The landscape of the data center colocation market is rapidly evolving, driven by the influence of AI technology. Recent research conducted by Synergy Research Group reveals a significant transformation taking place in this sector.
In the past, the colocation market was valued at $54 billion, but it is now experiencing exponential growth. Projections from Research and Markets indicate that by 2029, the market is expected to reach $133.3 billion.
As the demand for data center services continues to surge, the colocation industry is shifting its focus from established hubs to emerging regions. While 20 metro areas previously dominated 60% of the global colocation market, the landscape is now evolving, with high-potential markets emerging in Asia Pacific, Latin America, and Africa.
Key findings from Synergy’s latest report highlight the top eight metros projected to experience the highest growth rates through 2030, including Johor, Lagos, Santiago, Chennai, Kuala Lumpur, Queretaro, Jakarta, and Mumbai. Interestingly, only three existing major markets—Northern Virginia, Mumbai, and Phoenix—appear on this list, indicating a shift towards newer markets.
The demand for colocation services is significantly influenced by AI technology, with distinct patterns emerging based on workload type. While AI training typically occurs in hyperscale self-build facilities, AI inference infrastructure is increasingly being positioned in multi-tenant colocation facilities to meet the needs of end-users.
Sustainability considerations also play a role in shaping the growth of data center deployments globally. While environmental factors impact the industry as a whole, sustainability goals are not the primary driver of growth differentials between emerging and established markets. Scandinavia, for instance, benefits from a cooler climate that helps reduce the impact of high power requirements for AI.
Despite the geographic diversification of growth, the leadership in the colocation industry remains concentrated among established global and regional players. Equinix, Digital Realty, NTT, China Telecom, CyrusOne, GDS, KDDI (Telehouse), Chindata, and Centersquare are identified as the top colocation companies worldwide.
Northern Virginia, Mumbai, and Phoenix stand out as supersized and high-growth markets with unique characteristics that allow them to maintain momentum. While Mumbai benefits from being a key player in the Indian economy, Phoenix experiences a spillover effect from expensive California locations and benefits from ample space and power resources.
In conclusion, the colocation market is undergoing a significant transformation, driven by the interplay of AI technology, sustainability considerations, and the geographic diversification of growth. As the industry continues to evolve, staying abreast of these developments will be crucial for businesses looking to leverage colocation services effectively.
