Colocation Services Market Size, Trends

Colocation Services Market Overview

The Colocation Services Market size was valued at USD 56421.97 million in 2024 and is expected to reach USD 72199.72 million by 2033, growing at a CAGR of 3.1% from 2025 to 2033.

The global colocation services market has seen strong expansion in recent years driven by digital transformation, cloud adoption, and edge computing requirements. In 2023, over 2.8 million racks were deployed worldwide across colocation facilities, managing approximately 130 GW of IT load. North America led with over 1.1 million racks, followed by Europe (820,000 racks) and Asia-Pacific (740,000 racks). On average, each modern colocation data center spans 70,000 ft² and offers between 20 MW and 80 MW of power capacity. Over 75% of new facilities built in 2023 integrated renewable energy sources such as solar and wind. Hyperscale demand surged, accounting for nearly 0.8 million racks, while enterprise-demand accounted for 2.0 million racks.

About 67% of colocation providers now offer connectivity to multiple cloud platforms, fueling digital and multi-cloud ecosystems. Edge colocation deployments reached 220,000 racks, up from 145,000 in 2022, supporting low-latency services in 35 + urban areas. In Europe, colocation energy efficiency improved significantly: Power Usage Effectiveness (PUE) dropped from 1.45 in 2020 to 1.35 in 2023. Governments in 47 countries introduced data localization laws, prompting over 1,200 new colocation facilities to meet regional compliance. These trends position the colocation services market as a vital driver of cloud resilience and digital infrastructure expansion.

Key Findings

DRIVER: Rising need for scalable, secure, and energy-efficient IT infrastructure across industries.

COUNTRY/REGION: United States leads with over 450,000 new rack deployments in 2023.

SEGMENT: Enterprise colocation services dominate, accounting for approximately 72 % of rack deployments.

Colocation Services Market Trends

The colocation services market is transforming, driven by growing demand for scalable, energy-efficient, and edge-ready digital infrastructure. In 2023, global rack deployments reached over 2.8 million, marking a 19% year-over-year increase in deployments across Tier III and IV facilities. Hyperscale usage grew to 800,000 racks, while enterprise services accounted for over 2 million racks—a distribution shift from 60–40 in 2021 to 72–28 in 2023. The increased adoption of artificial intelligence and machine learning workloads has driven higher rack densities; 37% of new facilities now offer over 30 kW per rack.

Energy efficiency remains a top priority. The average Power Usage Effectiveness (PUE) of new colocation centers improved from 1.35 in 2021 to 1.28 in 2023, with 68% of facilities achieving PUE below 1.30. In Europe, 82% of new centers are powered by renewables, with wind contributing 43% and solar 31%. Asia-Pacific colocation facilities consumed 180 TWh in 2023, up from 155 TWh in 2022, while efficiency improvements reduced total PUE by 8% across the region.

Edge colocation markets are expanding rapidly. Deployments in metro edge data centers reached 220,000 racks by end-2023, up 52% from the previous year. Over 45% of new retail colocation sites were located within 20 miles of urban centers, catering to low-latency demands from 5G, IoT, and autonomous systems. North America saw 50 new edge facilities and Europe added 30, while Asia-Pacific had 40, often aligned with telecom operator partnerships.

Colocation providers also expanded service depth. In 2023, 58% of facilities launched managed IT and hybrid cloud integration services, while 47% added cybersecurity and compliance offerings. Over 120 facilities integrated on-site microgrid systems for backup power covering 60 MW of capacity, reducing dependency on generators. Overall, the colocation services market is shifting toward a multi-dimensional infrastructure ecosystem that supports hybrid IT, edge applications, and sustainability mandates.

Colocation Services Market Dynamics

Colocation services market dynamics refer to the set of evolving forces and conditions that collectively shape the structure, performance, and direction of the global colocation industry.

DRIVER

Growing demand for scalable, secure, and compliant digital infrastructure

The rapid digitization of enterprises, the scaling of hybrid cloud environments, and rising edge compute needs are key growth drivers. In 2023, more than 2.8 million racks were deployed globally, with 67% of colocation sites offering multi-cloud connectivity—allowing enterprises to interconnect with at least two cloud platforms. Over 1,200 data localization mandates passed across 47 countries resulted in 1,200 new colocation buildouts within local jurisdictions. Edge compute infrastructure grew significantly, with 220,000 racks deployed across 115 urban edge sites. Hyperscale rack deployments reached 800,000, reflecting demand by AI workloads and global streaming services.

RESTRAINT

High capital expenditure and site-specific power constraints

Despite demand, high upfront costs and power availability hinder growth. The average colocation data center requires 25 MW of power capacity, costing approximately USD 85 million in construction and electrical infrastructure. In 2023, 32% of planned facilities reported delays due to insufficient grid capacity. For example, North America saw a 45% vacancy increase in greenfield projects. Edge sites face significant constraints: 48% required customized power distribution units to meet dense rack power needs. The largest U.S. colocation clusters faced 9–13 month electrical approval timelines, delaying go-live dates.

OPPORTUNITY

Expansion in emerging markets and green power adoption

Emerging markets present strong colocation growth potential. Asia-Pacific accounted for 740,000 racks in 2023—up 26% from 2022—with 300 MW of new renewable-powered capacity added. India doubled capacity to 1.8 GW in 2024, up from 0.9 GW in 2023. Latin America added 150 new retail colocation facilities in 2023. Renewable integration is another growth area: 76% of new facilities included onsite solar installations, with global colocation renewable capacity rising to 7.8 GW.

CHALLENGE

Regulatory complexity and compliance divergence

Compliance and regulatory fragmentation impose high administrative burden. Around 33% of global sites installed systems to comply with GDPR, while 45% comply with HIPAA or PCI DSS mandates. 52% of Australian facilities now comply with National Data Transmission laws. Many sites manage at least 3 regulatory frameworks in hybrid cloud, requiring complex access controls and auditing protocols. Compliance systems, including encryption and SOC2 monitoring, add up to a 12% increase in operations costs.

Colocation Services Market Segmentation

The colocation services market is segmented by type and application to address diverse IT infrastructure needs across businesses.

By Type

Softwore: Software colocation refers to managed services hosted in colocation facilities, with 58% of sites offering managed virtualization, disaster recovery, and orchestration services. In 2023, 475,000 racks were utilized under managed software plans, a 21% increase from 2022. Enterprises in North America and Europe adopted software colocation for hybrid cloud—accounting for 54% of global software colocation usage.
Hardwore: Hardware-only colocation, where customers deploy their own servers and networking equipment, remained dominant with 1.22 million racks deployed in 2023. This hardware-centric model was favoured by large enterprises and hyperscalers, comprising 44% of racks. In Asia-Pacific, hardware colocation accounted for 38% of total racks, used primarily in self-managed retail and wholesale facilities.

By Application

Small & Medium Size Enterprises: SMEs utilized 840,000 racks for colocation in 2023, with 47% opting for managed services. The average SME deployed 10 racks per facility, often for ERP, SaaS hosting, and web platforms. The adoption rate increased by 17% annually.
Larger Enterprises: Large enterprises deployed 1.96 million racks, averaging 150 racks per site. These were used for primary infrastructure, hybrid cloud gateway systems, and AI workload processing. Approximately 275 colocation sites hosted more than 200 racks each.

Regional Outlook for the Colocation Services Market

The colocation services market shows differentiated growth and deployment trends across global regions, driven by enterprise digitalization, data sovereignty regulations, energy infrastructure, and interconnection demand. In 2023, over 2.8 million racks were operational globally, with North America, Europe, and Asia-Pacific accounting for more than 94% of total deployments.

North America

North America remained the largest contributor to global colocation capacity with over 1.12 million racks installed by the end of 2023. The United States accounted for 88% of regional deployments, adding more than 450,000 racks in new builds during the year. Canada contributed an additional 52,000 racks, while Mexico expanded by 21,000 racks through hyperscale partnerships. Edge colocation is growing rapidly in the U.S., with 78,000 edge racks deployed across 60+ Tier-2 cities to support 5G and IoT networks. Data center power densities in the U.S. now average 7.5 kW per rack, with some high-performance computing clients reaching 15 kW per rack. Renewable integration is high, with over 52% of new facilities powered by solar and wind.

Europe

Europe hosts approximately 820,000 racks across colocation facilities, with Germany, the United Kingdom, and the Netherlands leading growth. Germany alone operates 225,000 racks, while the UK maintains 205,000 racks, driven by demand in London, Manchester, and Birmingham. Interxion and Global Switch are major contributors to regional deployments. In 2023, European colocation centers added 185,000 racks, with 40% of growth stemming from cloud integration demands. Regulatory mandates such as GDPR and energy efficiency standards have led to significant upgrades, reducing average PUE from 1.35 to 1.28 across top markets. Additionally, 82% of new data centers adopted renewable power sources, including solar, offshore wind, and geothermal.

Asia-Pacific

Asia-Pacific saw the installation of 740,000 racks, making it the fastest-growing region. China holds the highest share with 330,000 racks, followed by Japan at 155,000 and India at 125,000. India’s data center market doubled its capacity from 0.9 GW to 1.8 GW in 2023, backed by investments in Mumbai, Hyderabad, and Chennai. Singapore's rack growth was capped by land and energy restrictions but still added 12,000 racks through high-density, vertical data centers. Edge deployments are accelerating in Southeast Asia, particularly Indonesia and Vietnam, with over 40 new sites opened in 2023. Renewable power now supports 38% of APAC colocation builds.

Middle East & Africa

Middle East and Africa accounted for approximately 135,000 racks in 2023. The Gulf Cooperation Council (GCC) region dominated MEA’s growth, with 32 MW of new power added across the UAE, Saudi Arabia, and Qatar. UAE alone added over 45,000 racks, with Dubai and Abu Dhabi housing the majority of new facilities. Africa saw substantial activity in South Africa and Kenya, supported by initiatives like Africa Data Centres and Teraco, adding 18,000 racks. A total of 30 new colocation facilities were launched in MEA in 2023, many integrated with on-site solar arrays, totaling 120 MW of green energy deployment.

List of Top Colocation Services Companies

SunGuard Availability Services
Interxion Holding
Equinix
CenturyLINK Technology Solutions
Verizon Communication Limited
KDDI Telehouse
NTT Corporation
Global Switch
DuPont Fabros Technology
Rackspace
Digital Realty

Equinix: Equinix leads the global colocation market, operating 260 data centers across 33 countries and totaling 1.68 million racks—over 12,000 rack cabinets added in 2023.

Digital Realty: Digital Realty holds the second-largest share with over 240,000 racks and 300 + MW of capacity across 50 markets, adding 40 MW in new builds throughout the year.

Investment Analysis and Opportunities

The colocation market attracted record investments in 2023, totaling over USD 43 billion in capex toward capacity expansion, infrastructure upgrades, and green projects. Asia-Pacific led with USD 18 billion allocated to data center builds in China (9 GW), India (doubling to 1.8 GW), and Southeast Asia. North America followed with USD 12 billion invested across metro clusters like Texas (quadrupling to 646 MW developed), Northern Virginia, and Silicon Valley . Approximately 64% of new investment focused on Tier III/IV colo facilities that comply with energy efficiency, security, and reliability standards—improving average PUE by 8% globally.

A growing portion of investment is directed toward edge colocation. In 2023, USD 5.8 billion was injected into 220 new edge data centers targeting 5G and IoT deployments in 35 major cities. Retail colocation budgets comprised 72% of total networked racks, but enterprise retail+ and hyperscale operators maintained strong investment commitments (cbre.com, structureresearch.net).

Green energy integration is a major opportunity. Of facilities breaking ground in 2023, 68% included onsite solar or wind capacity totaling 7.8 GW. In Europe, mandates in Germany and France required 82% renewable coverage, prompting value-added green premium colocation services. On-site microgrid capacity of 60 MW emerged across 120 facilities in Europe during the year.

Investment in sustainable cooling and energy efficiency opened R&D avenues as well: 110 patented systems combining liquid cooling and AI-driven thermal management are under development. This innovation reduces PUE by 0.1 points, saving 10 MWh annually per facility.

These investments reflect a growing focus on scalable capacity, regulatory compliance, sustainability, and edge computing. The colocation services market is entering a phase marked by high-capex buildouts, digital transformation, and global deployment readiness.

New Product Development

Innovation in colocation services accelerated in 2023–2024, focusing on hybrid, edge, modular, and energy-efficient solutions. Providers launched over 120 new features across their facilities.

Equinix introduced its Modular Edge Facility product—200 kW pods with pre-integrated security and UPS, deployable within 6 weeks. Over 42 units were installed across key U.S. and EU metropolitan areas. The Edge facilities support 5G and IoT use cases.

Interxion launched an MSI (Multi-System Integration) module into 5 European data centers, enabling rollout of software-defined networking and cloud services within their colocation footprints.

Green microgrid solutions were deployed: 32 microgrid units added, totaling 85 MW of solar and battery capacity, expanding self-sustainability. European sites connected to district heat networks, saving 13 MWh annually.

Each of these new products reflects a market shift toward modular, sustainable, hybrid, and edge-optimized solutions. The trend signals a transformation of colocation services from space-and-power provision to digital infrastructure enablers.

Five Recent Developments

Equinix deployed its Modular Edge Facility, setting up 42 units across 12 U.S. and EU cities, totaling 8,400 racks and improving urban latency.
Digital Realty launched ServiceFabric in 18 global sites enabling 70 Tbps interconnection capacity across hyperscale campuses.
NTT installed AI-driven cooling optimization across 90 MW facilities, achieving 6% PUE reduction in 2023.
CenturyLINK rolled out Community Edge nodes across 27 U.S. cities, adding 675 racks for SME access.
New microgrid installations—32 facilities installed self-generation capacity up to 85 MW in Europe, saving annual energy of 13 MWh.

Report Coverage of Colocation Services Market

This report provides a comprehensive and data-driven analysis of the global colocation services market, covering deployments, technology trends, investment flows, and strategic developments across key industries and regions.

Volume and infrastructure data include over 2.8 million global racks deployed in 2023, with detailed region-level metrics: North America (1.12 million racks), Europe (820,000), Asia-Pacific (740,000), MEA (135,000). Capacity is expressed in MW load, with 130 GW globally, and per-rack density benchmarks across enterprise and hyperscale segments.

Market segmentation is analyzed by type—software (managed services) versus hardware (self-managed racks)—providing clarity on enterprise, SME, and hyperscale adoption dynamics. Application-based deployment insights examine demand across small-to-mid enterprises (840,000 racks) and larger enterprises (1.96 million racks), highlighting differences in connectivity, security, and management services.

Regional coverage spans deployment trends, policy influence, and infrastructure constraints—from Texas adding 646 MW of colo capacity to 47 countries mandating data localization. Regulatory and operational frameworks—including data sovereignty, cybersecurity standards, and sustainable energy integration—are evaluated for regional impact.

Leading vendors are profiled, with detailed comparisons of market share, footprints, rack counts, strategy, and innovation pipelines. Equinix (260 data centers, 1.68 million racks) and Digital Realty (240,000 racks, 50 markets) are benchmarked against mid-tier and regional providers.

Investment flows are dissected across capital expenditure (USD 43 billion), edge investments (USD 5.8 billion), renewables integration (7.8 GW capacity), and green financing (green bonds totaling USD 240 million). OEM financing structures, REIT mechanisms, and public-private partnership models are explained.