Global Data Center Colocation Market Report 2032

Global data center colocation market is projected to witness a CAGR of 13.14% during the forecast period 2025-2032, growing from USD 76.50 billion in 2024 to USD 205.39 billion in 2032. The global data center colocation market is witnessing substantial growth as businesses increasingly seek cost-effective and scalable infrastructure solutions to meet their expanding digital requirements.

As digital innovation speeds up across industries, from healthcare and finance to e-commerce and manufacturing, colocation services allow organizations to deploy workloads more quickly and maintain business resilience. Colocation provides organizations with a cost-effective alternative to housing data centers in-house, enabling them to save on capital spending while obtaining high-level infrastructure, better uptime, and strong connectivity.

In addition, hyperscalers are utilizing colocation to expand in new markets rapidly without having to build full-scale infrastructure. This model also favors small and medium businesses by providing them access to high-performance facilities without significant upfront capital. Therefore, with data generation and connectivity demands rising across the world, colocation facilities continue to be an important support in contemporary IT infrastructure planning, driving the expansion of the global data center colocation market. For instance, in July 2024, Digital Realty Trust Inc. purchased a USD 200 million colocation data center campus in the Slough Trading Estate, expanding its presence in the west London submarket.

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Rising Data Volumes and Cloud Adoption Drives the Global Data Center Colocation Market

Global data center colocation market is growing at a faster rate because the amount of digital data generated through modern-day business processes, IoT ecosystems, and digital platforms is rising. While the rate of digital change increases, companies are generating and maintaining more data than ever, thereby making data storage internally is complex. Colocation service is a desirable choice by providing flexible, secure, and affordable infrastructure catering to growing data needs with minimal upfront capital expenditures. Furthermore, increasing use of cloud services is forcing businesses to embrace hybrid IT models that combine colocation with public and private clouds to achieve maximum workloads. The models demand facilities with robust connectivity and low-latency access to major cloud service providers.

For instance, in November 2022, global colocation market leader Equinix, Inc. partnered with VMware, Inc. to expand hybrid multi-cloud services throughout its data centers. The collaboration allows businesses to access VMware Cloud on Equinix Metal directly and helps to enhance the performance of workloads and secure data. Such strategic integration shows the way colocation facilities are evolving as drivers of digital infrastructure, allowing companies to successfully handle data growth while being agile and compliant.

Accelerated Growth in Edge Computing and IoT Deployments Boosts the Market

The increasing use of edge computing and Internet of Things (IoT) technology is drastically impacting demand for data center colocation facilities. With billions of sensors producing real-time data, companies need infrastructure to handle low-latency processing and local storage. Colocation facilities, particularly those placed strategically close to end-users or major urban areas, allow organizations to place their servers near the point of data generation. This is a necessity for applications such as autonomous vehicles, smart cities, and real-time analytics.

In addition, edge server colocation minimizes bandwidth expenses and network traffic while improving application performance as well as customer experience. For example, in September 2024, the U.S. Department of Homeland Security (DHS) granted Equinix, Inc. a colocation services contract in support of its Homeland Security Enterprise Network (HSEN).  Colocation companies are evolving by creating edge-ready facilities with modular infrastructure and interconnection. Such a transition is likely to provide considerable growth prospects for the colocation market, especially in areas with growing 5G networks and smart infrastructure development.

Cloud Segment Dominates Market Growth Through Hybrid Integration and Flexibility

The cloud segment is one of the key contributors to the growth in the global data center colocation market. Though the companies in industries are hastening their digital transformation process, the usage of cloud computing has gone up manifold. But some organizations have shifted away from traditional to hybrid cloud infrastructure that will offer the agility of cloud and management of on-premises or collocated infrastructure. This shift is creating colocation demand, which integrates in the middle of private infrastructure and public cloud platforms and is the essence of both worlds.

The colocation facilities are now providing direct cloud-on-ramps links to leading cloud service providers such as AWS, Microsoft Azure, and Google Cloud that provide clients with low-latency, high-speed, and secure interconnect. It is particularly useful for data-intensive processes, disaster recovery, and compliance-critical processes. For instance, in April 2023, Arista Networks, Inc., a provider of networking solutions, introduced an AI-driven network identity service for business safety and IT operations. The CV AGNI aids in safe IT operations with simple distribution and cloud-scale for all business network workers, their related endpoints, and Internet of Things (IoT) strategies. Colocation even allows organizations to scale their cloud infrastructure cost-effectively while being compliant with data sovereignty regulations by selecting specific geographic locations of data centers.

North America Dominates the Global Data Center Colocation Market

North America is the strongest market for the global data center colocation market because of its improved digital infrastructure, solid technology base, and early cloud and colocation service adoption. The United States has numerous hyperscale data centers and houses several world technology and cloud service titans. The ideal climate of this region facilitates the development of colocation services. Companies of various industries, such as finance, healthcare, retail, and telecommunications, generate large amounts of data and need secure, scalable, and affordable options to house their IT hardware. Colocation responds to such demands by providing trustworthy performance, great connection, and flexibility for less money compared to constructing and maintaining in-house data centers.

For instance, in April 2024, CoreSite, a subsidiary of American Tower Corporation, collaborated with Oxide Computer Company to take advantage of colocation capacity at CoreSite’s Silicon Valley SV2 data center. In addition, North America has a pleasant regulatory environment, accessibility of high-speed internet, and continued investment in data center infrastructure. Edge computing’s growth and the rollout of 5G technology are further driving market expansion. Together, all these factors position North America at the vanguard of the global data center colocation market.

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Impact of U.S. Tariffs on Global Data Center Colocation Market

Enforcement of U.S. tariffs on data center gear and components imported from overseas has increased the cost for colocation companies to construct and maintain. Core gear, such as servers, networking hardware, and cooling solutions, which often originate from Taiwan and China, is now more costly to import, introducing capital expenses and possibly hindering infrastructure growth. This added cost might be passed on to customers who pay higher service fees, thus diminishing the affordability and competitiveness of colocation services. Trade policy uncertainty also makes long-term planning and investment decisions by data center companies challenging. In response, companies are exploring alternative supply chains and regional-level diversification in a bid to deconstruct their reliance on tariff-impacted imports.

Report Scope

“Global Data Center Colocation Market Assessment, Opportunities and Forecast, 2018-2032F”, is a comprehensive report by Markets and Data, providing in-depth analysis and qualitative and quantitative assessment of the current state of global data center colocation market, industry dynamics, and challenges. The report includes market size, segmental shares, growth trends, opportunities, and forecasts between 2025 and 2032. Additionally, the report profiles the leading players in the industry, mentioning their respective market share, business models, competitive intelligence, etc.

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