Colocation gains traction as firms outsource data infrastructure: Savills exec

India’s data centre industry is poised for rapid expansion, driven by digital transformation, rising cloud adoption, the rollout of 5G networks, and the growing demand for AI-powered workloads. According to Srihari Srinivasan, Director – Lead Transactions, Data Centres at Savills India, the country’s total data centre capacity is expected to quadruple by 2030, reaching 4 Gigawatts (GW) of IT load with a compound annual growth rate (CAGR) of 23%. The industry is gearing up for a surge in capacity additions, with annual expansions projected to climb to 350–450 MW IT between 2025 and 2030 — nearly double the 150–200 MW additions recorded in the 2022–2024 period.

AI and power needs shape site selection

As AI and machine learning (ML) workloads demand high computational power, proximity to reliable power sources has emerged as a critical factor in data centre site selection. “While technology requirements don’t directly influence location choice, AI and ML applications require significantly higher power densities, making access to robust electricity infrastructure essential,” Srinivasan told TechCircle.

The rise of AI-driven workloads is also driving demand for high-end GPUs and AI-ready campuses, while the expansion of 5G and increased mobile device usage are accelerating the need for edge data centres in Tier 2 and Tier 3 cities. These edge setups improve latency and service delivery, enhancing user experience.

Sustainability, safety, and accessibility are key considerations

Data centre developers are increasingly prioritising sustainable building materials and energy-efficient cooling solutions. Site selection also hinges on mitigating risks like flooding and ensuring strong internet connectivity. Additionally, land parcels with regular shapes, multiple access points, and distance from dense residential areas are preferred.

“Land acquisition remains a challenge, particularly with power availability issues, despite some state governments offering subsidised land,” Srinivasan explained.

Co-location offers strategic advantages

The co-location model, where organisations outsource data infrastructure management, is gaining traction in India. “Co-location provides flexibility, reduces CAPEX and OPEX, and enables better disaster recovery, redundancy, and latency management,” Srinivasan noted. This approach allows companies to concentrate on their core operations while specialists handle data infrastructure needs.

He added that the company assists clients in India to in identify optimal data centre locations by conducting land acquisition assessments, infrastructure feasibility studies, and location advisory services.

Moreover, government partnerships and policies are crucial for the sustainable growth of India's data centre sector. According to Srinivasan, "Supportive policies ensure access to affordable, reliable power, subsidised tariffs, and reasonably priced land with deferred payment options. Proactive government involvement unlocks the sector's potential to become a global powerhouse."

Challenges in emerging markets

While Tier 2 cities present opportunities due to 5G-driven demand, challenges around adequate power supply and enterprise adoption remain. Data centre operators are increasingly opting for CAPEX-light models in these markets, creating hurdles around credible development partners and land procurement.

The data centre sector is now at the forefront of India’s digital ambitions, believes Srinivasan, adding that Andhra Pradesh recently attracted Google with its Top 100 Companies scheme, a good example of proactive government involvement to unlock India's data centre potential.

"With continued investments, policy support, and infrastructure development and private sector collaboration, it is poised to transform the country into a global hub for data-driven services," he summed up.