U.S. Colocation Market Size & Share Analysis - Trends, Drivers, Competitive Landscape, and Forecasts (2025 - 2032)

U.S. Colocation Market Dynamics

Hybrid, Edge, and Multi-Cloud Solutions Are Trending

• Edge data centers are gaining popularity in the U.S. because of the rising low-latency service demand, as well as advances in 5G, IoT, and autonomous driving systems.
• The concept entails establishing storage infrastructure close to the user to shorten data transportation distances, thus achieving faster, more reliable processing in real time.
• Businesses can satisfy growing data processing demands better through these facilities, which benefit industries including manufacturing, healthcare, and smart cities.
• The rising adoption of AI, ML, and big data demands edge data centers to process large data volumes close to the user, which results in the need for more efficient systems.
• The adoption of hybrid IT environments, which incorporate both private and public clouds, increases the need for colocation facilities.
• Users of colocation gain easy cloud platform integration with direct network connections to leading cloud providers, including AWS, Microsoft Azure, and Google Cloud.
• Multi-cloud and hybrid setups grants organizations flexibility to lower their expenses, while enabling them to scale operations and establish better disaster recovery systems.

Rising Need for Cost Optimization Drives Market

• By hosting their IT assets in a data center, businesses eliminate the need to build new infrastructure, while freeing up capital, which could be used to support core activities.
• The transparent pricing models of colocation providers allow businesses to better handle operational expenses and prevent cost surprises.
• As per studies, IT expenses amount to up to 6% of the operational cost for average U.S.-based companies, and colocation can reduce this by up to 30%.
• Private data centers are way too expensive for SMEs, while public cloud environments come with significant security risks, which large organizations cannot afford.
• Colocation combines the advantages of both and eliminates their risks, by offering cost-effective storage and stronger security.
• Another advantage of data centers is the redundancy of their systems, which ensures round-the-clock access to IT assets in case of a disaster or power interruption.
• New-age colocation centers are well-equipped to deal with physical intrusions and cyberattacks, thus helping data owners in regulatory compliance.

U.S. Colocation Market Segmentation Analysis

Type Insights

Retail is the larger category, holding market share of around 75% in 2024. Huge numbers of SMEs and startups choose retail colocation due to the availability of flexible plans and customizable solutions in well-connected urban areas. Scalability and affordability make retail colocation a preferred solution among businesses that cannot afford to spend too much on any one department. Retail colocation is also desirable because operations can scale while enjoying robust security benefits.

Types studied in the report:

• Retail (Larger Category)
• Wholesale (Faster-Growing Category)

Organization Insights

The large enterprises category leads the market as these organizations extensively employ colocation services to obtain a high storage capacity, security, scalability, and flexibility of access. Through data centers as a service (DCaaS), large businesses can store and process massive information volumes, to achieve operational continuity and regulatory compliance. As per Veritas Technology LLC, an average large enterprise in the U.S. stores around 10 Petabytes of data.

SMEs are witnessing the higher CAGR, of approx. 12.7%, as their digital transformation is leading to an increasing volume of data. However, their financial incapability prevents them from spending on expensive IT hardware for onsite installation. On the other hand, they are not also in a position to pay for damages in case of data breaches at a public data center. Both these dilemmas impel these companies to host their data at a colocation facility.

Organizations taken under study:

• Small and Medium Enterprises (Faster-Growing Category)
• Large Enterprises (Larger Category)

Vertical Insights

The IT & telecom category holds the market share of around 30% in 2024. This is because this sector depends on efficient data storage, processing, and connectivity to support telecommunications networks and data-driven technologies. The fast-growing adoption of cloud computing, 5G, and IoT and the abundant data traffic within IT & telecom companies drive the requirement for secure and scalable colocation facilities.

Healthcare is the fastest-growing vertical due to the digital health initiatives prevalent around the country. Health centers had already begun to digitize their record-keeping and charting activities in the beginning of the previous decade, and the COVID-19 pandemic put it into overdrive. The resulting trends of remote patient monitoring, teleconsultations, mHealth apps, and wearable fitness trackers continue to compound data storage challenges for the healthcare sector. This is why health systems around the country are looking at colocation facilities to store their data securely and cost-effectively.

Verticals covered in the report:

• BFSI
• Healthcare (Fastest-Growing Category)
• Energy and Utility
• IT & Telecom (Largest Category)
• Retail & E-commerce
• Manufacturing
• Government & Public Sector
• Media & Entertainment
• Others

U.S. Colocation Market Regional Outlook

The Northeast region dominates the market with 40% share in 2024 because it contains numerous financial institutions and technology corporations, which generate massive amounts of data. The Northeast region attracts colocation service providers with its next-generation telecommunications networks and easy access to renewable energy resources. Even the tech-savvy individuals in this region have started seeking colocation solutions for their substantial amounts of digital information.

Regions covered in the report:

• Northeast (Largest Region)
• Midwest (Fastest-Growing Region)
• West
• South

U.S. Colocation Market Share

• Multiple large global providers, together with regional specialists, exist in the U.S. colocation market, which results in a highly fragmented environment.
• Equinix, Digital Realty, and CyrusOne hold some prominence, but more than 500 smaller firms provide various services to distinct market sectors.
• Specialized providers include CoreSite, Flexential, and Cologix, which target specific customer needs in different market areas.

U.S. Colocation Market News

• In October 2024, Cologix secured USD 1.5 billion in capital to fund the development of new data centers across North America.
• In April 2024, the joint venture between Equinix and PGIM Real Estate launched their first xScale data center facility in Silicon Valley with a combined investment of USD 600 million.