The colocation industry in 2026 is facing a significant challenge: power availability. As the demand for data centers continues to rise, success in the industry will now depend more on the ability to deliver megawatts rather than just square footage.
According to projections, the global colocation market is expected to grow from $104.2 billion in 2025 to $204.4 billion by 2030, with a compound annual growth rate of 14.4%. However, this growth has led to a supply crunch, as vacancy rates have decreased and demand for power-dense facilities has surged.
One of the major trends in the industry is the shift towards more power-intensive AI-driven workloads. Legacy platforms that were built for lower power densities are struggling to keep up with the demands of modern AI applications, creating opportunities for new providers focused on power availability and delivery certainty.
The power crunch is also reshaping the geographical landscape of data centers, with growth moving towards regions where utilities can reliably deliver capacity. This shift is driven by utility constraints, permitting timelines, and energy price differentials, making energy resources the primary site-selection driver.
Another significant development in the industry is the rise of build-to-suit colocation facilities. Hyperscalers and neoclouds are increasingly leasing entire buildings or campuses from third-party operators to meet their aggressive growth targets. This trend reflects the challenge of building infrastructure fast enough internally to keep up with demand.
Overall, the colocation industry in 2026 is undergoing a transformation driven by the need for power availability and the shift towards more power-intensive workloads. Providers that can deliver megawatts reliably and efficiently will be the ones to thrive in this evolving landscape.
Challenges for Traditional Enterprise Colocation
Peter Feldman, the CEO of QTD Systems, a colocation provider based in New York, specializing in traditional enterprise workloads, faces a tough situation. Rising operational costs are putting pressure on margins, while customers are resistant to price hikes.
Feldman explained, “Non-AI or hyperscale colocation sales remained steady, but operators faced challenges due to increasing power costs and rising equipment expenses driven by tariffs and AI projects.”
“Equipment, replacement, and upgrade costs have surged due to tariffs and AI projects monopolizing resources for new constructions.” – Peter Feldman, CEO, QTD Systems
Christina Qi, the CEO of Databento, shares similar concerns from a customer standpoint. The Salt Lake City-based market data platform faces supply chain disruptions leading to delays in colocation deployments.
Qi mentioned, “Anticipate ongoing memory and storage shortages with increased costs, expected to persist into Q3 [2026]. Large server shipments have been significantly delayed due to supply chain disruptions.”
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