Data Center Colocation Market Due to Reach Nearly $50 Billion by 2019

By Mike Allen

Posted On November 25, 2014


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"Data center colocation continues to be a popular market option for businesses that want cost-efficient, enterprise-grade server storage and support, and continued investment in both wholesale and retail colocation is driving market forecasts up. Colocation adoption is still climbing in every region, with many secondary U.S. markets, as well as a greater number of European and Asia-Pacific markets, poised to see significant growth. For data center companies, colocation remains an alternative option to managed services and cloud hosting that can round out a provider's offerings and deliver solutions to issues that may not be as easy to fulfill in one of the other arrangements.

According to a recent report released by Research and Markets, the data center colocation market is expected to rise at a compound annual growth rate of 17.6 percent over the next five years, climbing from $16.65 billion in 2014 to a projected $49.57 billion by 2019. The data center market overall continues to expand as both new residential markets get on the grid and businesses explore larger outsourced hardware deployments, with overall traffic predicted to nearly triple over the next five years. Colocation not only represents an attractive investment for companies that need to broaden their back-end framework, but a necessary one for those dealing with heightening information security, disaster recovery, business continuity and compliance demands.

Wholesale Colocation Seeing Increased Interest
In keeping with this explosion of data center traffic and the need for much more extensive back-end architecture to support it, the research also found that the wholesale colocation market is seeing heightened interest. The more cost-effective rates that many wholesale colocation providers offer are being expanded to companies that have smaller space and lower power needs, allowing them to market to clients that the retail colocation market once solely served. Hybrid cloud-based facilities are also rising into a more prominent position in the overall colocation market as vendors expand and reshape their solutions to fit an ever-more diversifying set of individual enterprise needs.

Where Colocation is Growing
Besides augmenting and expanding existing solutions in order to attract a broader swath of clients, other changes in colocation facilities and marketing are following changes common to the rest of the data center and cloud industries. These include the move to more eco-friendly facilities, especially in regard to energy use and cooling methods, as colocation companies look to dramatically reduce their carbon footprint. With the writing on the wall for facilities that don't adopt more environmentally-conscious approaches, it's a competitive advantage and a look toward the future to greenify sooner rather than later.

Recent research by TeleGeography also found that secondary U.S. markets, as well as a handful of key areas in expanding data center regions, will be at the forefront of growth projections. Dallas and Seattle have been among the U.S. cities with the most growth in availablecolocation space: Floor space in Dallas has increased to 3.6 million square feet, good for 26 percent growth from 2011 to 2014, with companies including Equinix, CoreXchange, Internap, Telx and TierPoint investing heavily in Dallas colocation space. Seattle colocationspace now totals 1.9 million square feet for 16 percent growth over that period, with colocation companies including Equinix, Internap, XO and zColo serving the thriving tech community in the Pacific Northwest.

Across the Atlantic, Amsterdam and Stockholm have been among the European markets experiencing the most growth over the last few years. Colocation space in Amsterdam rose at a compound annual growth rate of 25 percent between 2011 and 2014 and now totals 2.1 million square feet, while Stockholm colocation space is now a gross of 380,000 square feet, representing a 21 percent rise.

As more data center companies look to establish an on-the-ground presence in Australia or serve the growing tech market there, colocation space in the area has seen a sharp rise. Both Sydney and Melbourne colocation space has experienced a compound annual growth rate of about 30 percent between 2011 and 2014. Singapore colocation space surpassed more than 1 million square feet in the last few years, with data center companies like CenturyLink and CyrusOne leading the way in launching facilities.

Why Colocation Facilities Will Continue to be Important
The continued growth and expansion of the colocation market illustrates the fact that it will remain critical to the ability of many businesses to cope with rising IT-related demands and scale up their hardware support without having to make correlative purchases for redundant backup, system components and operating system connections. In a recent piece discussing the importance of colocation data centers, TechRepublic contributor Michael Kassner outlined the critical support that colocation provides for Internet interconnectedness, writing that the complex topography of the Internet, as well as the need for redundancy and architecture build out makes ""scalable interconnections"" a necessity.

""'˜Scalable interconnections' allude to the fact that over time, the digital needs of a business could change; this may mean adding servers, obtaining access to a network in a different part of the region, or changing providers,"" Kassner wrote. ""Being able to accomplish physical and digital changes without moving to a different facility eliminates a great deal of angst, cost and physical work.""

And that's what data centers are about, isn't it? Enabling businesses to gain agility and flexibility without having to sacrifice resources to attain it is key to enabling their growth, and it's why colocation continues to play an important role as more and more enterprises seek outdata center services."


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Mike Allen

"Data center colocation continues to be a popular market option for businesses that want cost-efficient, enterprise-grade server storage and support, and continued investment in both wholesale and retail colocation is driving market forecasts up. Colocation adoption is still climbing in every region, with many secondary U.S. markets, as well as ...