Data Center Colocation Market Size, Share, Growth, and Industry Analysis, By Type (Retail colocation and Wholesale colocation), By Application (Small and Medium-Sized Enterprises (SMEs) and Large Enterprises), Regional Insights and Forecast To 2035

•   
•   
  

  Request a Free sample to learn more about this report

    

DATA CENTER COLOCATION MARKET OVERVIEW

The global Data Center Colocation Market size is USD 57.56 billion in 2025, is expected to rise to USD 61.01 billion in 2026, and is forecasted to reach USD 154.68 billion by 2035, expanding at a CAGR of 6% throughout the period 2025-2035.

Data center colocation means the ability of businesses to get space in a third-party data center where they house their server and other computing equipment. To avoid the problems associated with owning and maintaining a data center, companies can take advantage of colocation services that enable secure, reliable and cost effective hosting of the companies’ IT architecture.

KEY FINDINGS

COVID-19 IMPACT

Data Center Colocation Industry Had a Positive Effect Due to Surge in Digital Transformation during COVID-19 Pandemic

The global COVID-19 pandemic has been unprecedented and staggering, with the market experiencing higher-than-anticipated demand across all regions compared to pre-pandemic levels. The sudden market growth reflected by the rise in CAGR is attributable to market’s growth and demand returning to pre-pandemic levels.

Online learning, remote jobs, consultations through the internet, and streaming services created a new peak of internet usage. This enhanced the demand for colocation services for the provision of scalable, and dependable infrastructure. Organizations went deeper with cloud solutions across the firm. Providers of colocation facilities thus provided hybrid cloud infrastructure to integrate companies’ internal infrastructure with cloud systems.

LATEST TRENDS

Rise of Edge Data Centers to Propel Market Growth

One big trend observed in the DC colocation industry is the advancement of edge data centers as more and more consumers need fast access to data, owing to the rapid generation of data by IoT devices, 5G network, and remote applications. Contrary to conventional centralized data centers, edge data centres are rather distributed and smaller facilities. This proximity also leads to low latency of data transfer, improved real-time data management and it has many use cases including self-driving cars, AR/VR, smart cities, etc.

• According to the U.S. Department of Energy (DOE), the demand for edge data centers is accelerating. In 2023, over 30% of all new data center builds were dedicated to edge computing to cater to low-latency applications. This shift is driving the expansion of colocation services as companies increasingly prefer localized data storage solutions.

• According to the National Institute of Standards and Technology (NIST), hybrid cloud architectures are becoming the norm for many enterprises. In 2023, 58% of large enterprises in the U.S. were reported to be deploying hybrid cloud solutions, which rely heavily on data center colocation services for their integration and security needs.

•   
•   
  

  Request a Free sample to learn more about this report

    

DATA CENTER COLOCATION MARKET SEGMENTATION

By Type

Based on type the global market can be categorized into Retail colocation and Wholesale colocation.

• Retail Colocation- They are a type of outsourcing of server space where a business only takes a section of the data center, often just a few racks or cabinets to a retail customer.

• Wholesale Colocation- Wholesale colocation can be defined as leasing of big spaces for instance the suites, floors or data halls which occasionally may be customized to the tenant.

By Application

Based on application the global market can be categorized into Small and Medium-Sized Enterprises (SMEs) and Large Enterprises.

• Small and Medium-Sized Enterprises(SMEs)- SMEs claim that third parties such as Internet hosting services offer their enterprise servers and networking equipment storage at cheaper prices than constructing their individual data centers.In some instances, should the enterprise scale up, it can easily scale up on the number of servers without incurring in the construction of new data centers.

• Large Enterprises-  Colocation is usually applied to link an enterprise’s on-premise IT infrastructure to public or private cloud services, to have hybrid scenarios. Enterprise organizations use colocation facilities in many locations for their distributed offices and clients to minimize delay and enhance the flow of services.

Driving Factors

Growing Demand for Cloud Computing to Drive Market Advancement

One of the key driving factors in the Data Center Colocation market growth is Growing Demand for Cloud Computing. The most dominant driving force for the data center colocation market is the escalating need for Cloud & hosting services that help in increasing business dimensions, versatility & cost effectiveness. Colocation facilities offer enormous opportunities to integrate an organization’s on-premise IT infrastructure with public or private cloud solutions to create hybrid solutions which are critical for today’s organizations. These facilities allow for direct access to different cloud markets like AWS, Azure, as well as Google Cloud, achieving low-latency connection to the cloud.

• According to the U.S. Census Bureau, global data generation is expected to reach 175 zettabytes by 2025, up from 59 zettabytes in 2020. This massive increase in data is propelling the demand for colocation services, as businesses require scalable and secure infrastructure for storing, managing, and processing vast amounts of data.

• According to the European Union Agency for Cybersecurity (ENISA), data privacy regulations, such as the General Data Protection Regulation (GDPR), have made data sovereignty a priority for businesses. In 2023, 45% of companies in Europe cited regulatory compliance as a key factor for choosing colocation services to ensure that their data remains within specific geographic borders.

Rise in Data Generation and Storage Needs to Expand the Market

One of the major trends behind the development of data center colocation is the increased volume of data generated and, consequently, the need for its storage. Internet of Things (IoT) devices have emerged, e-commerce platforms are expanding, HD video streaming has become more common, and a growing number of organizations are going digital, all of which has created This has led to a significantly increased data generation. Various organizations operating in various industries need scalable and reliable storage and processing infrastructure to deal with this data effectively. But managing and constructing such expansive data centers internally to cater for such large amounts is expensive and state-of-art.

Restraining Factor

High Initial Costs to potentially impede Market Growth

Limited capital is a huge constraint to the data center colocation market, especially to SMEs and startups due to high initial expenses. However, colocation is still a cheaper solution to running an own data center: leasing space, purchasing the necessary hardware, and ensuring power and connectivity can also be rather expensive. Some of the colocation providers demand clients to sign up for long terms of service with a set price structure, which doesn’t benefit businesses with small capital and limited liquidity.

• According to the International Energy Agency (IEA), data centers account for about 1% of global energy consumption. In 2023, 30% of organizations reported concerns about the environmental impact of their data storage solutions. This has led to increasing pressure on data center operators to adopt greener technologies, posing a challenge to market expansion in regions with limited access to renewable energy sources.

Increasing Demand for Cloud Services to create opportunity for the Product in the Market

Opportunity

The trend of cloud computing is heading towards fast growth and as a result of the hybrid IT being looked forward as the best solution where organizations preferred both internal as well as external infrastructure. The facility of colocation centers also provides a cheaper integration with the cloud services, thus allowing firms to expand their structures, bearing main facilities into their hands. Colocation providers who have direct connections to the underlying cloud platforms, such as AWS, Azure or Google Cloud will be well placed to meet demand for hybrid cloud.

• According to the U.S. Chamber of Commerce, digital transformation efforts are driving enterprises to seek more flexible IT infrastructure. By 2023, 70% of U.S. businesses had either fully or partially adopted digital transformation strategies, which are expected to boost demand for colocation services that offer scalability and agility in their IT infrastructure.

• According to the International Telecommunication Union (ITU), the number of Internet of Things (IoT) devices globally was forecasted to reach 75 billion by 2025. With smart city projects on the rise, the need for colocation facilities to handle the massive influx of data generated by these devices is increasing. In 2023, IoT-related colocation services accounted for about 15% of all data center space globally.

Data Security and Privacy Concerns Could Be a Potential Challenge for Consumers

Challenge

The potential loss of data security and privacy issues remain paramount in the data center colocation market especially given the fact that growing numbers of organizations are outsourcing data to third-party facilities. Outsourcing services such as colocation demand that important organizational structures be handed over to third party providers which creates a security vulnerability that may lead to data theft, unauthorized access and physical infringements. As government regulatory environments tighten related to data privacy like the GDPR of EU, CCPA of California, and the HIPAA of healthcare, businesses are at risk of breaching these laws if data is not seamlessly secured within colocation centers.

• According to the Urban Land Institute (ULI), finding suitable land for constructing new data centers in densely populated regions is becoming increasingly difficult. In 2023, 40% of colocation service providers in urban centers reported challenges in securing affordable real estate, particularly in cities like San Francisco and London, where demand for data centers is high.

• According to the U.S. Cybersecurity and Infrastructure Security Agency (CISA), as colocation data centers become larger and more complex, they face increasing cybersecurity risks. In 2023, 25% of colocation providers reported cyberattacks affecting their facilities, highlighting the ongoing need for robust cybersecurity measures and the challenge of protecting sensitive customer data.

•   
•   
  Request a Free sample to learn more about this report

    

DATA CENTER COLOCATION MARKET REGIONAL INSIGHTS

• North America 

North America has emerged as the most dominant region in the Data Center Colocation market share due to a convergence of factors that propel its leadership in this dynamic industry. The Americas, especially North America and the USA have developed a data center market and a huge density of colocation services. The market leadership is boosted by the resident companies such as Amazon Web Services (AWS), Microsoft, Google, among other technology firms.

• Europe

Europe is also progressing mainly in some areas like the United Kingdom, Germany and the Netherlands especially data protection laws known as GDPR. However, the market is still smaller than that of North America due to more diverse and developing infrastructure and regulations on a country-level.

• Asia

Asia Pacific is growing at a fast pace majorly because of the internet adoption, cloud services, and setting up of bases in nations including China, India, and Japan. Nevertheless, it remains behind the North American market in size and development of the market infrastructure.

KEY INDUSTRY PLAYERS

Key Industry Players Shaping the Data Center Colocation Market Through Innovation and Market Expansion

Key enterprise players are shaping the Data Center Colocation marketplace through strategic innovation and marketplace growth. Current industry leaders are diversifying into new markets such as the Asia Pacific, Latin America and the Middle East to seek out new markets to break into. For instance; the Equinox, and Digital Realty, are expanding their coverage by constructing facilities on new markets of the world, in order to fulfill the demand of data centers.

• NTT Communications Corporation: According to NTT Communications, the company operates over 140 data centers across 20 countries globally as of 2023. NTT’s colocation services cater to industries including finance, healthcare, and e-commerce, where there is significant demand for high-performance infrastructure.

• Dupont Fabros Technology: According to Dupont Fabros Technology, the company has been a leading player in the data center colocation market, with more than 8 million square feet of data center space under management as of 2023. Their facilities are recognized for providing high security, energy efficiency, and scalability.

List Of Top Data Center Colocation Companies

• Cyrusone Inc.(U.S.)
• Cyxtera Technologies(U.S.)
• Digital Realty Trust(U.S.)
• Dupont Fabros Technology(U.S.)
• NTT Communications Corporation(Japan)

KEY INDUSTRY DEVELOPMENTS

July 2020:  Yotta Infrastructure, a Real Estate giant of India has inaugurated Asia’s largest and world’s second largest Data Center located at Navi Mumbai.

REPORT COVERAGE 

The study encompasses a comprehensive SWOT analysis and provides insights into future developments within the market. It examines various factors that contribute to the growth of the market, exploring a wide range of market categories and potential applications that may impact its trajectory in the coming years. The analysis takes into account both current trends and historical turning points, providing a holistic understanding of the market's components and identifying potential areas for growth.

The research report delves into market segmentation, utilizing both qualitative and quantitative research methods to provide a thorough analysis. It also evaluates the impact of financial and strategic perspectives on the market. Furthermore, the report presents national and regional assessments, considering the dominant forces of supply and demand that influence market growth. The competitive landscape is meticulously detailed, including market shares of significant competitors. The report incorporates novel research methodologies and player strategies tailored for the anticipated time frame. Overall, it offers valuable and comprehensive insights into the market dynamics in a formal and easily understandable manner.