Data Center Colocation Market

Data Center Colocation Market Synopsis

The Global Data Center Colocation Market was valued at USD 62.0 billion in 2023 and is expected to grow from USD 70.3 billion in 2024 to USD 220.9 billion by 2033, reflecting a CAGR of 13.5% over the forecast period.

The colocation market is where businesses sublease space, power, cooling and security for their IT infrastructure from a third-party data center. Instead of constructing data centers on their own, firms prefer to colocate their servers and networking gear in these studios to benefit from better connections, redundant electricity and more safety. Factors leading to the demand for colocation include needing more data storage, more cloud solutions and placing a greater priority on staying protected in the event of a disaster. Built-in savings and improved efficiency are advantages for businesses because they do not have to spend money on making and sustaining their own data center. Rather quickly, the market is growing, mainly in areas where digital transformation and access to the internet are advancing.

Data Center Colocation Market Driver Analysis

Rising Demand for Data Storage and Processing

The massive amount of data being created by IoT devices, AI and many digital services is driving the need for more scalable IT infrastructure. Information from sensors, smart appliances and connected cars is generated at all times and must be stored, worked on and reviewed. Also, training and inference for AI and machine learning models requires a huge amount of information and strong computers. Besides, the introduction of digital services for videos, online shopping, medical appointments and remote office work is increasing the amount of data we deal with. Traditionally, it’s very difficult for firms with on-premise data centers to deal with such an increase in traffic. Consequently, businesses are choosing colocation data centers because they can grow along with the organization, provide fast connectivity and strong computing capabilities to process all this data.

Data Center Colocation Market Restraint Analysis

Concerns Around Data Security and Compliance

Although colocation providers use biometric controls, monitor their facilities all day and follow worldwide standard, some firms are still unsure about moving their valuable data outside the office. Businesses working in finance, healthcare and government are usually required by regulations like GDPR, HIPAA or other financial rules to either keep data inside certain locations or maintain it under precise privacy guidelines. Many face questions about who is really in charge when data is saved in a third-party facility. With all these rules to follow, some companies still decide to keep everything in-house instead of accessing more scalable services because of the added costs involved. Consequently, fear of not complying with rules blocks the wider use of colocation among highly guided sectors.

Data Center Colocation Market Opportunity Analysis

Sustainability and Green Data Centers

A growing focus on sustainability by organizations worldwide is opening up many opportunities for companies that provide sustainable data centers. Because data centers use more energy as we consume more data, both regulators and customers are encouraging these companies to go green. More and more, enterprises are selecting partners whose approaches meet their Environmental, Social and Governance (ESG) targets. Those providers that introduce green approaches, set up advanced cooling systems and manage energy-saving infrastructure are seen differently from others. Besides, getting LEED (Leadership in Energy and Environmental Design) certification and ensuring carbon reduction makes these buildings attractive to people who want to help the environment. This approach backs worldwide sustainability while also making it less expensive to run these data centers which attracts attention and interest from many colocation businesses.

Data Center Colocation Market Trend Analysis

Focus on Automation and Remote Management

With data center operations growing in importance for businesses, colocation providers are now including advanced monitoring, AI and remote hands services as regular offerings. Thanks to these technologies, clients can quickly determine how their power, temperature, network and equipment are performing, making it easy for them to manage their IT assets. AI and machine learning are used to examine a lot of operating data so they can predict problems, manage energy better and allocate resources more efficiently. Additionally, using remote hands services, clients can have work done by technicians who visit the location and work under their supervision. These abilities are extra useful for business that either do not have much IT staff or oversee infrastructure in several locations. The use of automated and responsive support by colocation providers helps increase efficiency, lower downtime and meet what businesses want.

Data Center Colocation Market Segment Analysis

The Data Center Colocation Market is segmented on the basis of Type, Deployment Type, and End-User.

By Type

o   Retail Colocation

o   Wholesale Colocation

By Deployment Type

o   Cloud

o   On-Premises

By End-User

o   BFSI

o   Government and defense

o   Healthcare

o   IT and telecom

o   Research and Academics

o   Manufacturing

o   Other End-Users

By Region

o   North America (U.S., Canada, Mexico)

o   Eastern Europe (Bulgaria, The Czech Republic, Hungary, Poland, Romania, Rest of Eastern Europe)

o   Western Europe (Germany, UK, France, Netherlands, Italy, Russia, Spain, Rest of Western Europe)

o   Asia Pacific (China, India, Japan, South Korea, Malaysia, Thailand, Vietnam, The Philippines, Australia, New-Zealand, Rest of APAC)

o   Middle East & Africa (Turkey, Bahrain, Kuwait, Saudi Arabia, Qatar, UAE, Israel, South Africa)

o   South America (Brazil, Argentina, Rest of SA)

By Type, Retail Colocation Segment is Expected to Dominate the Market During the Forecast Period

The types discussed in this research study, the retail colocation segment is expected to account for the largest market share of data center colocation market in the forecast period. The approach is suitable for businesses that can avail of small racks or cages in a shared data center and it is best for SMEs hoping to reduce spending on infrastructure while avoiding the responsibility of running a whole data center themselves. Thanks to this model, people can increase their IT resources little by little, divide up shared infrastructure equipment and chose from several network providers to get a better connection. More shops are using cloud services and mixed IT solutions which has also boosted demand for colocation services able to directly connect clients to cloud services. Retail colocation services often handle this by operating in carrier-neutral locations.

By Deployment Type, the Cloud Segment is Expected to Held the Largest Share

The cloud segment is likely to dominate the market on account of the widespread adoption of cloud computing across industries. As companies choose to host their workloads in the cloud to be scalable, agile and cost-effective, colocation providers are adapting by supplying improved links to major cloud platforms through cloud on-ramps and direct links. Thanks to this, businesses can use public and private clouds and still rely on colocation for their operations. Because low-latency, independence over data and better disaster recovery are important, more people are drawn to colocation services that make cloud deployment possible.

By End-User, the IT and Telecom Segment is Expected to Held the Largest Share

The IT and telecom segment is expected to hold the largest share of the data center colocation market by end-user, owing to its high demand for scalable, secure, and high-performance infrastructure. Companies in IT and telecom are driving digital transformation, so they need to handle huge data loads, run nonstop and connect globally to ensure cloud services, content delivery, mobile apps and enterprise solutions function for everyone. Because of all the data and time-sensitive tasks they handle, these companies benefit from colocation by getting better performance and controlling costs. Low-latency services are being made possible for telecom providers thanks to the fast growth of 5G, edge computing and the IoT through colocating facility equipment near their users. Using colocation, companies in IT and telecom can easily manage their operations, ensure services are uninterrupted and quickly adapt to new market needs.

Data Center Colocation Market Regional Insights

North America is Expected to Dominate the Market Over the Forecast period 

North America is projected to dominate the data center colocation market during the forecast period due to its well-established digital infrastructure, high concentration of technology companies, and early adoption of cloud computing and advanced IT solutions. With cloud providers like Amazon Web Services, Microsoft Azure and Google Cloud operating many data centers across the region, the demand for colocation services providing easy and hybrid IT options is very strong. Well-designed government guidelines in North America in cybersecurity, data privacy and driving progress protect companies and influence them to build trustworthy data center systems. Because 5G networks and IoT applications are being used more, edge computing is on the rise and this is driving more colocation facility developments in important markets such as the United States and Canada. Putting great effort into green data centers and environmentally friendly infrastructure has helped North America become a top contender in the evolving colocation industry.

Recent Development

In July 2024, Digital Realty Trust announced the acquisition of a colocation data center situated in the Slough Trading Estate for USD 200 million. This purchase strengthens the company’s presence in the West London market and boosts its colocation service offerings in the City and Docklands regions.

Active Key Players in the Data Center Colocation Market

o   Cologix

o   China Telecom Corporation Limited

o   Colt Technology Services Group Limited

o   CyrusOne

o   CoreSite

o   Rackspace Technology

o   Centersquare

o   Equinix, Inc.

o   Digital Realty Trust

o   Flexential

o   QTS Realty Trust, LLC

o   Iron Mountain, Inc.

o   Other Key Players

Global Data Center Colocation Market Scope