India’s data center boom reshapes APAC investment landscape

CBRE report showcases India’s dominance in data center capacity, projecting substantial expansion ahead

CBRE South Asia Pvt Ltd, India’s leading real estate consulting firm, has released the findings of its report titled ‘Asia Pacific Data Center Trends Q1 2024.’ The report reveals that India leads major APAC countries in data centre capacity, boasting approximately 950 MW in the Asia-Pacific region (excluding China). This surpasses prominent nations such as Australia, Hong Kong SAR, Japan, Singapore, and Korea. Additionally, India is projected to experience the highest capacity growth, with an estimated addition of around 850 MW during the 2024-2026 period, exceeding that of other major APAC countries.

Country	Total Capacity (MW) – as of end -2023	2024 – 2026 Upcoming Capacity (mw)
India	~950	~850
Japan	892	407
Australia	773	314
Hong Kong SAR	613	296
Singapore	718	98
Korea	531	495

Following India, Japan recorded the second-highest data centre (DC) capacity with 892 MW, followed by Australia with 773 MW, Singapore with 718 MW, Hong Kong with 613 MW, and Korea with 531 MW. The DC industry in India has undergone remarkable growth and transformation, with capacity doubling since the onset of the pandemic. In 2023, there was an additional 255 MW new supply compared to 200 MW in 2022, resulting in a total stock of approximately 1,030 MW by year-end. 

This accelerated growth is anticipated to persist in 2024, with planned supply exceeding 330 MW across various cities, potentially increasing the stock by 30 percent annually to reach approximately 1,370 MW. The total DC stock in 2023 in India was approximately 16 million sq ft. Data centres, including India, remain among the top three preferred alternative assets for investors in the APAC region. The sector has attracted significant investments from global operators, real estate developers, and private equity funds eager to capitalise on the country’s thriving market.

Key investments in India	Investment Value (USD million)	Investment Region
STT GDC India	~1,000	Multiple cities
Colt DCS	~750	Tamil Nadu & Maharashtra
NTT	~542	Tamil Nadu & West Bengal
CapitaLand	~162	Maharashtra
BAM Digital	~30	Tamil Nadu

Beacon of opportunities

Global investors maintain a strong interest in the Indian data centre market, with many groups considering partnerships and joint ventures with local operators. Due to the growing number of players, M&A activity among operators is expected to increase in the coming years, leading to some consolidation before the market becomes overly fragmented. India’s data centre sector, known for its resilience and potential for attractive returns, has emerged as a beacon of opportunity for investors. 

The sector’s appeal is further bolstered by the fact that between 2018 and 2023, India secured investment commitments of over $40 billion from global and domestic investors. This significant influx of capital highlights the sector’s potential for high returns, making it a preferred choice among investors, with foreign investments playing a dominant role. 

Maharashtra, Uttar Pradesh, West Bengal, and Tamil Nadu are the top states dominating the cumulative investment commitments. India is also attracting global hyper scalers who see it as a prime market for expansion, with many opting for custom-built facilities. In 2023, more than 85 percent of the approximately $27 billion committed is earmarked for developing hyperscale facilities.

Strong DC supply pipeline

Mumbai, known as the financial capital and hosting key landing stations connecting India with the Middle East and Europe, remains the dominant market, with over 50 percent of the total stock in India as of 2023. Reliable power supply, broadband connectivity, and the availability of skilled manpower further contribute to Mumbai’s appeal as a sought-after destination. Chennai, with an 18 percent share, is the second most popular market due to its strategic location on the East Coast, facilitating strong connectivity to East Asia.

Notably, more than 60 percent of the upcoming supply will be concentrated in Mumbai and Chennai, while Delhi-NCR, Bengaluru, and Hyderabad are jointly expected to account for over 30 percent share. With the anticipated supply influx, tenants are expected to carefully assess their options, select suitable DC providers and negotiate favourable terms aligned with their specific requirements. The demand will likely pick up pace in H2 2024, paving the way for continued growth in this sector. Emerging markets such as Kochi, Jaipur, Ahmedabad, Lucknow, Patna, and Vishakhapatnam are experiencing growth, driven by their strategic locations and improved infrastructure, including enhanced power supply and fibre and cable connectivity upgrades.

Total colocation data centre capacity currently stands at 1gw, more than double the figure from 18 months ago. New data centre supply is projected to reach up to 250 MW annually for the next five years. Top occupier categories anticipated to drive demand include cloud service providers, BFSI firms, retail, healthcare, entertainment, telecommunications and others.

Focus of commercial real estate

Anshuman Magazine, Chairman & CEO-India, South-East Asia, Middle East & Africa, CBRE, said, “India, with its favourable market conditions, is attracting multinational corporations (MNCs) seeking to expand their digital services and relocate from other Asian markets due to supply constraints. Sustained demand is expected from BFSI firms, technology corporations and cloud service providers as they explore alternative solutions such as colocation and hyperscale facilities. Furthermore, engineering & manufacturing firms and technology companies will likely establish their own DCs dedicated to R&D labs.

India has actively promoted the DC segment through dedicated policies to attract DC operators and investors. Several states have recognised DCs as an ‘essential service’ to ensure uninterrupted operations throughout the year. These policies include provisions for uninterrupted electricity supply, access to renewable energy, fuel subsidies, essential infrastructure support for small and medium-sized enterprises (SMEs), providers of servers and racks, financial incentives and subsidies for manufacturing DC stacks within the state jurisdictions. These incentives are instrumental in unlocking many investment opportunities across the country.”

Henry Chin, Global Head of Investor Thought Leadership and Head of Research at CBRE APAC, said, “Despite economic headwinds, data centres remain in focus for the commercial real estate industry in Asia Pacific, with notable market developments across the region. In India, 2023 was a quiet year for leasing as many companies remained in wait-and-see mode amid a global economic slowdown. However, activity began to pick up strongly in Q4 2023, and many deals are in the pipeline. Hyperscale demand continues to grow, with many groups expanding to take on AI-related workloads. Some hyperscalers have purchased land to develop their facilities.”