Data Center Colocation Market Analysis

The increasing volume of data coming from social media is driving the market growth

As a result, high ownership and maintenance costs for data centers, particularly for businesses that produce variable volumes of data, are anticipated to be a major factor in the market's growth. Data center colocation offers customers several advantages in addition to reducing capital expenditures. In addition to the price incurred for installing the necessary fiber cabling, research studies indicate that owning or building a data center facility may cost more than USD 300 per square foot. For SMEs, handling an entire data center facility in-house comes at a high cost, whereas large-scale organizations can easily cover this expense.

Data center colocation is one such solution which supports SMEs with a workable and affordable alternative of renting data center space, which is expected to drive the market CAGR over the forecast period.

The demand for data centers and colocation services has increased due to the increasing volume of data coming from social media and Over-The-Top (OTT) platforms. Social media users are becoming increasingly active, resulting in an exponential increase in the amount of data generated by these platforms. For instance, monthly active Facebook users increased to roughly 2.74 billion in 2020 from 2.38 billion in 2019. The number of people using social media is predicted to increase even more in the upcoming years, which will increase demand for colocation facilities.

The Covid-19 pandemic has also caused a rise in OTT and streaming service usage, which has increased data volumes and is expected to drive market growth.

There is a greater need for higher bandwidths and faster data processing due to the development of technologies like the Internet of Things (IoT), cloud computing, autonomous vehicles, and advanced robotics. Lower latency and faster network connectivity are necessary to use these technologies effectively. Colocation data centers are a good fit to meet these needs because the operators can place their facilities close to the users and thus provide better networking and storage services. Additionally, the development of 5G is anticipated to accelerate the deployment of colocation services because it will allow colocation providers to offer services in remote areas.

Because of their lower costs, cloud data centers are becoming increasingly popular, which is expected to restrain market expansion. Cloud services are becoming increasingly popular among smaller businesses because they are scalable, affordable, don't require an IT staff, and have lower overheads. Long-term cost savings and flexibility in terms of total server control are both provided by colocation facilities. Enterprises are choosing colocation services in large numbers because of these features. Thus, driving the data center colocation market revenue.

The Global Data Center Colocation Market Industry is poised for remarkable growth, with projections indicating a market size of 68.4 USD Billion in 2024 and an anticipated increase to 249.8 USD Billion by 2035. This represents a compound annual growth rate (CAGR) of 12.49% from 2025 to 2035. Such growth is driven by various factors, including the rising demand for cloud services, increased focus on data security, and the expansion of IoT technologies. The market dynamics suggest that colocation services will remain integral to the evolving digital landscape, as businesses increasingly rely on external data centers for their operational needs.

Data security remains a paramount concern for organizations worldwide, propelling the Global Data Center Colocation Market Industry forward. As cyber threats evolve, businesses are compelled to adopt robust security measures, often turning to colocation providers that offer advanced security protocols. These facilities typically feature redundant power supplies, fire suppression systems, and physical security measures, which are crucial for safeguarding sensitive information. The emphasis on compliance with regulations such as GDPR and HIPAA further underscores the necessity for secure colocation services, indicating a sustained growth trajectory for this market segment.

The Global Data Center Colocation Market Industry experiences a notable increase in demand for cloud services, driven by businesses seeking scalable and flexible IT solutions. As organizations migrate to cloud-based infrastructures, colocation facilities become essential for housing critical hardware. In 2024, the market is projected to reach 68.4 USD Billion, reflecting the growing reliance on cloud technologies. This trend is likely to continue as companies prioritize efficiency and cost-effectiveness, suggesting that the colocation sector will play a pivotal role in supporting cloud service providers and enterprises alike.

Emerging markets and urbanization contribute to the expansion of the Global Data Center Colocation Market Industry. As developing regions experience rapid urban growth, the demand for reliable data infrastructure intensifies. Countries in Asia-Pacific and Latin America are witnessing significant investments in colocation facilities to support their burgeoning digital economies. This trend is expected to drive the market's growth, with projections indicating a rise to 249.8 USD Billion by 2035. The increasing urban population necessitates enhanced connectivity and data management solutions, further solidifying the role of colocation providers in these regions.

The proliferation of Internet of Things (IoT) devices significantly influences the Global Data Center Colocation Market Industry. With billions of devices generating vast amounts of data, the need for efficient data processing and storage solutions becomes increasingly critical. Colocation facilities provide the necessary infrastructure to handle this influx of data, enabling businesses to leverage IoT technologies effectively. As the number of connected devices is expected to reach 30 billion by 2035, the demand for colocation services is likely to surge, positioning the industry for substantial growth in the coming years.

Sustainability initiatives and energy efficiency are becoming critical drivers in the Global Data Center Colocation Market Industry. As environmental concerns gain prominence, colocation providers are adopting green practices to reduce their carbon footprints. This includes utilizing renewable energy sources and implementing energy-efficient technologies. Companies are increasingly seeking colocation partners that align with their sustainability goals, which may enhance their corporate social responsibility profiles. The shift towards sustainable operations not only meets regulatory requirements but also appeals to environmentally conscious consumers, suggesting a potential competitive advantage for providers who prioritize eco-friendly practices.

Leading market players are investing heavily in research and development in order to expand their product lines, which will help the data center colocation market grow even more. Market participants are also undertaking various strategic activities to expand their footprint, with important market developments including new product launches, contractual agreements, mergers and acquisitions, higher investments, and collaboration with other organizations. The data center colocation industry must offer cost-effective items to expand and survive in a more competitive and rising market climate.

Manufacturing locally to minimize operational costs is one of the key business tactics manufacturers use in the data center colocation industry to benefit clients and increase the market sector. The data center colocation industry has offered some of the most significant advantages in recent years.

Major data center colocation market players, including Equinix Inc. (US), Fibernet Inc. (US), Keppel Data Center Pte Ltd. (Singapore), NTT Communications Corporation (Japan), AT&T Inc. (US), Cogent Communications (US), CoreSite Realty Corporation (US), Cyxtera Technologies Inc. (US), Digital Realty Trust Inc. (US), DuPont Fabros Technology Inc. (US), PhoenixNAP (US), Rahi Systems Inc (US) and others, are attempting to increase market demand by investing in research and development operations.

DuPont Fabros Technology Inc. (US), Often abbreviated as DuPont, the French-American industrialist and chemist Éleuthère Irénée du Pont de Nemours founded the multinational chemical company in 1802. The business began as a significant supplier of gunpowder and later played a significant role in the growth of Delaware. In the 20th century, DuPont produced a variety of polymers, including Vespel, neoprene, nylon, Corian, Teflon, Mylar, Kapton, Kevlar, Zemdrain, M5 fiber, Nomex, Tyvek, Sorona, Corfam, and Lycra. Its scientists also produced a variety of chemicals, most notably Freon (chlorofluorocarbons), for the refriger. Additionally, it produced synthetic paints and pigments like ChromaFlair.

Equinix is the world’s digital infrastructure company. We interconnect industry-leading organizations such as finance, manufacturing, retail, transportation, government, healthcare and education across a digital-first world. Business leaders harness our trusted platform to unite and interconnect sustainably and securely the foundational infrastructure that powers their success.

Founded in Silicon Valley in 1998 as a vendor-neutral multitenant data center provider where competing networks could securely connect and share data traffic, we chose a name that reflected our company’s focus on EQUality, Neutrality and Internet eXchange—Equinix. Through Platform Equinix® and our ecosystem of leading service providers, digital leaders fast-track competitive advantage across clouds, networking, storage, computing and software.