North America Data Center Colocation Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

North America Data Center Colocation Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The North American data center colocation market is expected to grow at a CAGR of 11.72% over the forecast period 2021 to 2026. This is being driven by the increasing concerns regarding the expenses associated with running a data center. Data storage and the non-availability of strategic locations for data centers have always been key issues faced by organizations in today's environment. There has been an increase in the expenses of the investment along with the increasing cost to maintain the infrastructure faced by the organizations. Deployment of data center colocation has led enterprises to cut down their maintenance cost and has increased safety and high bandwidth availability.

Key Highlights

• With businesses expanding, the need for space and utilities has increased to unprecedented levels. Data Center colocation helps businesses to strengthen operations in their specific industries by taking advantage of high-quality managed data center services. This is enabling companies to focus on revenue generation by streamlining their workflows and reducing operating IT expenses.
• The demand for colocation services is on the rise, and vendors are now providing unique scalability features with increased control to enterprises. Colocation providers are partnering with cloud providers or hardware vendors to offer turnkey clouds for their colocation clients. The level of flexibility now being offered by colocation providers is unprecedented, with solutions ranging from simple data warehousing to high-velocity data analytics solutions. These features, along with the reduced expenses and greater ease of use, make colocation a very lucrative business for investment.
• The North American region is growing due to the presence of a large number of data centers, and it has witnessed rapid adoption due to the availability of comprehensive solutions. The management of a data center infrastructure hosted on-site necessitates the use of competent IT personnel. On-site hosting also entails a variety of costs for server management and infrastructure upkeep. Furthermore, establishing a new data center facility necessitates a significant initial expenditure and raises the enterprise's overall CAPEX. As a result, businesses are paying more attention to the CAPEX spent on establishing mission-critical data center facilities and searching for ways to cut costs and increase ROI (ROI). One of the primary factors that encourage businesses to investigate new IT choices is the pressure to reduce IT costs.
• Colocation enables companies to rent specific space to house their servers along with the servers of other companies in a common physical location. Colocation offers the flexibility to upscale or downscale a company's technology as per its requirements. Another major advantage of colocation is cost savings. The present market scenario is forcing companies to keep a check on the spending pattern, and hence, focusing on cost savings is expected to be a major driver for the growth of the data center colocation market. Whereas regulatory & compliance problems, fluctuating operating expenditure, and location of these colocation centers not ideal for firms are some of the key challenges faced by the industry/market.
• Datacenter Management is currently undergoing transformation. Data Center managers are struggling to keep abreast with growing capacity needs while working under the constraints of tightened budgets and energy efficiency initiatives. Under this norm, managers are working towards adopting colocation as a viable solution.
• Because of the COVID-19 epidemic in the United States, businesses have been obliged to develop a work from home (WFH) process as a backup plan to ensure company continuity. The region's data center industry was strong in the first half of 2020, according to CBRE's North American Data Center Trends Report 2020, since hybrid IT architecture is being widely deployed by enterprises to improve remote working capabilities. The data center industry has never had to deal with a global pandemic like COVID-19. The continuous spread of the virus has damaged nearly every industry, offering new IT and related economic prospects for the data center industry.

Key Market TrendsThe growing need for reducing the IT expenditure to Drive the Market

• There is a growing demand to cut IT costs associated with establishing mission-critical data center infrastructure. Datacenter colocation services give you the scalability and cost-effectiveness you need to manage your everyday data needs. One of the main drivers of the data center colocation business is this. High initial expenses, on the other hand, may deter end-users from adopting these solutions.
• Retail colocation is expected to have the greatest market share in the data center colocation industry. Power, space, cooling, cabling, and support are all provided by retail colocation. It also enables flexibility in terms of IT infrastructure, which is beneficial to Small and Medium-Sized Businesses (SMEs). Retail colocation's utility is predicted to boost its market share in the global data center colocation industry.
• SMEs and big organizations are among the data center colocation end-users, with large enterprises predicted to have the largest market share over the forecast period. Vast businesses are more likely to use colocation services since they may rent large spaces and meet their power and computing requirements. Furthermore, colocation services enable large organizations to fully control their data center infrastructure. Because of their disaster recovery capabilities, these services also help with business continuity. During the projected period, this is expected to boost the data center colocation market.
• For power, space, bandwidth, and Value-Added Services (VAS), such as interconnection services, internet solutions, and expert-managed IT services, businesses are increasingly turning to data center colocation providers. The operation of a data center infrastructure that is hosted on-site necessitates the use of professional IT personnel. Server management and infrastructure maintenance are also costs associated with on-site hosting. Furthermore, establishing a new data center necessitates a substantial upfront expenditure.
• The initial cost of setting up IT equipment in data center facilities is astronomically large. Businesses that choose to lease colocation facilities must buy their own IT equipment. Enterprises must also transport their equipment to colocation centers. The cost of transporting the equipment is determined by its size and weight. Furthermore, the initial cost and complexity of deploying data infrastructure solutions are substantially higher. Enterprises are also responsible for maintenance tasks linked with the equipment when it is deployed in colocation facilities. These maintenance procedures are carried out off-site at the data center, which adds to the associated cost. Remote help for maintenance operations is available at the colocation facilities, as well as services such as remote hands and smart hands.

United States Account for Largest Market Share

• The data center colocation market in North America is growing at a rapid pace, owing to the rising generation of data, urbanization, and industrialization. The region's colocation footprint is expected to dominate the global market, with over 2000 facilities across the region, most of them concentrated in concentrated zones.
• The majority of the global companies have established their business base in the region, leading to the rapid growth of the economy in countries such as the United States and Canada. These companies have been generating massive volumes of business data, due to their rapidly expanding operations, across the world. To handle the amount of data, these companies have partnered with the data center colocation space players for the effective and expert management of their IT facilities. For instance, Google partnered with Equinix Inc. for the supply of colocation services.
• The colocation industry in North America is the largest in the world, with 5G, cloud computing, IoT, AI, and HPC applications driving the market. Digital Realty topped America's data center colocation market in 2020, with a market share of roughly 15%. Other prominent investors in the industry included COPT Data Center Solutions, Compass Datacenters, Equinix, Vantage Data Centers, CyrusOne, Switch, QTS Realty Trust, CoreSite Realty, STACK INFRASTRUCTURE, and NTT Global Data Centers.
• Virginia, Texas, Illinois, Atlanta, Arizona, California, Nevada, Oregon, and New York are among the states where data center growth is accelerating. The major data center sites in Canada are Toronto and Montreal. During the projection period, these locations are expected to grow even more.
• In 2020, the Americas data center colocation market saw numerous mergers and acquisitions. The acquisition of Data Foundry by Switch in May 2021 and the acquisition of QTS Realty Trust by Blackstone Group in June 2021 were two notable partnerships. In 2020 and 2021, many new entrants into America's colocation industry, including Cirrus Data Services, EdgeMicro, EdgeX Data Centers, Quantum Loophole, and Yondr, among others, will help the region's colocation growth.

Competitive Landscape

The North America Data Center Colocation Market can be said as fragmented as there are lots of M&A activities happening and there's a constant flow of newcomers in the market. However, the market tends to be consolidated in the future as there are fewer players such as Equinix, Digital Realty Trust, NTT Communications, AT&T, etc., controlling the major part of the market. The smaller portion of the market sees maximum competition and mergers and acquisitions.

• August 2021 - Sila Realty Trust is exiting the data center market, selling all 29 of its facilities in the United States to Mapletree for USD 1.3 billion. This isn't Mapletree's first foray into the US, as the company has previously acquired data centers from Bank of America and Digital Realty.
• August 2021 - Iron Mountain, a publicly-traded data center operator based in the United States, signed 12.6MW in leases in the first quarter and now aims to lease more than 30MW for the entire year. It had previously stated that it would lease 25MW to 30MW of data centers in 2021.

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