Data Center Colocation Market - By Type (Retail Colocation, Wholesale Colocation), By End-Use (SMEs, Large Enterprises), By Application (BFSI, Energy, Government & Defense, Healthcare, Manufacturing, IT & Telecom, Retail) & Forecast 2023 – 2032

Data Center Colocation Market Size 

Data Center Colocation Market size was valued at USD 69.3 billion in 2022 and is projected to grow at a CAGR of over 11.5% between 2023 and 2032. The growing demand for hybrid cloud and virtualization technologies is a pivotal factor in the industry.
 

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Businesses are increasingly adopting hybrid cloud models, blending on-premises & cloud-based resources, and utilizing virtualization to optimize server utilization. Colocation providers offer the ideal environment for housing hybrid cloud infrastructure due to their robust facilities, high-speed connectivity, and security measures. This trend reflects the need for flexible, scalable, and reliable data center solutions that support hybrid cloud deployments, further propelling the demand for colocation services in the market. For instance, in May 2023, IBM launched the IBM Hybrid Cloud Mesh, which facilitates seamless connectivity and communication across various cloud environments. Colocation facilities leverage this technology to provide their clients with direct, low-latency connections to multiple cloud platforms, enhancing the versatility and agility of their services.
 

The rising adoption of green data center facilities is fueling data center colocation market expansion. With increasing environmental concerns, businesses are seeking sustainable and energy-efficient solutions. Colocation providers are responding by implementing green practices such as using renewable energy sources, optimizing cooling systems, and reducing carbon footprints. Clients are drawn to colocation facilities that support their sustainability goals while enjoying cost savings from reduced energy consumption. The demand for eco-friendly data management solutions will continue to surge, and colocation providers are well-positioned to meet this need, driving market expansion. For instance, in July 2023, Huawei launched three new sustainable data center solutions at the 2023 Global Smart Green Data Center Summit. The solutions include an indirect evaporative cooling solution, a distributed cooling architecture, and an intelligent management solution.
 

Location restraints are a major concern in the data center colocation market. These restraints are often related to factors such as space availability, proximity to clients, power infrastructure, and geographic risks such as natural disasters. To address this challenge, providers can explore innovative solutions, such as modular data center & edge data centers, that can be deployed in constrained locations. Additionally, partnerships with existing data centers or the development of data center clusters can optimize resource utilization. Careful site selection and infrastructure investments can help mitigate location restraints and effectively expand colocation offerings.
 

COVID-19 Impact

The COVID-19 pandemic has significantly contributed to the increasing demand for digital mediums and automation in the data center colocation market. With lockdowns and social distancing measures in place, businesses rapidly adopted remote work & digital communication solutions, driving the need for robust data storage and processing. This surge in digital activity led to an increased demand for colocation services to ensure reliable and scalable infrastructure. Furthermore, the growth of e-commerce, online services, and digital transactions during the pandemic further emphasized the importance of data center colocation in supporting these trends, spurring market expansion.
 

Data Center Colocation Market Trends

The trend toward hybrid and multi-cloud adoption is driving colocation providers to become crucial enablers of seamless cloud integration. They offer connectivity, infrastructure, and managed services necessary for enterprises to leverage the advantages of hybrid & multi-cloud strategies while maintaining control, scalability, and data security. Colocation providers are developing their services to offer enhanced connectivity options including direct connections to major Cloud Service Providers (CSPs) such as AWS, Azure, and Google Cloud. They are also providing infrastructure & network capabilities necessary for seamless integration between on-premises data centers and various cloud environments. Colocation facilities are strategically located near major cloud regions to reduce latency and improve the performance of hybrid & multi-cloud deployments. These data centers offer reliable and low-latency connections, ensuring that data can flow seamlessly between on-premises infrastructure and cloud services.
 

Data Center Colocation Market Analysis

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Based on type, the data center colocation market is divided into retail colocation, and wholesale colocation. The retail segment was valued at over USD 48 billion in 2022. The retail colocation segment is expected to experience substantial growth attributed to the increasing demand from businesses of all sizes seeking reliable and scalable data center solutions. Retail colocation offers clients a dedicated space, power, and connectivity within multi-tenant data centers, allowing them to align their IT infrastructure with specific requirements. With the growing need for data storage & processing capabilities, retail colocation presents a flexible and cost-effective solution, contributing to its significant growth in the market.
 

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Based on application, the data center colocation market is categorized into BFSI, energy, government & defense, healthcare, manufacturing, IT & telecom, retail, and others. The BFSI segment is expected to grow at a fastest CAGR of around 14% during the forecast period. In the BFSI sector, data is the lifeblood of operations, necessitating secure, scalable & highly available data infrastructure. The BFSI industry faces rigorous data security and compliance regulations. Colocation providers offer data centers with robust security measures and compliance certifications, making them an ideal choice to meet these requirements. As financial institutions grow or introduce new services, they require scalable IT infrastructure. Colocation facilities provide the flexibility to expand or downsize IT resources as needed. The BFSI sector's ongoing digital transformation journey relies on advanced data processing and analytics, making colocation facilities crucial for handling data-intensive tasks. Colocation services enable financial institutions to meet regulatory standards, enhance operational efficiency, and remain competitive in a rapidly evolving industry.
 

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North America held a dominant market share of over 40% in 2022. North America is witnessing significant growth in the data center colocation market, which is driven by the growing demand for hybrid cloud and virtualization technologies. North American businesses are increasingly adopting hybrid cloud strategies, which involve a mix of on-premises, private, and public cloud resources. Colocation providers offer the ideal environment for integrating these various components, allowing companies to optimize their hybrid cloud deployments. Virtualization technologies, such as VMware & Hyper-V, are widely embraced in North America to improve server efficiency and resource utilization. Colocation facilities provide the infrastructure and expertise needed to support virtualized environments, helping organizations reduce hardware costs & enhance scalability.
 

Data Center Colocation Market Share

Major players operating in the data center colocation market are

• Equinix, Inc.
• Digital Realty
• NTT Communications
• China Telecom Corporation

These players are focused on strategic partnerships, new product launches, and commercialization efforts for market expansion. They are also heavily investing in research to introduce innovative products and garner the maximum market revenue.
 

Data Center Colocation Industry News

• In August 2023, Digital Realty launched a high-density data center colocation service in 28 markets across North America, EMEA, and Asia Pacific. The new service supports workloads of up to 70 kilowatts per rack.
   

The data center colocation market research report includes in-depth coverage of the industry with estimates & forecast in terms of revenue (USD Billion) from 2018 to 2032, for the following segments:

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By Type

• Retail colocation
• Wholesale colocation

By End Use

• SMEs
• Large Enterprises

By Application

• BFSI
• Energy
• Government & Defense
• Healthcare
• Manufacturing
• IT & Telecom
• Retail

The above information is provided for the following regions and countries:

• North America
  • U.S.
  • Canada
  • Mexico
• Europe
  • UK
  • Germany
  • France
  • Spain
  • Italy
  • Poland
  • Benelux
• Asia Pacific
  • China
  • India
  • Japan
  • Singapore
  • Australia 
• Latin America
  • Brazil
  • Chile
  • Colombia
  • Argentina
• MEA
  • GCC
  • South Africa