Global Data Center Colocation Market by Type (Retail Colocation, Wholesale Colocation), by Deployment (Cloud, On-Premises), by End-User (BFSI, IT and telecom, Government and defense, Healthcare) Region and Companies – Industry Segment Outlook, Market Assessment, Competition Scenario, Trends and Forecast 2024-2033

Report Overview

The global data center colocation market size is expected to be worth around USD 227.4 billion by 2033, from USD 57.2 billion in 2023, growing at a CAGR of 14.8% during the forecast period from 2024 to 2033.

The data center colocation market is experiencing significant growth in the present day due to the increasing demand for reliable and scalable IT infrastructure. Businesses are increasingly shifting towards colocation services as a cost-effective alternative to building and maintaining their data centers. This shift is driven by the need for high availability, disaster recovery, and operational efficiency.

Colocation offers companies access to state-of-the-art facilities, reductant power & cooling systems, and enhanced security measures, which are crucial for supporting complex IT environments and managing large volumes of data.

Moreover, the rise of cloud computing and the growing adoption of hybrid IT environments are fuelling the demand for colocation services. Organizations are leveraging colocation as a bridge between on-premise data centers and cloud services, enabling them to scale their infrastructure flexibly while maintaining control over critical systems.

One of the primary factors driving the expansion of the colocation market is the rapid adoption of hybrid IT infrastructures. By 2025, over 70% of enterprises are expected to adopt a hybrid cloud strategy, blending public, private, and on-premise data storage. Colocation facilities provide the flexibility and security needed to bridge the gap between these platforms, making them an attractive option for companies seeking to enhance their IT capabilities while optimizing costs.

The growth of edge computing, driven by the increasing need for low-latency data processing in industries such as healthcare, autonomous vehicles, and IoT, is also boosting the demand for colocation services. Edge data centers are projected to account for 25% of colocation revenue by 2026, as organizations shift towards decentralized data processing models to support real-time applications and services. This shift is expected to further drive the demand for regional colocation facilities that can handle data closer to the source of generation.

In terms of regional growth, North America remains the dominant market, with over 40% of global colocation revenue in 2023, largely due to the concentration of hyperscale data centers and cloud service providers in the U.S. However, Asia-Pacific is emerging as the fastest-growing region, with a projected CAGR of 15% from 2023 to 2028. This rapid expansion is driven by increasing digitalization, data localization regulations, and the growing need for colocation services across countries like India, China, and Japan.

Despite the positive outlook, the market faces challenges related to power consumption and energy efficiency. Data centers are notoriously energy-intensive, and as sustainability becomes a top priority, colocation providers are investing heavily in green initiatives. By 2026, it is estimated that 35% of colocation facilities will be powered by renewable energy sources, driven by both regulatory requirements and growing customer demand for eco-friendly solutions. This shift towards sustainable practices presents both challenges and opportunities for the industry as it continues to evolve.

Key Takeaways:

• The Global Data Centre Colocation Market size is expected to be worth around USD 227.4 Billion by 2033, from USD 57.2 Billion in 2023, growing at a CAGR of 8% during the forecast period from 2024 to 2033.
• In 2023, the Retail Colocation segment held a dominant market position, capturing more than a 54.6% share of the Data Centre Colocation Market.
• In 2023, the cloud segment held a dominant market position, capturing more than a 57.8% share of the Data Centre Colocation Market.
• In 2023, the IT and Telecom segment held a dominant market position, capturing more than a 34.7% share of the Data Centre Colocation Market.
• In 2023, North America held a dominant market position in the Data Centre Colocation Market, capturing more than a 37.3% share.

Type Segment Analysis

In 2023, the retail colocation segment held a dominant market position, capturing more than a 54.6% share of the data center colocation market. The retail colocation segment has dominated the market due to several reasons. It tends to provide smaller, scalable space options which are ideal for businesses requiring flexibility without significant capital investment. This model appeals to start-ups and SMEs, which benefit from cost efficiency and lower entry barriers.

Additionally, the retail colocation often offers enhanced support services, including managed IT services and compliance assistance, which attract businesses lacking in-house expertise. The increasing demand for digital transformation and cloud services also drives growth, as retail colocation facilitates support for a wide range of IT infrastructures.

Furthermore, the rise of edge computing data localization requirements has bolstered the retail colocation’s appeal by providing proximity to end users and regulatory compliance. These factors collectively ensure that retail colocation remains a dominant force in the data center market.

Deployment Segment Analysis

In 2023, the cloud segment held a dominant market position, capturing more than a 57.8% share of the Data Centre Colocation Market. The cloud segment dominated the data center colocation market due to its flexibility, scalability, and cost efficiency. Businesses increasingly prefer cloud services for their ability to scale resources up to down based on demand, which is crucial for managing costs and ensuring agility in operations.

Cloud services eliminate the need for substantial upfront capital investment in IT infrastructure, making them appealing to companies of all sizes, particularly start-ups and SMEs. Additionally, cloud providers offer a range of managed services, reducing the burden of maintenance and management for businesses.

The shift towards digital transformation, big data, and IoT has heightened the demand for cloud-based solutions, which can efficiently handle large volumes of data and support real-time analytics.

End-User Segment Analysis

In 2023, the IT and Telecom segment held a dominant market position, capturing more than a 34.7% share of the Data Centre Colocation Market. The IT and Telecom segment dominates the data center colocation market due to its substantial and continuous demand for reliable, high-performance infrastructure. Both industries have extensive computing power, storage, and connectivity to support their operations, which makes colocation an ideal solution.

Colocation facilities offer the scalability, redundancy, and security needed to handle large volumes of data and ensure, uninterrupted services which is critical for IT and telecom companies.

The rapid growth of cloud computing, 5G technology, and the Internet of Things further drive the demand for colocation services, as these advancements require robust and geographically distributed data centers.

Key Market Segments

By Type

• Retail Colocation
• Wholesale Colocation

By Deployment

• Cloud
• On-Premises

By End-User

• BFSI
• IT and telecom
• Government and defense
• Healthcare

Driving Factors

Increasing growth in data generation

The increasing growth in data generation is a significant driver for the data center colocation market. As businesses and consumers tend to generate a vast amount of data via cloud computing, social media, IoT devices, and big data analytics, the demand for storage and processing power has surged.

This exponential growth in data requires robust, scalable, and efficient data center infrastructure, which colocation providers are well-positioned to offer. Colocation services allow organizations to handle large volumes of data without the need for significant capital investment in building their own data center.

Moreover, colocation facilities often provide advanced connectivity options, ensuring fast and reliable data transfer, which is crucial for businesses that rely on real-time analytics and large-scale data processing.

Restraining Factors

Involvement in a complex and time-consuming process

The involvement of complex and time-consuming processes acts as a restraint on the data center colocation market. Migrating to a colocation model involves several intricate steps, including data migration, network configuration, and the integration of existing IT infrastructure with the colocation facility.

These processes require meticulous planning, specialized expertise, and often, substantial time to execute efficiently. Additionally, the transition may disrupt regular business operations, as companies must carefully manage the downtime associated with moving equipment and data to the new facility.

The complexity is further heightened when dealing with the legacy system, multiple data sources, or hybrid cloud environments which require careful synchronization to enhance seamless operations. This can deter organizations, particularly SMEs who have limited IT resources, from opting for colocation services.

Growth Opportunities

Growing focus on sustainability and energy efficiency

The growing focus on sustainability and energy efficiency presents a significant opportunity for the data center colocation market. As environmental concerns rise and regulations tighten, businesses are increasingly prioritizing green initiatives and seeking energy-efficient solutions to reduce their carbon footprints.

Colocation providers can capitalize on this trend by investing in sustainability practices, such as utilizing renewable energy sources, implementing advanced cooling technologies, and optimizing energy use through efficient infrastructure design.

These efforts not only attract environmentally conscious clients but also help colocation providers reduce operational costs, which can be passed on as savings to customers. Additionally, by offering energy-efficient data centers, colocation providers can differentiate themselves in a competitive market, appealing to companies aiming to meet sustainability goals or adhering to corporate social responsibility (CSR) standards.

Challenging Factors

Privacy and security concerns

Privacy and security concerns pose a significant challenge for the data center colocation market. As businesses store and process sensitive data within colocation facilities, they must ensure that stringent security measures are in place to protect against breaches, data loss, and unauthorized access.

However, relying on third-party providers for data storage introduces risks, as companies may have limited control, over security protocols and practices.

Additionally, colocation centers are attractive targets for cyberattacks due to the large volumes of data they house, increasing the pressure on colocation data center providers to implement robust cybersecurity defense.

Compliance with diverse regulatory requirements across different regions further complicates security management, making it challenging for colocation providers to maintain consistent security standards globally.

Growth Factors

Cost efficiency: A colocation data center provides a cost-effective alternative to building and maintaining in-house data centers, appealing to businesses of all sizes.

Scalability and flexibility: Colocation data centers offer the ability to quickly scale IT infrastructure in response to business growth without significant upfront investment.

Focus on the core competencies: outsourcing data center operations to colocation data center providers allows businesses to focus on their core activities rather than IT management.

Digital transformation: the global shift towards digitalization in various industries increases the need for robust, reliable data center infrastructure.

Regulatory compliance: colocation data center providers often offer advanced security and compliance features, helping businesses meet industry-specific regulatory requirements.

Latest Trends

Hybrid IT solutions: Increasing adoption of hybrid cloud models where businesses use a combination of on-premise, colocation, and public cloud services for greater flexibility and optimized performance.

Edge computing expansion: Growth in edge computing is driving the demand for colocation data center facilities closer to end-users, reducing latency and supporting real-time data processing for applications like IoT and 5G.

Sustainability Initiatives: Rising focus on green data centers, with colocation data center providers investing in renewable energy, efficient cooling technologies, and carbon-neutral operations to meet sustainability goals.

Advanced Security measures: Implementation of sophisticated cybersecurity measures, including AI-driven threat detection, zero-trust architectures, and compliance with stricter data protection regulations like GDPR and CCPA.

Regional Analysis

North America region is leading the market

In 2023, North America held a dominant market position in the Data Centre Colocation Market, capturing more than a 37.3% share with a growth of USD 21.3 Billion. North America’s dominance in the data center colocation market is largely driven by the region’s advanced and mature IT infrastructure. The United States, in particular, is home to a significant concentration of technology giants, cloud service providers, and enterprises with substantial data needs.

This high demand for data storage, processing, and management services fuels the growth of colocation data center facilities, which offer scalable and cost-effective solutions. Additionally, North America’s widespread internet penetration and the rapid adoption of digital technologies across various industries further bolster the demand for colocation services, as businesses seek reliable and secure infrastructure to support their operations.

Key Regions and Countries

North America

• US
• Canada

Europe

• Germany
• France
• The UK
• Spain
• Italy
• Russia
• Netherlands
• Rest of Europe

Asia Pacific

• China
• Japan
• South Korea
• India
• Australia
• Singapore
• Thailand
• Vietnam
• Rest of APAC

Latin America

• Brazil
• Mexico
• Rest of Latin America

Middle East & Africa

• South Africa
• Saudi Arabia
• UAE
• Rest of MEA

Key Players Analysis

The data colocation market is highly competitive with several key players dominating the industry. These companies offer a range of services, including space, power, cooling, and connectivity, catering to businesses of all sizes across various industries.

Equinix is one of the largest global colocation data center providers, known for its extensive network of data centers across multiple continents. The company operates in over 60 markets worldwide, offering interconnection services that enable businesses to connect directly to partners and cloud providers within its facilities.

Digital Reality is one of the leading colocation providers, offering a broad range of data center solutions across the Americas, Europe, Asia, and Australia. The company serves a diverse client base, including enterprises, cloud and IT services companies, and network providers.

Top Key Players in the Market

• Equinix Inc.
• NTT Communications Corporation
• AT&T Inc.
• CoreSite Realty Corporation
• Cyxtera Technologies Inc.
• Digital Realty Trust Inc.
• VerizonEnterprise Solutions, Inc.
• Zayo Group, LLC
• CyrusOne
• Cologix
• Other Key Players

Recent Developments

• In February 2024, Bridge Data Centres International Pte Ltd joined forces with the Singaporean firm Red Dot Analytics Pte Ltd in a strategic alliance to further BDC’s aims in data center resilience, energy efficiency, and sustainability through the use of RDA’s data center Digital Twin AI technology.
• In January 2024, Digital Realty launched the MAA10 data center in Chennai, which sets new standards for India’s data center industry. This is a new cloud- and carrier-neutral data center that provides colocation and interconnection solutions.

Report Scope