Data Center Colocation Market size is projected to expand at over 11.5% CAGR from 2023 to 2032, attributed to the ongoing shift towards edge computing and the increasing adoption of IoT devices in colocation facilities.

The growing emphasis on decentralized data processing, reduced network congestion, and the thriving need for real-time data analytics is surging the adoption of colocation services for supporting edge computing and IoT infrastructure. Furthermore, the rising trend of outsourcing IT infrastructure management and maintenance to specialized colocation service providers may provide lucrative growth opportunities to the industry participants. For instance, in August 2023, Digital Realty launched a higher-density colocation service in 28 markets across Europe, North America, and APAC to support workloads of over 70 kilowatts per rack while enabling businesses to rapidly deploy high-performance infrastructure on a global scale.

The data center colocation industry is segmented into type, end-use, application, and region.

The market value from the wholesale colocation type segment is anticipated to witness high demand between 2023 and 2032 due to its ability to cater to the expanding needs of large enterprises and cloud service providers for scalable and cost-effective data center solutions. Moreover, the escalating demand for spacious, customizable, and high-density colocation spaces driven by the requirements for housing extensive IT infrastructure and managing complex workloads will contribute to the increasing adoption of wholesale colocation.

Data center colocation industry is poised to gain significant traction from the IT and telecom application segment between 2023 and 2032. The growth is attributed to the increasing demand for scalable and secure data storage solutions to manage the rising volumes of digital data, network traffic, and communication services across the IT and telecom sectors. Moreover, the emphasis on data security, compliance with regulatory standards, and the integration of advanced networking capabilities will further fuel the segment growth.

Regionally, the Asia Pacific data center colocation industry is set to expand at robust growth rate from 2023 to 2032 owing to the rapid digitization, increasing adoption of cloud computing services, and the proliferation of internet-enabled devices across the region. Major countries such as India, China, and Japan possess robust technological expertise, emerging as attractive locations for businesses leveraging rapidly advanced technologies, augmenting the regional industry outlook. For instance, Google announced its plans to set up its first data center through $730 million infrastructure fund in Japan by the end of 2023.