

Data Centers were identified as one of the top five alternate real estate investment options and India emerged as one of the top investment destinations across APAC as per CBRE's APAC Investor Intentions Survey, 2019.  With progressive interest of global investors, operators and developers in the Indian DC segment, it is likely that the next few years may witness the inclusion of quality DCs (with high occupancies) in future REIT portfolios.

What are the trends in terms of migration of on-premise workloads to cloud infrastructure?

TRAI highlights that India currently has 1.2 billion people with unique digital identity, 637 million total internet subscribers, average of 9.1 GB data consumption per subscriber per month (this consumption figure has increased substantially in last 3-4 months' time), 350 million number of smart phone devices and the increased adoption of cloud computing has created an unprecedented demand for DCs. Additionally, occupiers' demand for co-location space over captive DCs is further likely to boost due to categorization of third-party Data Centres as 'Essential Services' ensuring uninterrupted and uneventful operations even during a pandemic situation like the world is facing today. With regulatory requirements for data storage expected to be implemented in the coming quarters, CBRE anticipates that corporates would now seriously re-evaluate their DC portfolios in the country.

What has been the impact of the pandemic on Data Centre segment as a whole?

The Data Centre (DC) industry has also been pressure-tested due to Covid-19. Amid change and uncertainty, strategies to get ahead or stay viable have been shifting as all applications being run by companies across all industries are seeing record usage. The data centre sector is one of the best protected in the current Covid-19 situation and downturn. They are playing a critical role in keeping the country literally online, as the place where everything digital is stored and processed. All of the applications we are using to function effectively during Covid-19 are ultimately powered by data centres, and therefore the role of the data centre today is critical for all aspects of life.

CBRE anticipates continued demand for DCs as the pandemic is likely to accelerate the general growth of hybrid infrastructure and a move to the cloud.  We believe India will be a key DC market across APAC and our current capacity of 500-520 MW may double by 2025. 

What are the major challenges that may dent the healthy growth of the industry?

The major factors driving the data center market is the availability of tax incentives, skilled resources, reliable electricity supply, network connectivity and renewable energy sources.

The data center business is capital and technology intensive, and over the past few years data centre growth has been concentrated in regions / countries that offer tax incentives. Several state and local governments provide investment and tax incentives based on economic development, where incentives are focused on effective facility operations and renewable energy sources procurement. Among all Indian states, Maharashtra and Telangana were the first movers to release state-specific incentives for the DC segment. Several other states (Gujarat, Karnataka, Tamilnadu, Andhra Pradesh, Kerala) also now offer / plan to offer incentives to DCs over the coming quarters.

The data center market has a strong presence of general contractors. Expertise in developing facilities in a short period will be key criteria for operators in the selection of general contractors. The major challenge for several contractors in the region is the unavailability of skilled workforce to manage multiple hyperscale projects.

Power accessibility is always a challenge to the data center industry. As the industry expands, the challenge lies in balancing the power demand against the market demand. It will be essential to link solar power with regional and national power grids strategy which will eventually boost the smooth operation of data centers.

Carbon emission is rapidly heading to the top and will become a big environment concern moving forward. Data Centre leaders will be required to put-in significant efforts for a better tomorrow with sustainability measures by adopting techniques to tackle climate change supporting the UN's Act Now call to action.

CBRE, as a leading international property consultancy, could you tell the core competencies and strength of CBRE?

CBRE, a Fortune 500 and S&P 500 company is the world's largest commercial real estate services and investment firm. As a leading international property consultancy, CBRE provides clients with a wide range of real estate solutions, including Strategic Consulting, Valuations/Appraisals, Capital Markets, Agency Services and Project Management. The guiding principle at CBRE is to provide strategic solutions that make real estate holdings more productive and economically efficient for its clients across all service lines.

The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE was the first International Property Consultancy to set up an office in India in 1994. Since then, the operations have grown to include more than 10,000 professionals across 10 offices with a presence in over 80 cities in India.

What are the unique services / solutions provided to your clients in the data centre space?

Understanding the demand of the market, CBRE has strengthened Data Centre Advisory Services that enables business and technology leaders to transform their businesses with precise information with the least amount of effort. Our detailed and vendor neutral analysis aids customers to leverage Data Centre and IT strategy by suggesting workload movements to the best DC/Cloud platform (depending on the application design landscape). The expert analysis also gives insights to systems and applications which continue to be maintained in house.

CBRE helps occupiers from diverse verticals and geographies to understand – the strategic and cost ramifications of Data Center (DC) decisions. This encompasses services across the entire real estate and IT lifecycle of a DC, including advisory, transaction, project management and facilities management disciplines. CBRE has managed more than 800+ data centers including enterprise, colocation and hyperscale models across 50+ countries represented with a global network of deep experience. CBRE has successfully derived $1.7B in transactions per year delivering proactive insights and expertise locally, regionally and globally. We have 100+ data centre advisors globally to assists and facilitate the data centre services.

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