Data Center Colocation Market Set to Reach $569.58 Billion by 2034 – BIS Research

Market Overview 

Market Size and Growth Rate:

In 2024, the global data center colocation market was valued at $130.22 billion. It is projected to grow at a compound annual growth rate (CAGR) of 14.65% from 2025 to 2034, reaching $569.58 billion by 2034.  

Trends & Innovation:

The market is witnessing a surge in demand for hybrid IT solutions, integrating colocation with cloud services. Innovations in energy-efficient cooling systems and the adoption of renewable energy sources are becoming prevalent, aiming to reduce operational costs and environmental impact. 

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Key Highlights:

Report USP: 

• Comprehensive analysis of market drivers, challenges, and opportunities. 
• Detailed segmentation by service type, end-user industry, and geography. 
• Insights into emerging trends and technological advancements. 
• Profiles of key players with their strategic initiatives. 
• Market forecasts and growth projections up to 2034. 

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Demand Drivers, Challenges & Opportunities: 

Market Drivers: Increasing Data Center Spending 

The data center colocation market is being fueled by exponential growth in demand, especially in the U.S., where data center power consumption is projected to rise from 17 GW in 2022 to 35 GW by 2030, accounting for nearly 40% of global data center capacity. Investment interest is surging across infrastructure and private equity players, with Blackstone alone allocating $70 billion toward future developments. AI’s rising computational needs are expected to trigger $2 trillion in global data center capex over five years, half of which will be in the U.S. To manage rising data volumes, firms like OrbitsEdge and HPE are innovating with edge computing in space, offering satellite-based data centers that reduce bandwidth usage and enhance real-time processing. 

Market Challenges: Power and Energy Constraints 

Power availability and energy efficiency are becoming major hurdles for the colocation market. With AI workloads pushing rack power densities to 40–60 kW, traditional colocation facilities are struggling to adapt. Grid limitations in key regions such as Northern Virginia, Singapore, and London are stalling new developments, prompting governments to impose moratoriums. Energy costs, which make up about 20% of operating expenses, have become increasingly volatile, while regulatory pressure is pushing for better energy efficiency and sustainability standards like PUE 1.2. In response, operators are turning to advanced cooling, energy storage, and on-site generation to remain competitive amid rising operational and compliance challenges. 

Market Opportunities: Growing Demand for Different Business Models 

Evolving customer needs are creating new opportunities for colocation providers to diversify their business models. The convergence of wholesale and retail colocation is evident as firms like Equinix and Digital Realty offer hybrid solutions, enabling better support for hyperscale and enterprise customers alike. The shift toward hybrid cloud strategies has prompted businesses to re-integrate critical workloads into colocation environments for cost efficiency and performance gains. Furthermore, flexible pricing models such as pay-as-you-go are gaining traction, especially among startups and agile enterprises. Providers like NTT, Cyxtera, and Equinix Metal are meeting this demand with scalable, cloud-like bare-metal services, positioning colocation as a dynamic, cost-efficient infrastructure choice in a rapidly digitizing economy. 

Market Segmentation 

Segmentation 1: Application based segmentation 

•    IT and Telecom 

•    Banking, Financial Services, and Insurance (BFSI) 

•    Government and Public Sector 

•    Healthcare 

•    Manufacturing 

•    Retail 

•    Others 

Segmentation 2: Business Model based segmentation 

•    Retail 

•    Wholesale 

Segmentation 3: Operator Size based segmentation 

•    Global 

•    Regional 

Segmentation 4: Region based segmentation 

•    North America: U.S., Canada, and Mexico 

•    Europe: Germany, France, U.K., Netherlands, Ireland, Italy, and Rest-of-Europe 

•    Asia-Pacific: China, Japan, Australia, India, South Korea, and Rest-of-Asia-Pacific 

•    Rest-of-the-World 

Competitive Landscape 

Key Players 

•    Digital Realty 

•    Equinix, Inc. 

•    Lumen Technologies 

•    CoreSite 

•    DataBank, Ltd.  

•    Centersquare 

•    Flexential 

•    MOD Mission Critical 

•    CyrusOne 

•    TierPoint, LLC 

•    IPTP Networks 

•    365 Data Centers 

•    EdgeConneX Inc. 

•    HostCircle Inc. 

•    Cogent Communications   

Strategic Initiatives 

These companies are focusing on expanding their global footprint through mergers and acquisitions, investing in green data center technologies, and enhancing their service offerings to cater to the evolving needs of customers. 

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Case Studies & Success Stories: 

Equinix Inc. has successfully expanded its global presence by acquiring data centers in strategic locations, enhancing its service capabilities and customer reach. Digital Realty Trust Inc. has invested in sustainable data center solutions, achieving significant energy savings and attracting environmentally conscious clients. 

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