Colocation services market to grow steadily over the next 5 to 7 years

The global colocation services market continues to maintain its growth streak through the pandemic and is expected to continue on a high growth trajectory over the next 5 to 7 years, according to ResearchAndMarkets.

colocation services market

Key factors that will drive growth during this period are increasing demand from hyperscale data centers, high levels of investment pouring in, significant increase in data creation and consumption, high volumes of data traffic fuelled by emerging technologies, such as 5G, edge, IoT, along with AI/ML developments, ever-increasing enterprise outsourcing, increasing adoption of hybrid-cloud, and the high degree of data center activity in emerging economies.

Key drivers

Colocation services are driven significantly by the increasing need for hyperscale capacity from the enterprises primarily from public cloud services provider segments. The contribution to demand is expected to continue throughout the forecast period. Hyperscale data centers are expected to increase from 509 data centers in 2019 to 890 in 2025 at a CAGR of 9.76%. Most development is expected to happen in Asia and North America.

Asia-Pacific is expected to have a majority share in hyper-scale data centers globally, with more than 40% of the market share by 2030. North America’s market share is expected to decline gradually during this period. Europe is expected to see its hyper-scale market share maintained between 19% to 20% as development in secondary markets and key locations of the Nordics and Eastern Europe drive growth in the continent.

As the enterprise outsourcing boom continues, companies are becoming more aware about the benefits of using third-party data center services; there is a better understanding and appreciation of the benefits of leveraging specialist service providers to facilitate their IT operations and mitigate risks. Enterprises are implementing multiple infrastructure options to ensure optimal deployment of each application. The shift from capital to operating expenses and decreased hardware maintenance burden will motivate enterprises to adopt third-party data center services.

Data creation has increased manifold due to increased penetration of internet-enabled devices and industrial sensors, such as IoT devices, leading to high demand for data transfer and data storage systems. This has led to massive investments in data centers across the globe.

This increase in data center investment, mainly from technology firms will be a key driver for market growth. Cloud investments are mainly driven by North American technology firms that are investing heavily in hyperscale facilities across the globe.

The data center industry is also witnessing a massive wave of investment activity from special purpose acquisition companies (SPACs) and marquee investors; this is expected to take M&A activities to the next level in the coming years.

Colocation services market thriving in the APAC region

The Asia-Pacific region is expected to become a hub for data center construction as companies in China, South Korea, Japan, and Taiwan try to take advantage of the coming boom in data creation due to 5G technology.

The APAC colocation services market is the largest in the world with a revenue contribution of 41% in 2020. APAC is expected to become a hub for data center construction as companies in China, South Korea, Japan, and Taiwan invest to take advantage of the coming boom in data creation due to 5G technology.

India is a key market to watch out for in APAC. It offers tremendous growth potential over the forecast period with an estimated CAGR of 22%.

It is one of the fastest growing data center market in the world and is expected to emerge as the next hub of APAC during the forecast period. North America is the second largest market in the world for colocation services; even though NA is expected to maintain its second position throughout the forecast period, its overall global revenue share is expected to gradually decline over the forecast period.

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