What Is Driving Growth in Data Center Colocation in 2030?

According to the report by Next Move Strategy Consulting, the global Data Center Colocation Market size is predicted to reach USD 150.59 billion by 2030 with a CAGR of 13.6% from 2024-2030.

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Data center colocation—where businesses rent space, power and cooling in shared facilities—has become a cornerstone of modern IT infrastructure. Amid surging demand for compute capacity, particularly from hyperscale cloud and AI workloads, colocation markets are witnessing unprecedented expansion. In India, colocation capacity is set to add approximately 230 MW of IT load by end‑2024, with expectations of similar or higher growth in 2025. Simultaneously, North America recorded a record‑low vacancy rate of 2.6 % and absorbed 4.4 GW of capacity in 2024 alone, quadrupling absorption since 2020. These shifts underscore evolving strategies by corporations and data center operators to secure power, manage costs and scale efficiently across geographies.

What Is Data Center Colocation and Why Does It Matter?

Colocation enables organizations to deploy their own servers within a provider’s purpose‑built facility. Key features include:

• Reliable Infrastructure: Redundant power, cooling, and connectivity.

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• Cost Efficiency: Shared capital expenditure on construction and maintenance.
• Scalability: Rapid deployment of additional racks or cages.
• Security and Compliance: Industry‑standard certifications and on‑site personnel.

Summary
Businesses leverage colocation to offload operational burdens, access high‑quality facilities, and pivot swiftly to meet evolving IT demands.

• Reduces capital outlay for in‑house builds
• Provides carrier‑neutral connectivity
• Offers flexible contracts and rapid scaling

Why Is Colocation Capacity Growing Rapidly in India?

According to Cushman & Wakefield, India’s colocation data center capacity will increase by roughly 230 MW in 2024, driven primarily by Mumbai, Delhi‑NCR, Kolkata and Chennai.

• Cost Advantage: Median construction cost is USD 6.8 million per MW—below Australia (USD 9.17 million) and Japan (USD 12 million).
• Infrastructure Boost: Three new undersea cable projects landing in Mumbai are slated to complete by 2025, enhancing connectivity and positioning the city as a regional hub.
• Market Momentum: With greenfield projects underway, India is on track to add 250 MW in 2025, bringing pan‑India installed capacity to 1.46 GW by year‑end.

Summary
India’s competitive costs and connectivity investments are fueling colocation expansion, drawing both domestic and international hyperscalers.

• Construction costs 30 %–40 % lower than regional peers
• Strengthened by undersea cable capacity
• Projected continued double‑digit MW growth

How Are Vacancy Rates Influencing Hyperscaler Moves?

The North America Data Center Year‑End 2024 Report from JLL highlights:

• Record‑Low Vacancy: Colocation vacancy rate fell to 2.6 %—the lowest on record.
• Surging Absorption: 4.4 GW absorbed in 2024, up 4× since 2020.
• AI Workloads: Represent 15 % of data center workloads in 2024, potentially reaching 40 % by 2030.

Primary markets captured 88 % of absorption, led by Northern Virginia (847 MW), Chicago (308 MW), Phoenix (166 MW), Dallas‑Fort Worth (123 MW) and Toronto (55 MW).

Summary
Tight vacancy and high absorption are compelling hyperscalers to explore emerging markets with available power and land, reshaping the industry’s geographic footprint.

• Vacancy at near‑zero levels
• AI‑driven compute demands rising
• Primary markets still dominate, but secondary zones are emerging

What Does This Mean for Costs and Investment?

According to Inside News, key financial trends from the JLL report:

• Rising Rents: +12 % year‑over‑year in 2024; 11 % CAGR since 2020.
• Lease Renewals: Tenants face up to 50 % rent hikes; concessions are increasingly scarce.
• Investment Appetite: Data center ABS volume increased 49 % to USD 9.0 billion in 2024.
• Pipeline Strength: 6.6 GW under construction; 22.9 GW in planning as of year‑end 2024.

Summary
Escalating rents and robust capital market activity reflect colocation’s status as a prime real estate asset class, with investment funds targeting hyperscale and value‑add projects alike.

• Lease costs climbing steeply
• Strong debt and equity inflows
• Massive development pipelines securing future capacity

What Should Businesses Consider When Choosing Colocation Services?

Factors to evaluate:

1. Power Availability: Assess utility capacity and grid reliability.
2. Connectivity Options: Look for carrier neutrality and undersea/backhaul links.
3. Scalability: Verify the provider’s expansion roadmap and build‑to‑suit capabilities.
4. Cost Structure: Compare per‑MW build costs and long‑term lease terms.
5. Geographic Strategy: Balance primary market stability with emerging market opportunities.

Summary
Selecting the right colocation partner requires aligning technical, financial and strategic priorities to support both current workloads and future growth.

• Ensure robust power and network options
• Factor in total cost of occupancy
• Plan for modular expansion and flexibility

Next Steps

1. Conduct a Power Audit: Quantify your current and projected power requirements.
2. Map Connectivity Needs: Identify essential carriers and undersea/terrestrial routes.
3. Build a Total Cost Model: Include build‑out, rent escalations and service charges.
4. Engage Multiple Providers: Solicit proposals with different capacity and location options.
5. Plan for AI Workloads: Reserve capacity and cooling for high‑density compute clusters.

This actionable roadmap will help you navigate the dynamic colocation landscape and secure optimal capacity, cost‑efficiency and performance.