Global Data Center Colocation Market Reaches $25B

The global colocation data center market has reached $25 billion in annual revenue run rate, more than half of that revenue generated by the top 60 service providers in the space, according to the latest report by 451 Research.

The researchers pegged total number of data center providers across North America, Latin America, EMEA, and Asia Pacific at 1,086. These companies collectively operate 3,685 individual data centers.

The 60 top providers account for about six percent of the total number of players in the market. The top 10 players pull in 28 percent of the revenue.

Many Smaller Players, Despite Consolidation

While the colocation market has been consolidating, more than 1,000 companies, many of whom are regional players, account for the other half of the revenue.

“At its heart, the multi-tenant data center business is a regional business,” Greg Zwakman, research director at 451, said in a statement. “So despite active consolidation and some concentration at the top, much of the market remains highly fragmented, with a mix of national and local players.”

Some of the most recent big acquisitions in the colocation data center market were Colt’s acquisition of KVH in Asia Pacific in November, and Shaw Communications’ $1.2 billion ViaWest deal in July.

Examples of smaller deals that took place this year were Zayo’s CoreXchange acquisition in March, DataBank’s acquisition of Arsalon in May, and the purchase of Colo5 in Florida by Cologix in September.

Graph courtesy of 451 Research

Interest in Second-Tier Markets Rising

The bulk of multi-tenant data center construction over the past decade has taken place in big markets with lots of potential tenants, but, according to 451 research director Kelly Morgan, interest in markets outside of the big cities is growing.

“This is for several reasons, such as to reduce latency, to target medium-sized local businesses, or because operating costs are lower,” she said in a statement. “We expect to see strong growth in several of these secondary markets over the next few years.”

More Ongoing Construction in Major Markets

Despite growing activity in second-tier data center markets, more square feet of data center space and megawatts of power capacity will come online over the next two years, according to 451, which has identified 176 known data center expansions and 134 new builds.

More than 60 percent of this construction activity is taking place in North America, but expansion rates in Asia Pacific and EMEA are strong as well.

Correction: A previous version of this article was erroneously said the 451 report was about retail colocation market only. The figures actually include retail and wholesale multi-tenant data centers. The headline was corrected accordingly.