Dublin, May 14, 2025 (GLOBE NEWSWIRE) -- The "Data Center Colocation Market - A Global and Regional Analysis: Focus on Application, Product, and Region - Analysis and Forecast, 2025-2034" report has been added to ResearchAndMarkets.com's offering.
The global data center colocation market was valued at $130.22 billion in 2024 and is projected to grow at a CAGR of 14.65% from 2025 to 2034, reaching $569.58 billion by 2034.
This rapid growth is driven by the increasing demand for secure, scalable, and cost-effective IT infrastructure solutions. As businesses embrace cloud computing, hybrid IT models, and digital transformation strategies, the need for colocation services has surged.
The key players operating in the data center colocation market include Digital Realty, Equinix, Inc., Lumen Technologies, CoreSite, DataBank, Ltd., Centersquare, Flexential, MOD Mission Critical, CyrusOne, TierPoint, LLC, IPTP Networks, 365 Data Centers, EdgeConneX Inc., HostCircle Inc. and Cogent Communications. These companies have been focusing on strategic partnerships, collaborations, and acquisitions to enhance their product offerings and expand their market presence.
Demand - Drivers, Limitations, and Opportunities
Market Drivers: Increasing Data Center Spending
The growing demand for data centers has drawn interest from a wide range of investors, including growth capital, buyout firms, real estate, and infrastructure investors. In the U.S. market, data center demand measured by power consumption as an indicator of server capacity is expected to grow from 17 gigawatts (GW) in 2022 to 35 GW by 2030. The U.S. represents approximately 40% of the global data centers.
In July 2024, Blackstone, a major investment firm, expanded its data center portfolio with $70.0 billion allocated for future developments and its existing $55.0 billion in assets, including ongoing construction projects. AI's transformative impact is projected to drive $2.0 trillion in global data center capital expenditures over the next five years, with $1.0 trillion expected in the U.S. alone.
Due to the growing demand for data centers, the industry faces significant challenges, particularly in managing the vast amounts of data generated by modern applications. This has led to the exploration of innovative solutions to address these challenges. For instance, in August 2022, OrbitsEdge partnered with Hewlett Packard Enterprise (HPE) to develop compact data centers housed within satellites in low Earth orbit (LEO). These space-based data centers aim to process and analyze data directly in orbit, reducing the need to transmit large volumes of information back to Earth. This approach alleviates bandwidth constraints and enhances data processing efficiency for Earth observation and satellite communications applications.
Market Challenges: Power and Energy Constraints
The data center colocation market faces growing challenges related to power availability, rising energy costs, and sustainability pressures. Increasing power densities in IT workloads, particularly AI and high-performance computing, are straining existing colocation infrastructure. While average rack power consumption has doubled from 5-6 kW to 10-12 kW, AI workloads demand significantly more, with hyperscale facilities designing racks supporting 40-60 kW. However, many colocation providers lag behind in accommodating these densities. The rising heat output also necessitates advanced cooling solutions, including liquid cooling, which adds cost and complexity to operations.
Beyond technology constraints, regional power shortages are limiting colocation growth. Major hubs such as London, Northern Virginia, and Singapore have faced grid capacity exhaustion, delaying new data center developments. Northern Virginia, for instance, requires over three years to secure grid power for new facilities, while West London halted housing projects due to data center power consumption. Governments in key markets, including Amsterdam, Dublin, and Singapore, have imposed temporary construction moratoriums to control grid strain and environmental impact, slowing colocation expansion.
Energy costs further complicate the landscape. Electricity constitutes approximately 20% of colocation operating expenses and has seen extreme volatility. These rising costs, combined with stricter sustainability regulations, force operators to invest in energy-efficient designs, renewable power sources, and advanced cooling techniques to meet efficiency targets such as PUE 1.2. Additionally, regulatory frameworks increasingly mandate carbon footprint disclosures, requiring colocation providers to align with sustainability goals or risk operational restrictions.
To address these challenges, colocation operators are investing in high-density infrastructure, on-site power generation, and energy storage solutions. However, with hyperscale cloud providers achieving superior efficiency at scale, colocation firms must continuously innovate to remain competitive in an increasingly power-constrained market.
Market Opportunities: Growing Demand for Different Business Models
The growing demand for diverse business models presents a significant market opportunity in the data center colocation industry. Providers are increasingly tailoring their offerings to serve both wholesale and retail colocation customers, capitalizing on the distinct needs of hyperscale cloud firms, enterprises, and service providers. Wholesale colocation, characterized by large-scale single-tenant leases, is experiencing rapid expansion, driven by hyperscale cloud and internet companies.
Major colocation providers, including Equinix, Digital Realty, NTT, CyrusOne, and QTS, are pivoting toward hybrid models that combine wholesale capacity with retail interconnection. Equinix, traditionally a retail-focused provider, introduced its xScale program to cater to hyperscale clients, while Digital Realty expanded its retail colocation footprint through its Interxion acquisition. This strategic shift enables providers to capture demand across both segments, strengthening their market position.
Hybrid colocation is another emerging opportunity, as enterprises increasingly view colocation as an extension of their cloud and on-premises environments. Additionally, enterprises are moving key workloads, such as data analytics and content delivery, from public clouds back into colocation for cost savings and performance optimization.
Flexible consumption models mirroring cloud-like pricing structures further drive colocation demand. Traditional fixed-term leases are replaced with pay-as-you-go models, where businesses dynamically scale their infrastructure. Retail colocation, in particular, benefits from this trend as companies seek agility without heavy capital investment.
Leading colocation providers are adapting to this demand by offering scalable, on-demand infrastructure. Equinix Metal and Cyxtera have launched bare-metal services with cloud-like provisioning, while NTT introduced a pay-per-use colocation model. These innovations enhance colocation's appeal to startups, seasonal businesses, and enterprises undergoing digital transformation, making it a highly flexible and cost-efficient alternative to traditional IT infrastructure. As colocation evolves into a more service-oriented and elastic resource, providers that embrace hybrid models, cloud adjacency, and flexible consumption strategies will capture a larger share of the growing market.
Competitive Strategy:
The key players in the data center colocation market analyzed and profiled in the study include professionals with expertise in the automobile and automotive domains. Additionally, a comprehensive competitive landscape such as partnerships, agreements, and collaborations are expected to aid the reader in understanding the untapped revenue pockets in the market.
Key Attributes:
| Report Attribute | Details |
| No. of Pages | 135 |
| Forecast Period | 2025 - 2034 |
| Estimated Market Value (USD) in 2025 | $166.47 Billion |
| Forecasted Market Value (USD) by 2034 | $569.58 Billion |
| Compound Annual Growth Rate | 14.6% |
| Regions Covered | Global |
Key Topics Covered:
1 Markets
1.1 Colocation Data Center Market Trends: Current and Future Impact Assessment
1.1.1 Data Center Capacities: Current and Future
1.1.1.1 Retrofitting and Brownfield Projects
1.1.1.2 Green Field Projects and New Installation
1.1.2 Data Center Power Consumption Scenario
1.1.3 Vacancy Rates and Absorption (by Region)
1.1.4 Key Markets to Focus on
1.1.5 Other Industrial Trends
1.1.5.1 HPC Cluster Developments
1.1.5.2 Blockchain Initiatives
1.1.5.3 Super Computing
1.1.5.4 5G and 6G Developments
1.1.5.5 Impact of Server/Rack Density
1.2 Research and Development Review
1.3 Market Dynamics Overview
1.3.1 Market Drivers
1.3.1.1 Increasing Data Center Spending
1.3.1.2 Growing Integration of AI and Cloud Computing
1.3.1.3 Sustainability and Environmental Pressures
1.3.2 Market Restraints
1.3.2.1 Power and Energy Constraints
1.3.2.2 Data Security and Compliance Challenges
1.3.3 Market Opportunities
1.3.3.1 Growing Demand for Different Business Models
1.3.3.2 Growth in AI Workloads
2 Application
2.1 Application Segmentation
2.2 Application Summary
2.3 Data Center Colocation Market (by Application)
2.3.1 BFSI
2.3.2 IT and Telecommunications
2.3.3 Government and Defense
2.3.4 Healthcare
2.3.5 Research and Academic
2.3.6 Retail, Energy, and Manufacturing
2.3.7 Others
3 Products
3.1 Product Segmentation
3.2 Product Summary
3.3 Data Center Colocation Market (by Business Model)
3.3.1 Retail
3.3.2 Wholesale
3.4 Data Center Colocation Market (by Operator Size)
3.4.1 SME and Country Level Operators
3.4.2 Enterprise and Multinational Operators
4 Regions
4.1 Regional Summary
4.2 North America
4.3 Europe
4.4 Asia-Pacific
4.5 Rest-of-the-World
5 Markets - Competitive Benchmarking and Company Profiles
- Digital Realty
- Equinix, Inc.
- Lumen Technologies
- CoreSite
- DataBank, Ltd.
- Centersquare (Cyxtera)
- Flexential
- MOD Mission Critical
- CyrusOne
- TierPoint, LLC
- IPTP Networks
- 365 Data Centers
- EdgeConneX Inc.
- HostCircle Inc.
- Cogent Communications
For more information about this report visit https://www.researchandmarkets.com/r/rcv5nc
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