India's Data Centre Vacancy Narrows Amid Accelerating AI Demand Outpacing New Supply

India's Data Centre Sector Enters Supply-Constrained Growth Cycle

India's data centre sector is experiencing a supply-constrained growth cycle, despite a significant 3.1 GW development pipeline, as hyperscale cloud operators and AI-driven demand rapidly absorb new capacity across key markets.

According to a recent report by Cushman & Wakefield, released on May 27, India's vacancy levels have fallen to 12.9 percent by the end of 2025, even as developers aggressively expand capacity, signaling tightening availability across the country's digital infrastructure market. This trend is a clear indicator of the growing demand for data centre capacity in India.

India ranks as the second-largest data centre market in Asia Pacific, with 1.6 GW of operational capacity, and is among the top three global markets by future pipeline, with 3.1 GW under construction and planned. The report highlights the growing importance of India as a data centre hub, with Mumbai remaining the dominant market and expected to cross 1 GW of operational capacity by the end of 2026.

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The data centre growth is increasingly spreading beyond Mumbai into secondary markets such as Hyderabad, Chennai, Pune, and Delhi-NCR. Hyderabad has emerged as one of the biggest gainers, ranking as the top secondary market in Asia Pacific and ninth globally, driven by rising hyperscale and enterprise investments.

The trend of pre-leasing new data centre capacity in Asia Pacific, with more than 50% of new capacity being pre-leased even before completion, reflects the surging demand from hyperscalers and artificial intelligence workloads. This trend is not unique to India, as regional vacancy levels declined from 12.4 percent to 10.9 percent despite more than 1.5 GW of new supply being added during the year.

Industry experts attribute this trend to the fundamental reshaping of infrastructure demand globally, driven by AI adoption and cloud expansion. India is emerging as one of the biggest beneficiaries, with more than 10.5 GW of future capacity in India currently at the land acquisition or planning stage, reflecting strong investor confidence in long-term digital demand.

The demand is increasingly being fueled by AI workloads, cloud computing, enterprise digitisation, and the rapid expansion of Global Capability Centers (GCCs) across Indian cities. Emerging locations such as Visakhapatnam are also positioning themselves as AI-focused digital infrastructure hubs as operators look beyond traditional markets for scalable land and power availability.

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The report highlights the need for a more execution-driven phase of growth, where access to power, infrastructure readiness, and delivery capability are becoming as important as demand itself. India's expanding multi-city ecosystem and strong long-term demand visibility position it among the most important global growth markets for digital infrastructure.