Data Center Colocation Market - Global Industry Size, Share, Trends, Opportunity, and Forecast Segmented By Colocation Type (Retail, Wholesale), By Enterprise Size (Large, SMEs), By End-Use (BFSI, Retail, Others), By Region & Competition, 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 76.37 Billion
CAGR (2026-2031)	14.81%
Fastest Growing Segment	Retail
Largest Market	North America
Market Size (2031)	USD 174.91 Billion

Market Overview

The Global Data Center Colocation Market will grow from USD 76.37 Billion in 2025 to USD 174.91 Billion by 2031 at a 14.81% CAGR. Data Center Colocation is defined as the provision of secure physical space, power, and cooling infrastructure by an external provider to house a client's computing hardware. This service model enables enterprises to transition from capital heavy private facility management to a flexible operational expenditure structure while retaining ownership of their servers. The primary drivers supporting market growth include the strategic necessity for robust disaster recovery solutions and the demand for scalable connectivity to facilitate hybrid cloud deployments. These factors allow businesses to expand their digital capabilities rapidly without the logistical complexities of constructing internal facilities.

Despite these positive indicators, the market confronts a substantial challenge in the form of power scarcity and sustainability mandates. The rapid consumption of energy resources has led to grid capacity limitations in primary markets, restricting the ability of providers to bring new inventory online. According to the International Energy Agency, in 2024, global data centers consumed approximately 415 terawatt hours of electricity, underscoring the critical strain placed on power infrastructure. This energy bottleneck, compounded by strict environmental regulations, poses a significant threat to the continued expansion of the global colocation sector.

Key Market Drivers

The rapid adoption of artificial intelligence and high-performance computing workloads is fundamentally reshaping the infrastructure requirements of the global colocation sector. As enterprises integrate complex language models and data-intensive applications, they require facilities capable of supporting extreme power densities and advanced liquid cooling technologies that traditional on-premises data centers often lack. Colocation providers are rapidly upgrading their infrastructure to accommodate these specialized needs, effectively positioning themselves as the physical backbone for the AI revolution. This shift is creating unprecedented demand for capacity; according to JLL, May 2024, in the 'Data Centers 2024 Global Outlook', the computing capacity required for AI training and inference is projected to double the size of the data center industry within the next five years.

Simultaneously, the acceleration of hybrid and multi-cloud strategy implementation is driving the market by necessitating robust, carrier-neutral interconnection hubs. Businesses are moving away from improved siloed data storage, preferring colocation environments that offer low-latency connectivity to multiple public cloud providers while maintaining private infrastructure for sensitive workloads. This architecture allows companies to optimize costs and ensure regulatory compliance without sacrificing scalability. According to Flexera, March 2024, in the 'State of the Cloud Report', 89% of organizations have adopted a multi-cloud strategy, utilizing a combination of providers to meet diverse technical obligations. This reliance on distributed digital ecosystems is fueling broader market expansion; according to Equinix, in 2024, global interconnection bandwidth is forecast to grow at a 34% compound annual growth rate.

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Key Market Challenges

The scarcity of power and the associated inability to secure sufficient grid capacity constitute a formidable barrier to the Global Data Center Colocation Market. As data center operators attempt to scale facilities to meet the exponential demand driven by high-density computing, they are increasingly blocked by utility infrastructure that cannot deliver the necessary megawattage. This bottleneck effectively caps revenue potential, as providers are physically unable to activate new server halls or fulfill client contracts despite robust demand. The inability to secure timely power connections forces operators to delay construction projects and pause leasing activities, stalling market expansion in key digital hubs where inventory is most needed.

This infrastructure deficit is quantifiable within the industry's recent operational data. According to AFCOM, in 2024, 58% of data center professionals reported experiencing significant supply chain constraints specifically related to power systems. This metric indicates that the challenge extends beyond raw electricity generation to the procurement of critical equipment required to distribute and manage that power. Without the necessary transformers, switchgear, and utility connections, colocation providers are unable to convert their capital investments into operational inventory, directly decelerating the overall growth trajectory of the global sector.

Key Market Trends

The expansion into secondary and edge market locations is fundamentally reshaping the geographical landscape of the sector as operators seek to bypass the power and land constraints currently saturating primary hubs. With core digital corridors like Northern Virginia and Frankfurt facing severe grid bottlenecks, providers are increasingly developing facilities in Tier 2 cities to ensure inventory availability and lower latency for regional users. This decentralization strategy not only alleviates infrastructure pressure on major grids but also caters to the localized data processing needs of enterprises deploying distributed applications. According to CBRE, August 2024, in the 'North America Data Center Trends H1 2024' report, the substantial shift in demand toward these emerging locations caused the overall vacancy rate for secondary markets to fall to 9.7% in the first half of 2024.

The acceleration of sustainability and net-zero initiatives has evolved from a corporate responsibility metric into a critical operational imperative for colocation providers globally. Operators are aggressively procuring renewable energy and implementing low-carbon technologies to meet tenant ESG requirements and comply with tightening environmental regulations. This trend is driving a surge in power purchase agreements and the retrofitting of legacy facilities to improve energy efficiency scores, ensuring long-term viability in a climate-conscious market. According to Digital Realty, June 2024, in the '2023 ESG Report', the company exemplified this sector-wide commitment by achieving 66% renewable energy usage across its global portfolio, underscoring the rapid transition toward carbon-neutral operations.

Segmental Insights

The Retail segment is recognized as the fastest-growing category within the Global Data Center Colocation Market, primarily driven by the aggressive digital transformation of Small and Medium-sized Enterprises (SMEs). This segment is expanding rapidly as organizations increasingly shift from capital-intensive on-premise infrastructure to flexible, outsourced solutions. Retail colocation allows businesses to lease precise amounts of rack space and power, offering a cost-efficient alternative to the extensive capacity commitments required by wholesale options. Furthermore, the rising demand for edge computing and distributed connectivity necessitates the adaptable, regionally accessible infrastructure that retail facilities uniquely provide to support modern business operations.

Regional Insights

North America maintains a dominant position in the global data center colocation market due to the high concentration of hyperscale cloud providers and large technology enterprises in the United States. This leadership is supported by established telecommunications infrastructure and substantial corporate investment in IT modernization. Additionally, the region benefits from initiatives promoting energy efficiency, often aligned with standards from the United States Department of Energy, which drive the development of modern facilities. The sustained demand for scalable data management solutions from the banking, financial services, and insurance sectors further secures this regional market share.

Recent Developments

• In April 2025, CyrusOne officially broke ground on a new data center campus known as DFW7 in Fort Worth, Texas. This development represented a continued expansion of the company’s portfolio in one of the fastest-growing digital infrastructure hubs in the United States. The project was planned as a multi-building campus capable of delivering an initial IT capacity of approximately 70 megawatts. The CEO of the company emphasized that the new location would enable the delivery of innovative solutions to meet customer needs, with the first phase of construction expected to conclude in early 2026.
• In February 2025, Iron Mountain announced comprehensive plans to develop a new data center campus in Henrico County, Virginia, following the acquisition of a 66-acre site. The project, which was estimated to involve an investment of more than $1 billion, included the construction of four data center buildings spanning over one million square feet. The Executive Director of the local Economic Development Authority noted that the campus would be situated in the White Oak Technology Park. This expansion was designed to deliver more than 200 megawatts of expected capacity, strengthening the company’s footprint in a key market.
• In October 2024, Equinix signed a major joint venture agreement with GIC and the Canada Pension Plan Investment Board to raise more than $15 billion in capital. This strategic collaboration was formed to accelerate the expansion of the company’s xScale data center portfolio within the United States. The partnership aimed to acquire land and construct new facilities on multiple campuses, each with a capacity exceeding 100 megawatts. The initiative was projected to add over 1.5 gigawatts of new capacity, directly addressing the core workload deployment needs of the world’s largest cloud service providers.
• In June 2024, Vantage Data Centers completed a significant equity investment totaling $9.2 billion to support its global expansion. This capital raise was led by investment vehicles managed by DigitalBridge Group and Silver Lake, attracting participation from multiple global investors. The company stated that the primary proceeds would be directed toward funding its growth across North America and the EMEA region. This strategic financial move was designed to accelerate the development of next-generation data centers, specifically engineered to meet the surging demand for cloud computing and artificial intelligence infrastructure required by global hyperscalers.

Key Market Players

• Equinix, Inc.
• Digital Realty Trust, Inc.
• CyrusOne Inc.
• NTT Ltd.
• CoreSite Realty Corporation
• Iron Mountain Incorporated
• QTS Realty Trust, Inc.
• Switch, Inc.
• Global Switch Holdings Limited
• Flexential, Inc.

By Colocation Type	By Enterprise Size	By End-Use	By Region
Retail Wholesale	Large SMEs	BFSI Retail Others	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Data Center Colocation Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Data Center Colocation Market, By Colocation Type:

• Retail
• Wholesale

• Data Center Colocation Market, By Enterprise Size:

• Large
• SMEs

• Data Center Colocation Market, By End-Use:

• BFSI
• Retail
• Others

• Data Center Colocation Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE