Data Center Emerging as a New Theme among Capex India Inc.

In their latest report on Corporate Capital Expenditure (CAPEX) trends, analysts at Spark Capital Research pointed out that data center capex is emerging as a new mega-theme in India. The growing preference for hybrid working models has led to increased cloud adoption and investments in data centers across sectors such as banking and financial services, retail, healthcare and e-commerce, the report said. In addition, telecom companies gearing up for 5G roll-out are also set to increase their investments in data centers as data consumption is expected to increase.

Analysts at Spark Capital said derivatives of data center spending should be visible in higher demand for switchgear, substation/transformer, building management systems, cooling solutions and gensets. Therefore, companies engaged in manufacturing these items will benefit.

Another beneficiary of this emerging trend will be real estate, especially in metro cities. Interestingly, Adani Group, Japan’s NTT and Hiranandani Group are among the companies looking to expand their data center presence in Noida, Pune, Delhi and Mumbai in India. These companies have recently announced fresh investments for the purpose.

Viral Desai, National Director, Occupier Services, Knight Frank India, said, “Mumbai’s strategic location, being a coastal city and having access to cable landing destinations under the sea, make the city a suitable choice for data centres.”

“Chennai also serves as a data center for other South Indian cities in close proximity. Desai said Delhi-NCR, Hyderabad and Bengaluru are other places where several major IT corporations have their headquarters in India. Contributes to 5-10% of the overall absorption of commercial real estate in any given market.

“From an investor’s perspective, data centers constitute a long-term stable asset that can provide stable and secure returns over a long period (20-30 years). This segment is already dominated by global companies such as Brookfield, Blackstone, ESR and CapitaLand. The investments from the funds are being seen.”

Another asset consultant, JLL India, estimates that the capacity of India’s data center industry will double and cross the 1 GW mark by 2023. According to JLL India, global investors and data center companies have increased their commitment during the last six months by announcing joint ventures with operators. to set up sites. The property advisor said in its recent report that its investment commitment of $3 billion highlights the growth potential of this property.