Data Center Colocation Market Analysis North America, APAC, Europe, South America, Middle East and Africa - US, Canada, China, UK, Germany - Size and Forecast 2024-2028

Data Center Colocation Market Forecast 2024-2028 

The data center colocation market size is projected to increase by USD 66.57 billion at a CAGR of 14.8% between 2023 and 2028. Market growth rates are influenced by several factors, including the rising demand for these facilities, the increasing need for powerful networking driven by business operational needs, and the growing number of mergers and acquisitions among companies. These elements collectively shape market dynamics, reflecting the evolving requirements and trends in the data center industry. With the increased demand for colocation facilities and networking solutions, along with industry consolidation, the market anticipates sustained growth opportunities.

Moreover, the market growth and forecasting report includes key player's detailed analyses of the competitive landscape of the market and information about 20 market companies, including BT Group Plc, China Telecom Corp. Ltd., Cologix Inc., Colt Technology Services Group Ltd., Corporate Technologies LLC, CtrlS Datacenters Ltd., Custodian Data Centres, CyrusOne LLC, Cyxtera Technologies Inc., Digital Realty Trust Inc., Equinix Inc., eStruxture Data Centers, Flexential Corp., Fujitsu Ltd., Internap Holding LLC, Iron Mountain Inc., Lumen Technologies Inc., Microsoft Corp., NEXTDC Ltd., Nippon Telegraph and Telephone Corp., Retelit S.p.A., Stream Realty Partners LP, Switch Inc., Telstra Corp. Ltd., and Web Werks India Pvt. Ltd.. Additionally, American Tower Corp. company offers data center colocation such as dedicated, reliability, private connection options to hundreds of network, hybrid cloud and IT service through its subsidiary CoreSite Realty Corp.

What will be the Size of the Market During the Forecast Period?

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Market Dynamics 

The market is witnessing rapid growth fueled by the increasing adoption of cloud computing and AI/ML technologies. As businesses embark on digitalization initiatives, they rely on colocation data centers to support their cloud strategy. Small and Medium-Sized Enterprises (SMEs) are leveraging colocation services for their digital transformation, leading to a surge in demand for both wholesale colocation companies and retail colocation companies. In regions like Paraguay, Central and Eastern Europe, Nigeria, and Kenya, the market is witnessing robust growth driven by smart city developments and fiber connectivity initiatives. Additionally, emerging trends like liquid immersion cooling and direct-to-chip cooling are reshaping the landscape, while advancements in microgrid technologies are enhancing energy efficiency and reliability. Our researchers analyzed the market research and growth data with 2023  as the base year, along with the key market growth analysis, trends, and challenges. A holistic analysis of drivers, trends, and challenges will help companies refine their marketing strategies to gain a competitive advantage. 

Key Market  Driver

A growing number of mergers and acquisitions among companies is the key factor driving the market growth. Since 2020, the market has experienced a surge in merger and acquisition (M&A) activities driven by increasing business demands. Such M&A endeavors allow colocation providers to swiftly expand their infrastructure, meeting the rising demand for information center services more efficiently.

Moreover, notable transactions include Iron Mountain Inc.'s acquisition of a Frankfurt information center from Calcium DC Pte. Ltd in July 2021 and DataBank's USD 670 million purchase of four CyrusOne information centers in January 2022. These strategic moves not only enhance the company's competitive edge but also create opportunities for geographic and product portfolio expansion, attracting new customers and propelling market growth.

Significant Market Trends

Innovative approaches for cooling colocation services is the primary trend shaping the market. To mitigate the heat generated by traditional information centers and reduce costs associated with power and cooling systems, many service providers are relocating information centers to cooler regions. Approximately 30%-40% of data center power consumption is attributed to cooling systems. Utilizing free cooling and liquid immersion techniques helps lower power consumption.

Moreover, Microsoft's innovative submarine information center, situated off Scotland's Orkney coast, operates several feet below sea level. Capable of storing and processing information for up to five years without maintenance, it enhances Internet speeds in underserved areas while requiring minimal cooling investment. Such innovative solutions, like submarine information centers, will drive growth in the market by reducing power consumption and improving Internet access.

Major Market Restrain

The emergence of containerized data centers is the major challenge that affects market expansion. A containerized data center is also known as a modular information center in which the information compartments are portable. These modular information centers can be placed at any location. Modular information centers consist of servers, storage, and networking equipment, which are fitted into a shipping container. With the growing need for the expansion and replacement of existing and traditional brick-and-mortar information centers, several market players are introducing new containerized information centers.

Additionally, several top companies, such as International Business Machines Corp. (IBM), Dell Technologies Inc. (Dell), HP Inc. (HP), and Schneider Electric SE (Schneider Electric), have begun commercializing containerized information centers. Furthermore, portable and containerized information centers are a top solution for several companies that need to install information centers within a short span of time to cater to the growing volume of information. Therefore, containerized data centers will hinder market growth during the forecast period.

Market Segmentation 

In the market, the landscape is shaped by various factors, such as virtualization technologies and cloud services, enabling efficient server utilization and IT load capacity management. The growing presence of Autonomous vehicles and Internet-of-Things (IoT) devices necessitates low latency and robust fiber cable connectivity over extensive distances, including the deployment of submarine cables for global reach. Rack space utilization and the number of data centers by tier play a pivotal role in ensuring seamless operations and mitigating downtime risks. Furthermore, the burgeoning AI startup development scene is driving innovation in virtualization and data center optimization, enhancing server utilization and scalability while addressing latency concerns for emerging technologies.

By Type

The market share growth by the retail colocation segment will be significant during the forecast period. Retail colocation is a type of information center colocation in which many companies rent space and integrate their own IT equipment, such as servers and storage devices, into racks provided by colocation providers. Retail colocation includes the process of renting racks, rack cages, and private suites in large information centers. Retail colocation facilities are leased by companies on 1 to 3-year contracts.

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The retail colocation segment showed a gradual increase in the market share of USD 17.34 billion in 2018. The market is growing due to the increasing adoption of information centers by Server Message Blocks(SMBs) choosing colocation to save both capital expenditures (CAPEX) and operating expenses (OPEX). The adoption of colocation facilities is increasing as the CAPEX and OPEX to own and maintain traditional on-premises segment centers are increasing. The move to colocated information centers is steadily growing as companies gain complete control over their IT infrastructure at an affordable price. This will drive the growth of the market. 

Market Segmentation By End-user

The small and medium-sized enterprises?segment will account for the largest share of this segment.? Small and medium-sized data centers prioritize device reliability over size, necessitating continuous upgrades to meet growing demands. This drives the demand for information center colocation, enhancing operations, productivity, and energy efficiencies while ensuring business continuity. Adhering to stringent standards like the GB Class B ensures uninterrupted operations, making these information centers crucial for organizations. The increasing prevalence of small and medium-sized information centers is expected to fuel growth in the market.

Regional Overview

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North America is estimated to contribute 32% to the growth of the global market during the forecast period. Technavio's analysts have provided extensive insight into the market forecast, detailing the regional trends and drivers influencing the market's trajectory throughout the forecast period. The market is poised for significant growth, fueled by investments from hyperscale cloud providers, colocation services, and enterprises upgrading infrastructure to support edge computing, 5G, multi-cloud services, big data analytics, and IoT. Increased data traffic, driven by IoT adoption, autonomous technologies, AI investments, and 5G deployment in sectors like telecom, is a key driver. The construction of Tier 3 and Tier 4 data centers in the US further boosts market revenue.

Market Customer Landscape

The market forecasting report includes the adoption lifecycle of the market research and growth, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth and trends strategies.

Global Market Customer Landscape

Market Companies

Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.

• AT and T Inc.: The company offers data center colocation solution that provides robust power density options, and it helps to connect between the public cloud and private colocation data centers.

Market analysis and report of qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.

Segment Overview

The market research report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2018 to 2028

• Type Outlook
  • Retail colocation
  • Wholesale colocation

• End-user Outlook
  • Small and medium sized enterprises
  • Large enterprises

• Region Outlook
  • North America
    • The U.S.
    • Canada
  • Europe
    • U.K.
    • Germany
    • France
    • Rest of Europe
  • APAC
    • China
    • India
  • South America
    • Chile
    • Brazil
    • Argentina
  • Middle East & Africa
    • Saudi Arabia
    • South Africa
    • Rest of the Middle East & Africa

Market Analyst Overview

The market is undergoing a transformation driven by technological advancements such as 5G technology, advanced robotics, and AI tools, leading to increased connectivity options and improved customer experience. With the rise of IoT platforms and online streaming services, there's a growing demand for cloud-based resources and high-capacity networks to support digitalization applications and smart services.

Moreover, cloud migration and hybrid cloud infrastructure are becoming prevalent, leveraging cloud service providers and enabling seamless cloud integration for scalability and reliable data center solutions. The market is also witnessing efforts towards sustainable data center solutions, including eco-friendly data management and the utilization of renewable energy sources to address environmental concerns. However, challenges like data security, low-latency connections, and location restraints persist, necessitating intelligent management solutions and robust network security measures. The adoption of edge-computing applications and redundant power supply ensures uptime and reliability, crucial for critical IT requirements across IT & telecom, healthcare, and online shopping sectors. In essence, the Market reflects a shift towards innovative, scalable, and sustainable solutions, driven by advanced technologies and strategic initiatives towards digital transformation and efficiency in data storage and processing capabilities.

Market Scope
Report Coverage	Details
Page number	173
Base year	2023
Historic period	2018-2022
Forecast period	2024-2028
Growth momentum & CAGR	Accelerate at a CAGR of 14.8%
Market growth 2024-2028	USD 66.57 billion
Market structure	Fragmented
YoY growth 2023-2024(%)	14.0
Regional analysis	North America, APAC, Europe, South America, and Middle East and Africa
Performing market contribution	North America at 32%
Key countries	US, Canada, China, UK, and Germany
Competitive landscape	Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks
Key companies profiled	American Tower Corp., AT and T Inc., BT Group Plc, China Telecom Corp. Ltd., Cologix Inc., Colt Technology Services Group Ltd., Corporate Technologies LLC, CtrlS Datacenters Ltd., Custodian Data Centres, CyrusOne LLC, Cyxtera Technologies Inc., Digital Realty Trust Inc., Equinix Inc., eStruxture Data Centers, Flexential Corp., Fujitsu Ltd., Internap Holding LLC, Iron Mountain Inc., Lumen Technologies Inc., Microsoft Corp., NEXTDC Ltd., Nippon Telegraph and Telephone Corp., Retelit S.p.A., Stream Realty Partners LP, Switch Inc., Telstra Corp. Ltd., and Web Werks India Pvt. Ltd.
Market dynamics	Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for the forecast period.
Customization purview	If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized.

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What are the Key Data Covered in this Market Research Report?

• CAGR of the market report forecast during the forecast period
• Detailed information on factors that will drive the growth of the market  between 2024 and 2028
• Precise estimation of the market size and its contribution to the market in focus on the parent market
• Accurate predictions about upcoming trends and changes in consumer behavior
• Growth of the market across North America, APAC, Europe, South America, and Middle East and Africa
• Thorough market analysis and report of the market’s competitive landscape and detailed information about companies
• Comprehensive analysis of factors that will challenge the growth of Industry companies

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