The pandemic has fast-tracked tech implementation and digitization to a great extent. In 2020-21, internet users in India surged by 8.2% – clocking over 620 million in January. As we analyse the last few quarters, market dynamics have stirred the need for organizations to adopt a ‘digital-first approach to their business, which means a robust IT infrastructure – that’s flexible, efficient, and scalable.
As businesses juggle multi-cloud models, it’s critical to understand the significance of outsourcing proposition for managing various aspects of an enterprise’s IT architecture. Implementations such as ‘edge’ data centres (DC) are gaining significant popularity – as they provide access to service that’s geographically closer and faster. These data centres have positioned themselves as key business enablers for the Indian tech space.
The New Asset Class
Initially, data centres were considered an unchartered territory for investors and had limited interest from a market yield perspective. But the year 2019-2020 changed everything. Increased use of tech, social media, and ‘work-from-anywhere’ models, is likely to boost the data centre demand – resulting in India becoming one of the largest DC destinations across APAC over the next decade.
Identifying this boom, DCs have become the next big asset class in India’s real estate market – with investors realizing the expected gains from capital appreciation and long-term rental yields. CBRE’s APAC Investor Intentions Survey found that data centres are now one of the top five alternate real estate investment options. India is emerging as one of the leading investment destinations across the Asia-Pacific.
With the progressive interest of global investors, operators and developers, it is likely that the next decade may witness the inclusion of quality DCs (with high occupancies) in future REIT portfolios.
Increased use of tech, social media, and online streaming, coupled with a burgeoning population, is likely to boost DC demand, resulting in India becoming one of the largest DC destinations across APAC over the next decade. For instance, it is estimated that India would be home to more than one billion internet users by 2030, further boosting consumerism, the omnichannel presence of brands, and the e-commerce sector in India.
India’s DC stock is also expected to grow to about 2,000 MW over the next decade, with avenues for investors in tier-1 and tier-2 cities. This is further supported by the government’s initiative of establishing 100 Smart Cities in four phases. Many companies have already shown interest and are exploring options of investing in data centres in India, leading to the emergence of a whole new architecture for the next phase.
Additionally, with technology such as AI, IoT, Machine Learning, Big Data, and cloud computing becoming more mainstream, developers are increasingly redesigning their offerings to incorporate edge computing to process data as close as possible to their end-users. While demand will continue in cities like Mumbai, Chennai, Hyderabad, and Delhi-NCR, it is expected that cities like Kolkata, Pune, Kochi, and Jaipur are likely to witness the completion of edge DCs by 2021-23, basis their ability to service-specific geographic zones.
Hence, Edge data centres offer load distribution, enabling the supply of heavy traffic load from a large, geographically diverse user base, using multiple smaller edge data centers as part of a multi-datacenter strategy. Additionally, it has increased reliability while reducing the cost with a predictable trace.
Therefore, indicating towards raising investment interest, further boosted by the growth of hyperscale computing. Here, the tenant is a mega organisation with brilliant credit, lowering the risk profile for investors, potentially becoming a global technology powerhouse.
India is successfully developing and providing the right space for investors in the data center realm. As the shift to digital is here to stay, the nation will lead to high global investment.
Authored by Ram Chandnani Managing Director, Advisory & Transactions Services, CBRE India
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