More multinational IT data center users are leasing space in various regions around the globe, partly due to data sovereignty requirements that are imposed by local government regulators. According to the latest market study by 451 Research, the worldwide colocation market will reach $33.2 billion by 2018.
In the fourth quarter 2015, the data center colocation market realized $27 billion in annualized revenue. The majority of this revenue (54.6 percent) continues to be derived from local providers with sub-$500 million in annualized colocation revenues.
"2015 was a record year for the data center, hosting, and managed services sector, with the highest number of deals since we began tracking it. But there are still hundreds of data center providers around the world that will continue to consolidate, either to gain scale or add services or both," saidd Kelly Morgan, research director at 451 Research.
Colocation Market Leaders Drive Growth
According to their analyst's assessment, the move to cloud computing continues to drive strong demand for leased data center space. Moreover, the industry is maturing, and regional service providers are becoming more strategic in their approach to customer needs.
Among the largest providers, Equinix is the market leader in the combined wholesale and retail colocation market with a share of 8.1 percent of global annualized wholesale and retail colocation revenue.
Digital Realty, primarily a wholesale provider, is the second largest supplier in terms of revenue at 5.6 percent, but leads the global market in terms of operational square feet with a 7.8 percent share globally.
451 Research estimates that the global colocation market will grow -- in terms of total operational data center space -- from today’s 132.4 million square feet to 176.5 million by the end of 2018.
Regional Market Development Opportunities
451 Research believes that colocation is quickly becoming the nexus of both cloud services and enterprise IT. The colocation market is serving as a data center host to both large enterprises and foreign cloud service providers. In this process, colocation is often becoming the strategic connection point between the two.
451 Research estimates that today, the world's largest region in terms of total operational space for colocation is Asia Pacific (40.1 percent). Growth in APAC has been fueled by the sheer size of the economy and a less entrenched installed base of enterprise facilities with which colocation providers must compete.
In addition, some Asian countries have been supporting their colocation industries with special zones and tax treatment. North America is second largest with 33.7 percent of total, global operational square feet, while Europe, Middle East and Africa accounts for another 22.1 percent. The remaining 4.1 percent of space is in Latin America.