India’s Data Centre (DC) Industry is all set for exponential growth, driven primarily by artificial intelligence (AI) and the nationwide rollout of 5G technology. According to JLL India, the DC industry is expected to add a staggering 604 MW capacity in the next two and a half years (H2 2024-2026). The growth is a testimony to India’s emergence as a global hub for AI innovation and data centre development.
“India is rapidly establishing itself as a global centre for AI innovation and data centre growth. Hyperscalers are increasingly pursuing self-build projects in major data centre hubs, and operators are planning new campuses powered by 400 kVA lines to support AI clusters. Navi Mumbai, a satellite city near Mumbai, is rising as a key data centre location, with potential demand expected to reach 800 MW in the coming years. The push for AI-ready infrastructure, combined with the transformative influence of 5G, is revolutionising India’s digital ecosystem and positioning the country as a leader in technological advancements,” said Rachit Mohan, APAC Lead – Data Centre Leasing, JLL.
Impressively, by the first half of 2024, the DC industry had already reached a capacity of 917 MW and recorded 873 MW occupancy. This has highlighted extremely tight market conditions in the sector. Over the past four and half years (from 2019 to H1 2024), the sector expanded 2.5 times, achieving significant growth at a remarkable compound annual growth rate (CAGR) of 24%. This trend shows no signs of slowing down, boosted by significant government initiatives, including the approval of a USD 1.24 billion investment dedicated to AI infrastructure. By the end of 2023, 5G network coverage is estimated to have reached over 90% of India’s population.
Dr. Samantak Das, Chief Economist and Head of Research & REIS at JLL, explained, “The future expansion of the DC industry until 2026 will require approximately 7.3 million sq. ft of real estate, along with a capital investment of USD 3.8 billion. We expect Mumbai to lead the market, along with expected growth in Chennai and other regions. This expansion is not just increasing demand for specialized skills; it’s also opening up opportunities across related industries.
The expansive growth of the data centre industry is poised to yield far-reaching effects on India's digital infrastructure and the economy at large. The growth of the data centre industry is not just about infrastructure—it's also about creating job opportunities and fueling innovation across various sectors. This positions India more prominently on the global technological stage.
Meanwhile, across the oceans, the dynamics of real estate are also transforming, propelled by AI. For example, Texas Pacific Land Corp., established during the Wild West era, has enjoyed notable stock market success as the AI boom sweeps through the sector. This Dallas-based land company has seen its stock price soar more than 230% this year, pushing its market cap close to $40 billion.
Digging deep, what’s driving this surge? Well, the firm manages approximately 873,000 acres of land enriched with resources and potential. With utility-scale batteries, renewable energy projects, and Bitcoin mines rising within its commercial envelopes, it offers vast opportunities for tech giants eager to establish themselves on cheap, energizing land. This includes names like Google, Microsoft, and Amazon, all being attracted by the promise of vast resources for their energy-accumulating servers.
Even more intriguing, TPL’s recent inclusion among the S&P 500 constituents has helped its shares witness immediate spikes. “There’s considerable interest from the industry about leasing land for data centres. We’re confident we’re among the best positioned landowners in West Texas to provide necessary land and infrastructure solutions,” declared TPL CEO Tyler Glover during a conference call with investors.
The current enthusiasm around AI is causing substantial shifts, with financial institutions projecting large-scale investments. Notably, Alphabet, Microsoft, Amazon, and Meta Platforms are forecasted to expend over $200 billion on physical infrastructure just next year, much of it focused on data centres. With AI’s potential to reshape lifestyles, work methods, and interaction styles, it forms the heartbeat of the rising S&P 500 Index, which has skyrocketed over 50% the last two years due to exuberant valuations.
Despite this optimistic outlook, experts caution about the potential for excesses; managing director Greg Halter noted, “Different sectors will largely benefit from this phenomenon. There’s arisen interest around unexpected entities, and values are shifting drastically.” Meanwhile, amid this surge, TPL’s shares have soared to $1,730, reflecting the current market frenzy over AI.
Historically, TPL's rise from humble origins—established as a trust to repay bondholders from efforts to construct railways decades ago—fascinates investors today. That land has become enormous wealth due to the shale innovation boom, and they now earn near $100 million quarterly from royalties paid by oil producers. They’ve also gained added revenue from water sales and land leasing agreements.
And it’s not just TPL benefiting. Other players like LandBridge Co. are capitalizing too, seeing their stock prices triple since IPO and making moves to expand their holdings following increasing demand for infrastructure related to AI.
The reality remains, AI is reshaping not only technology sectors but ancillary spaces, raising demands for energy-driven services. With Goldman Sachs estimating power demand for US data centres could surge by about 170% by 2030, all bets are off on how the infrastructure will keep up with this spectacular growth.
Major costs might not only involve capital expenditures on infrastructure, as energy boilerplate indicates high demand can push climate ambitions out of the picture. Future projections indicate significant strains with energy costs rising dramatically, significantly impacting sustainability goals amid rising data centre demands. Some reports imply the use of natural gas primarily available from the Permian Basin can bridge these staggering energy requirements.
The Permian Basin stands significantly positioned to provide substantial energy as it produces large volumes of natural gas, often wasted through flaring. This cheap, abundant gas holds promises as it could efficiently power both data centres and other projects. This situation presents multiple angles of challenges and opportunities moving forward. Glover from TPL remains optimistic but refrains from making hasty predictions, wary of market movements.
“Nobody has more land than us here. We’re well-positioned to cater to this surge of business from AI,” he concludes, hinting at more infrastructure planning on the horizon for TPL's expansive lands.
