In an increasingly digitised world, where the internet is integrated into many of our daily routines, an inconceivable amount of data is being generated. The collection and analysis of big data in data centers quickly became a crucially important industry in the early 21st century, as consumer brands realised the power this had to help them better cater to customers. Certainly as India holds the world’s second largest base of active social media users, tech companies tend to focus on the region as a hub for digital analysis.
But an often overlooked question is how the data is being physically stored - the answer being with 8.2 million sq ft of data centres across India’s main cities. Members gathered at a GRI Club India meeting to discuss the investment opportunities that this niche real estate asset class may hold.
Some numbers, courtesy of a report published by JLL in conjunction with GRI Club, were first cited to illustrate just how quickly the sector was growing. There has been a growth of 296 million Indian wireless data subscribers in the last four years. This has risen the data usage per person per month by 2800%, from 0.3GB to 7.6GB.
Technological advancement has been constantly been driving growth in the industry; not only increasing capability of storage and usage, but better optimisation and branding of digital services has resulted in the growth of these enablers and therefore momentum - at 400 million WhatsApp has the highest user base in this country.
So what must investors and developers consider when entering this market? Firstly, the previously mentioned tech innovation certainly plays a part in the operation of the asset - the amount of sq ft needed to store 1MW of data is now at least 6 times smaller than it was a few years ago. Furthermore, the adaptation of cloud technology has turned the industry away from stand alone buildings and more towards entire data center campuses.
In the future, data centers are likely to attract investments from sovereign wealth funds who are looking at long term stable yields. However the sector has a long way to go before it becomes REITable. This is partly down to approvals taking a long time, as well as the youth of the asset class meaning it also remains to be seen what legislation will come to affect it. The problem is the industry is quite sensitive to risk, and any kind of disruption can cause huge losses.
For more information on the Indian real estate market across all asset classes, active discussions will take part between senior key leaders at India GRI 2020.
This paper was developed in conjunction with GRI Club India, and released at a recent club meeting concerning data centre real estate.
Download the full report below.
Article by Matt Harris