US Data Center Colocation Market 2024–2033

Reports Description

As per the current market research conducted by CMI Team, the US Data Center Colocation Market is expected to record a CAGR of 16% from 2023 to 2032. In 2022, the market size is projected to reach a valuation of USD 48.08 billion. By 2032, the valuation is anticipated to reach USD 205.55 billion.

In recent years, the concept of colocation has experienced a tremendous surge in growth, largely driven by the establishment of vast data center campuses by major players like Google Cloud Platform, Microsoft Azure, and Facebook in remote locations. This model allows companies to lease space within these facilities to house their computing hardware and equipment.

Colocation services encompass providing end-users with data center space and essential infrastructure, including power, network bandwidth, physical security, and cooling components. This practice is commonly referred to as colocation.

The data center colocation market is currently experiencing a bullish trend, driven by the widespread adoption of data centers across various industry verticals. This surge in demand is due to companies’ rapid embrace of data centers to store and manage substantial amounts of data and handle server operations efficiently.

Data center colocation refers to the process where a service provider rents a significant physical space, internet bandwidth, and network resources within an established data center to deploy their own data center infrastructure. This arrangement enables businesses to share the existing data center resources, leading to more cost-effective and scalable solutions for their computing needs.

US Data Center Colocation Market – Significant Growth Factors

• Increasing Data Storage Needs: The digital transformation of businesses, the proliferation of data-intensive applications, and the rise of big data and analytics have led to a massive increase in data storage needs. Many companies prefer colocation services to securely store their data and manage IT infrastructure efficiently.

• Cloud Adoption: The adoption of cloud services, including public, private, and hybrid clouds, has been on the rise. Colocation data centers serve as strategic locations for cloud providers to host their infrastructure, improving service reliability and reducing latency for end-users.

• Internet of Things (IoT) Growth: IoT devices generate vast amounts of data that require processing and storage. Data center colocation providers offer scalable solutions to manage the influx of IoT-generated data effectively.

• Edge Computing: The demand for edge computing has surged due to the need for low-latency processing and real-time data analysis. Data center colocation facilities located near end-users or IoT devices enable quicker data processing and reduced network congestion.

• Cost-Effectiveness: Setting up and maintaining a private data center can be expensive. Colocation allows businesses to avoid significant capital expenditures and operational costs associated with running their data centers.

• Business Continuity and Disaster Recovery: Colocation providers offer robust infrastructure and redundancy measures that enhance business continuity and disaster recovery capabilities for organizations.

• Scalability and Flexibility: Data center colocation offers scalability to accommodate the changing needs of businesses. Companies can quickly expand their IT infrastructure without significant lead time or investment.

• Regulatory Compliance: Data center colocation providers adhere to stringent security and compliance standards, helping companies meet industry-specific regulations and data protection requirements.

• Global Interconnectivity: Major colocation data centers act as connectivity hubs, facilitating direct interconnection between businesses, cloud providers, and network carriers, enhancing the overall digital ecosystem.

• Outsourcing IT Operations: Many companies prefer to outsource their IT operations to specialized colocation providers to focus on their core business functions and benefit from the expertise of data center professionals.

US Data Center Colocation Market – Mergers and Acquisitions

• Digital Realty and Interxion: In 2019, Digital Realty, a major data center provider, completed its acquisition of Interxion, a leading European colocation provider. This merger expanded Digital Realty’s presence in Europe and strengthened its global data center portfolio.

• Equinix and TelecityGroup: In 2016, Equinix, a prominent global data center operator, completed its acquisition of TelecityGroup, a European data center provider. This deal expanded Equinix’s footprint in Europe and solidified its position as a key player in the colocation market.

• CyrusOne and Zenium Data Centers: In 2018, CyrusOne, a significant colocation provider, acquired Zenium Data Centers, gaining access to data center facilities in key European markets like London and Frankfurt.

• Iron Mountain and IO Data Centers: In 2018, Iron Mountain, known for its data storage and information management services, acquired IO Data Centers, a colocation provider, expanding its data center offerings.

• NTT Communications and RagingWire: In 2014, NTT Communications acquired a controlling stake in RagingWire Data Centers, a US-based colocation provider. This acquisition helped NTT expand its data center operations in the United States.

• Digital Bridge and DataBank: In 2016, Digital Bridge, a communications infrastructure investment firm, acquired DataBank, a colocation provider with data centers across several US markets.

• Equinix and Switch Data Centers: In 2017, Equinix acquired a portfolio of data centers from Switch Data Centers, a move that strengthened Equinix’s position in key US markets like Las Vegas.

COMPARATIVE ANALYSIS OF THE RELATED MARKET

US Data Center Colocation Market – Significant Threats

• Cybersecurity Risks: With the increasing amount of data stored in data centers, the risk of cyberattacks and data breaches has become a major concern. A successful breach could lead to significant financial losses, reputational damage, and potential legal liabilities for data center colocation providers and their clients.

• Competition from Cloud Services: Cloud computing continues to gain popularity, and public cloud providers offer Infrastructure-as-a-Service (IaaS) solutions that compete with traditional colocation services. Many businesses may choose cloud options over colocation due to the ease of use, scalability, and pay-as-you-go pricing models.

• Energy Costs and Sustainability: Data centers consume massive amounts of energy, leading to high operational costs and environmental impacts. Rising energy prices and increasing awareness of sustainability issues may lead some organizations to seek alternative solutions or more energy-efficient data center providers.

• Data Sovereignty and Compliance: With data being stored and processed in data centers, the issue of data sovereignty and compliance with various regulations becomes crucial. Colocation providers need to ensure that they meet specific data residency requirements and comply with relevant data protection laws.

• Economic Uncertainty: Economic downturns or geopolitical instability can affect IT spending and demand for data center services. Uncertainty may lead businesses to delay or scale back their colocation plans, impacting the market’s growth.

• Vendor Lock-In: Some colocation providers offer long-term contracts, which can lead to vendor lock-in for their clients. If businesses are dissatisfied with the services or pricing, breaking away from these contracts can be challenging and costly.

• Edge Computing: The rise of edge computing could potentially impact traditional data center colocation models. As businesses demand lower-latency solutions, edge data centers located closer to end-users and IoT devices may gain popularity, posing a threat to larger, centralized colocation facilities.

• Regulatory Changes: Evolving data privacy and security regulations can require colocation providers to make costly changes to their infrastructure and practices to remain compliant, which may affect their profitability and competitiveness.

• Natural Disasters and Geopolitical Risks: Data centers are vulnerable to natural disasters such as earthquakes, hurricanes, and floods. Additionally, geopolitical risks in certain regions could impact the reliability and accessibility of data center facilities.

Report Scope

Category-Wise Insights

By Colocation:

Retail Colocation:

Retail colocation, also known as retail or retail-customer colocation, involves offering smaller portions of data center resources to individual customers. It is ideal for businesses and organizations that require smaller amounts of space, power, and network connectivity for their IT infrastructure. Key features of retail colocation include:

• Customizable Solutions: Retail colocation providers offer a range of options to cater to various customer requirements, allowing businesses to select the specific amount of space, power, and network bandwidth they need.

• Flexible Contract Terms: Retail colocation contracts typically offer shorter terms, providing businesses with the ability to scale their IT infrastructure more dynamically and adapt to changing needs.

• Diverse Interconnection Options: Retail colocation facilities often serve as connectivity hubs, offering access to a wide array of network carriers and cloud service providers, facilitating seamless interconnection.

• Managed Services: Many retail colocation providers offer additional managed services, such as monitoring, security, and support, to assist businesses in managing their IT operations effectively.

Wholesale Colocation:

Wholesale colocation, also known as wholesale or wholesale-customer colocation, involves leasing large portions of data center space and resources to single tenants, often on a larger scale than retail colocation. Wholesale colocation is suitable for enterprises, cloud providers, and hyper scale companies with significant IT infrastructure needs. Key features of wholesale colocation include:

• Larger Footprint: Wholesale colocation clients typically lease a substantial amount of space, often an entire data center floor or multiple data center modules.

• Dedicated Infrastructure: Wholesale colocation offers clients the option to have dedicated power and cooling infrastructure designed to meet their specific requirements.

• Long-Term Contracts: Wholesale colocation agreements often have longer contract terms, providing stability and predictability for both the colocation provider and the tenant.

• Custom Buildouts: Wholesale colocation allows clients to customize the data center environment to suit their unique operational needs, enabling greater control over their infrastructure.

• High Scalability: Wholesale colocation facilities are designed to accommodate rapid growth and scalability, making them attractive to companies with expanding IT needs.

US Data Center Colocation Market – Regional Analysis

Major Metropolitan Areas: The largest data center colocation markets in the US are typically concentrated around major metropolitan areas. Cities like New York, Chicago, Los Angeles, Dallas, Atlanta, and Northern Virginia (Ashburn) are known as major data center hubs due to their robust network infrastructure, proximity to business centers, and connectivity to international network backbones.

• Northern Virginia (Ashburn) Region: The Northern Virginia region, particularly the Ashburn area, is often considered the “Data Center Capital of the World.” It houses a significant concentration of data centers due to its strategic location near Washington, D.C., access to major network peering points, and availability of reliable power and connectivity.

• West Coast: The West Coast, including cities like Los Angeles, San Francisco, and Seattle, is another critical region for data center colocation. Its proximity to Asia and access to trans-Pacific network cables make it an attractive location for businesses seeking connectivity to global markets.

• Central US: Cities in the central United States, such as Dallas, Chicago, and Denver, are also major data center hubs. These locations provide geographic diversity and serve as interconnection points between various regions, making them valuable for disaster recovery and content distribution.

• East Coast: The East Coast, with cities like New York, Atlanta, and Miami, hosts several data centers to serve businesses in the financial, healthcare, and media industries, among others.

• Pacific Northwest: The Pacific Northwest, including cities like Seattle and Portland, attracts data center investments due to its access to renewable energy sources, such as hydroelectric power, making it an appealing option for environmentally conscious companies.

• Emerging Markets: Besides the well-established data center regions, emerging markets in smaller cities across the US are also witnessing growth in colocation services. This expansion is driven by the need for edge computing facilities to reduce latency and support the growth of IoT applications.

List of the prominent players in the US Data Center Colocation Market:

• Equinix
• Digital Realty
• CyrusOne
• CoreSite Realty Corporation
• CenturyLink (now Lumen Technologies)
• Cologix
• NTT Global Data Centers Americas (formerly RagingWire Data Centers)
• Iron Mountain
• vXchnge
• Zayo Group
• Others

The US Data Center Colocation Market is segmented as follows:

By Colocation Type

• Retail
• Wholesale

By Enterprise Size

• Large
• SMEs

By Tier Level

• Tier 1
• Tier 2

By End-Use

• BFSI
• Retail

On the basis of US Geography

• Northeast Region
• Southeast Region
• Midwest Region
• West Coast Region
• Southwest Region
• Mountain States