Data Colocation Market

Increasing penetration of advanced technologies is driving market growth.

Market CAGR for data colocation is driven by the growth of immersive techniques like augmented reality, artificial intelligence, virtual reality, and 5G technology, which has further contributed to the need for delivering larger bandwidths for data transfer across institutions. The continuous usage of several disruptive technologies, including IoT, autonomous cars, cloud computing, and sophisticated robotics, is a factor driving the increasing demand for colocation in data centers.

Additionally, the increasing adoption of cloud data centers, due to decreased costs, is anticipated to fuel market growth. SMEs are increasingly embracing cloud services due to eliminating the requirement for IT staff, scalable low costs, and having lesser overheads. Several prominent companies in the market have been growing different strategic initiatives, including partnerships, acquisitions, and mergers, among others, to get adequate traction in the market. For instance, in May 2022, Cyxtera revealed its colocation solution delivery in India, performed by a strategic collaboration with Sify Technologies Ltd.

As a part of this collaboration, Sify Technologies Ltd. will resell Cyxtera's solutions to more than 10,000 consumers.

The requirement for high-capacity networks has increased with the improvement in edge-computing applications. Businesses are also moving toward the cloud, which formed the demand for seamless data transfers and more immediate data processing. These solutions deliver a step towards cloud migration, which allows market growth. However, certain cons, which contain being a shared facility and requiring more control over the location, promotions, and servicing control by the firm, may hinder growth.

On the other hand, adequate connectivity, redundant power supply, improved network security, and bursting capability outweigh the cons of data center colocation, room for growth, drawing businesses and revving the data colocation market revenue.

Moreover, setting up a unique data center facility needs a large amount of initial investment and improves the overall CAPEX of the companies. Thus, companies are increasingly becoming considerate of the CAPEX expended on commissioning mission-critical data center talents and are looking for ways to decrease cost and enhance Return on Investment (ROI). This force to cut IT expenditure is a significant catalyst that enables enterprises to analyze new IT infrastructure options.

Thus, enterprises are increasingly switching to data center colocation providers for power, bandwidth, space, and Value-Added Services (VAS), such as internet solutions, interconnection services, and skilled managed IT services based on their size and need.

The rise of edge computing is reshaping the Global Data Colocation Market Industry, as organizations seek to process data closer to its source. This shift necessitates the establishment of colocation facilities at the edge of networks, enabling faster data processing and reduced latency. As businesses increasingly adopt edge computing strategies, the demand for colocation services that can support these initiatives is likely to grow. The market is projected to expand significantly, with a compound annual growth rate of 11.7% from 2025 to 2035, indicating the pivotal role of colocation in facilitating edge computing solutions.

The Global Data Colocation Market Industry is poised for substantial growth, with projections indicating a market size of 176.1 USD Billion by 2035. This growth trajectory reflects the increasing reliance on colocation services as businesses seek to optimize their IT infrastructure and enhance operational efficiency. The anticipated compound annual growth rate of 11.7% from 2025 to 2035 underscores the market's potential, driven by factors such as the rising demand for cloud services, data security concerns, and the expansion of IoT and edge computing. These dynamics collectively position the colocation market as a critical component of the global digital economy.

Data security remains a paramount concern for organizations across various sectors, influencing the Global Data Colocation Market Industry. As cyber threats evolve, businesses are compelled to invest in secure colocation facilities that offer advanced security measures. This heightened focus on data protection drives demand for colocation services, as these facilities often provide robust security protocols, including physical security, fire suppression systems, and advanced monitoring technologies. The growing awareness of data breaches and regulatory compliance requirements further propels organizations to seek colocation solutions, thereby enhancing the market's growth trajectory.

The Global Data Colocation Market Industry experiences a surge in demand for cloud services, driven by businesses seeking scalable and flexible IT solutions. As organizations increasingly migrate to cloud-based infrastructures, the need for colocation facilities that can support these services grows. In 2024, the market is projected to reach 52.1 USD Billion, reflecting the critical role of colocation in enabling cloud service providers to deliver reliable and efficient services. This trend is expected to continue, as companies prioritize agility and cost-effectiveness in their operations, further solidifying the position of colocation providers in the global market.

The proliferation of Internet of Things (IoT) devices significantly impacts the Global Data Colocation Market Industry. As more devices connect to the internet, the volume of data generated increases exponentially, necessitating efficient data management solutions. Colocation facilities play a vital role in handling this influx of data by providing the necessary infrastructure for storage and processing. The anticipated growth in IoT deployments is expected to drive the colocation market, as businesses require reliable and scalable solutions to manage their data effectively. This trend highlights the importance of colocation in supporting the evolving digital landscape.

Regulatory compliance and data sovereignty concerns are driving organizations to utilize colocation services within the Global Data Colocation Market Industry. As governments implement stricter data protection regulations, businesses must ensure that their data is stored and processed in compliance with local laws. Colocation facilities often provide the necessary infrastructure to meet these regulatory requirements, offering businesses peace of mind. This trend is particularly relevant in regions with stringent data sovereignty laws, where organizations are compelled to seek local colocation solutions to avoid potential legal repercussions. Consequently, this factor contributes to the overall growth of the colocation market.

By region, the study provides market insights into North America, Europe, Asia-Pacific and the Rest of the World. The North American data colocation market will dominate owing to various factors, such as enhancing digital infrastructure, rapid digitalization, the existence of top data center colocation providers, and the increasing number of data centers set up will boost the market growth in this region. Further, the US data colocation market held the largest market share, and the Canadian data colocation market was the fastest-growing market in the European region.

Further, the major countries studied in the market report are The US, Canada, German, France, the UK, Italy, Spain, China, Japan, India, Australia, South Korea, and Brazil.

Figure 3: GLOBAL DATA COLOCATION MARKET SHARE BY REGION 2022 (USD Billion)

Source: Secondary Research, Primary Research, Market Research Future Database and Analyst Review

Europe's data colocation market accounts for the second-largest market share due to increased investment from hyper-scale cloud providers, and colocation service providers will boost the market growth in this region. Further, the German data colocation market held the largest market share, and the UK data colocation market was the fastest-growing market in the European region.

The Asia-Pacific data colocation market is expected to grow at the fastest CAGR from 2023 to 2032. This is due to rising data center complexities, increasing costs of owning a large infrastructure facility and rising demand for hybrid cloud and virtualization technologies in this region. Moreover, China’s data colocation market held the largest market share, and the Indian data colocation market was the fastest-growing market in the Asia-Pacific region.

Leading market participants are financing heavily in research and development to develop their product lines, which will allow the data colocation market to grow even more. Market players are also undertaking various strategic activities to extend their global footprint, with significant market developments including recent product launches, contractual arrangements, mergers and investments, higher acquisitions, and partnerships with other institutions. To extend and stay in a more competitive and advancing market climate, the data colocation industry must deliver cost-effective items.

Manufacturing locally to minimize operating costs is one of the key business tactics manufacturers utilize in the global data colocation industry to benefit clients and increase the market sector. Major players in the data colocation market, including SunGard availability services (U.S.), DuPont Fabros Technology, Inc. (U.S.), Equinix, Inc. (U.S.), American Telephone & Telegraph, Inc. (U.S.), and others, are attempting to expand market demand by investing in research and development operations.

Google LLC, a Alphabet Inc. subsidiary, provides search and advertising services online. The company's business areas include advertising, search, platforms and operating systems, and enterprise and hardware products. Its portfolio of products and services includes Google Search, Google Chrome, Google Docs, Google Photos, Google Calendar, Google Meet, Google Drive, Google Finance, Google Play Books, Google News, Google Earth, Google Ad Manager, Google Play, AdMob, Google Maps, AdSense, Gmail, Google Groups, and YouTube. In February 2023, Google declared a collaboration with StarHub.

StarHub will examine Google Cloud's data management, ML, and AI instruments for its network operations and expand the consumer experience as part of the partnership.

CyrusOne LP provides data center services. The Company offers connectivity, implementation, hosting, disaster recovery space, information technology infrastructure consulting, network design and performance, managed IT, and network security services. CyrusOne serves clients worldwide. In January 2023, CyrusOne cultivated an office complex in Frankfurt, Germany, preparing to turn it into a data center campus. The investment group Corum had sold the Europark office complex in Frankfurt for EUR 95 million before confirming that CyrusOne was the buyer.