data center market outlook

Anshuman Magazine
Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE

The rollout of the 5G network, increasing internet penetration, and continued growth in digitization are expected to further boost the
Data Centre (DC) segment in 2023. We anticipate sustained demand from various sectors, including technology, telecom, BFSI, media, and Over-The-Top (OTT) services. Moreover, demand from public sector organizations, led by an increasing focus on e-governance, is likely to emerge as a key demand driver in 2023. Further, sustained occupier demand and rising investments are likely to improve supply addition across the country. However, regulatory hurdles in terms of sourcing land delay in approvals are expected to be a challenge in select cities.

DC occupancy levels in India stood at about 80-85% by the end of 2022, which are likely to improve further during 2023. We expect large tech occupiers to continue their expansion/consolidation plans moderately despite global headwinds. Further, public sector undertakings and other key government enterprises are also likely to move to third-party co-location DCs due to an increased focus on digitization and e-governance to ease operations. In order to rationalize costs, we anticipate that certain cloud occupiers would consider taking a hybrid digital infrastructure approach (mix of co-location and cloud services).

Led by increasing supply, DCs' power requirements are expected to grow further in 2023. This, in turn, could exert pressure on power grids in key cities that have a higher share of DC stock. To address concerns about power consumption and meet occupiers' ESG targets, DC operators would continue to seek ways to reduce their carbon emissions. These would include reducing their reliance on traditional, carbon-intensive fossil fuels and infusing more clean and affordable energy. Operators are also expected to rethink how every DC is designed and managed until the end-of-life disposal of buildings and equipment.

According to CBRE, data centre investments in India are expected to surpass USD 20 billion by 2025. DC supply addition during 2022 stood at 130 MW compared to 71 MW in 2021. As a result, the total DC stock in India touched ~680 MW by the end of 2022. During 2023, the total stock is expected to increase further by about 50% annually to touch ~1,020 MW, with planned supply addition of about ~340 MW during the year. We expect a majority of the supply addition in 2023 to be concentrated in Mumbai, Noida, Chennai, Hyderabad, Pune, and Bangalore. These cities are expected to account for more than 95% of the development completions. However, the expected supply is anticipated to be deployed phase-wise based on occupier demand.

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