CHENNAI: The increased pace of digitisation and the significant growth in data consumption enforced by the ongoing COVID-19 pandemic has resulted in a growing demand for data centres. The data centre market in Chennai is estimated to grow to a capacity of 174 MW by 2023 -- more than double in three years -- according to a report by Knight Frank.
The 14th edition of Knight Frank's flagship half-yearly report -- India Real Estate: Second Half 2020 -- which was released on Wednesday, states that Chennai’s data centre market is presently estimated to be at a capacity of around 70 MW and occupies approximately 2 million square feet of real estate space (built-up area). Large IT office market base, hyperscalers and large enterprises are the primary demand drivers in Chennai and investments worth Rs 120 billion have already been announced by six players during April-October 2020.
The report says that the proposed National Data Centre Policy will further boost data centre growth in the city as proposals such as granting ‘infrastructure’ status, setting up Data Centre Economic Zones (DCEZs) and providing single-window clearance are on the cards. These, coupled with the impending rollout of 5G technology, will strengthen the data centre growth trend in Chennai, it added.
"Within Chennai, the Ambattur and Siruseri micro markets have evolved into data centres and cloud hotspots, and key national and international players such as Netmagic, Adani and Yotta have
established their base in the city," the Knight Frank report states.
The report states that Chennai has four undersea cable landing stations that offer sound optic fibre network connectivity. The city is geographically the closest in India to the South-East Asia region
thus facilitating easy international connectivity. Being a coastal location, it also ensures further scope of building new cable landing stations in the future, the report adds.
The report which provides comprehensive analysis of the office and residential market performance states that Chennai's fourth quarter office space transactions grew by a significant 227 percent compared to third quarter of the year 2020. "With news of the vaccine coming in, Information Technology (IT) companies have started locking in office spaces and implementing their lease plans. This increase in leasing activity coupled with the pent-up demand contributed to the fourth quarter of 2020's transaction volume surge," says the report.
The share of Banking, Financial Services and Insurance (BFSI) sector in total transactions went up from 13% in H2 2019 to 22% in H2 2020, recording a sizable 60% YoY growth in the sector’s office space absorption in H2 2020. With a share of 58% of the total transaction volume, the IT sector remained the primary driver of Chennai's office market.
Srinivas Anikipatti, Senior Director, Tamil Nadu and Kerala, Knight Frank India, said the Chennai commercial office real estate market has seen a steady annual demand of around 4 million sq ft for more than a decade. In 2020, despite the pandemic, the office market has recorded a healthy leasing volume of 4.5 million sq ft.
After a decadal high in transactions last year, the demand momentum continued to remain strong in Q1 2020 and was muted only by the onset of the COVID pandemic and the ensuing market uncertainties. Even then, the second half of 2020 recorded the second highest half-year transaction volume in this decade. BFSI and IT sector companies have been the drivers of this demand, he said.
He said residential prices have been subjected to tremendous pressure this year with the COVID pandemic derailing the momentum of both sales and launches. The weighted average of residential prices at the city level has seen a 9 per cent year on year dip in 2020. "The prices are expected to rebound in 2021," he says hoping that it will happen after the assembly elections.