Data center colocation is a service that enables businesses to place their IT infrastructure, such as servers and networking equipment within third-party, high-performance data centers. Instead of maintaining in-house facilities, companies benefit from shared access to advanced power, cooling, connectivity, and security systems. This setup reduces costs, improves uptime, and supports scalability. As demands for cloud services, AI workloads, and edge computing rise, colocation offers the flexibility and resilience needed to support modern digital operations while also advancing sustainability through energy-efficient and renewable-powered infrastructure.
According to BIS Research, global data center colocation is projected to reach $569.58 billion by 2034 from $130.22 billion in 2024, growing at a CAGR of 14.65%,
• Investor Interest: Surge in data center demand is attracting growth capital, buyout firms, real estate, and infrastructure investors.
• AI Impact: AI-driven demand to push global data center capex to $2T by 2030; $1T expected in the U.S. alone.
• Innovation Spotlight: OrbitsEdge and HPE (2022) are developing LEO-based satellite data centers to process data in space, easing bandwidth strain and boosting efficiency.
• Power Demand Surge: AI/GPU racks now need 40-60 kW (vs. traditional 5-12 kW), straining old infrastructure.
• Grid Capacity Shortages: Major hubs (Virginia, London, Singapore) have no spare power, delaying new projects for years.
• Rising Energy Costs: Electricity makes up 20% of operating costs; prices are unpredictable.
• Cooling Struggles: Air cooling fails for high-density AI racks, forcing costly liquid cooling upgrades.
• Feb 2024: NTT & Schneider launched AI-ready modular edge data center with private 5G at Berlin’s Marienpark.
• Nov 2023: Vertiv released SmartMod Max CW for rapid, energy-efficient modular deployments up to 200kW.
• Sep 2022: Vertiv India unveiled modular data centers with UPS, thermal units, and fast deployment to meet India’s rising demand.
By Application
• IT and Telecom
• Banking, Financial Services, and Insurance (BFSI)
• Government and Public Sector
• Healthcare
• Manufacturing
• Retail
• Others
By Business Model:
• Retail
• Wholesale
By Operator Size:
• Global
• Regional
By Region:
• 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
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The global data center colocation market is poised for significant growth, fueled by rising demand for secure, scalable IT infrastructure amid rapid cloud adoption, big data analytics expansion, and edge computing deployment. Businesses increasingly outsource IT management to colocation providers for cost efficiency and operational flexibility, driving market expansion. Sustainability initiatives and energy-efficient designs are becoming critical differentiators, while strategic investments and partnerships among key players continue to strengthen the sector's role in enabling digital transformation.
-BIS Research Analyst Team
What is the expected growth rate of the data center colocation market?
The data center colocation market is expected to grow at a CAGR of 14.65% from 2025–2034.
Who are the key players?
Leading companies driving the data center colocation include Equinix, Digital Realty, NTT Global Data Centers, CyrusOne, and China Telecom.
Which technologies are most in demand?
High-density racks, liquid cooling, AI-driven DCIM, and renewable energy solutions are driving innovation.
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