The global colocation market is entering a period of sustained expansion—growing from $42 billion in 2024 to a projected $101 billion by 2035, an estimated 8.3 percent compound annual growth rate (CAGR). North America leads the market with a more-than 40 percent share, followed by Europe (30 percent), Asia‑Pacific (20 percent), and the Middle East and Africa (10 percent). Given the criticality of colocations as part of modern infrastructure environments, we wanted to examine some of the market trends in drivers and constraints.

Because colocations represent a growing portion of the infrastructure for many organizations, it is essential to highlight some performance observability strategies for consideration.

Colocation use by enterprise organizations has been growing exponentially, driven by a number of business and environmental considerations, including the following:

• Explosive data generation. Rapid growth in enterprise data volumes is increasing demand for scalable, high‑density infrastructure that can handle storage and processing requirements beyond what on‑premises environments can support, with room to grow.
• Rise of hybrid cloud architectures. In 2024, 68 percent of enterprises used a combination of on‑premises, public cloud, and colocation environments to host workloads efficiently.
• Limitations of legacy IT infrastructure. 60 percent of enterprises report difficulty scaling legacy environments, driving adoption of colocation as a flexible alternative for expanding compute and storage capacity.
• Expansion of edge computing. More than 450 micro colocation centers were deployed globally in 2024, representing approximately 9 percent of the global colocation capacity. These are supporting low-latency applications such as real-time video analytics and remote diagnostics.
• Growth in emerging markets. Southeast Asia, Africa, and Latin America collectively saw 20 percent year-over-year growth in colocation adoption in 2024, with countries such as India and Brazil expanding new data center development.
• Demand for lower latency, resilience, and recovery. Organizations are increasingly expanding their colocation footprints to support latency-sensitive workloads, with latency improvements cited by 26 percent of enterprises.
• Fueling the AI supercycle. Hyperscalers and colocation providers are scaling capacity at an unprecedented pace, driving more than 80 percent of global data center physical infrastructure expansion as they race to support the AI supercycle and maintain competitive advantage.

Despite proven adoption by many companies, a number of important issues and considerations are holding IT teams back from adopting colocation as part of their infrastructure strategy, including:

• Power availability and grid constraints. Power availability remains a primary constraint for colocation expansion, particularly in dense metropolitan areas where grid capacity is limited. These challenges are increasingly being addressed through new site build-outs that leverage renewable energy sources such as solar, hydro, and wind, as well as AI‑driven automation for temperature control, predictive maintenance, and energy optimization, helping reduce overall energy consumption and improve uptime.
• Carbon emissions and sustainability. Concerns over the environmental impact of colocation facilities persist, especially as energy demands rise. In response, providers are accelerating investments in renewable energy procurement, such as solar, hydro, and wind sources, along with efficiency‑focused designs and intelligent workload and cooling optimization to lower carbon footprints.
• Data security and regulatory compliance. Organizations, particularly in highly regulated industries such as healthcare and financial services, often cite security risks such as unauthorized access, data breaches, and regulatory noncompliance when considering multitenant colocation environments. Although caution remains higher for sensitive workloads, the majority of colocation providers maintain certifications across major compliance frameworks, including the International Organization for Standardization (ISO), security operations center (SOC), and General Data Protection Regulation (GDPR), making many of these concerns more perception‑driven than current operational reality.
• Latency and infrastructure limitations. Physical distance and network availability, particularly when colocation facilities are geographically distant from users or major network hubs, can introduce latency challenges for real‑time or performance‑sensitive workloads. This requires careful site selection and network design to ensure application responsiveness.
• Performance assurance and operational visibility gaps. Unlike on‑premises environments, customers do not own or directly instrument all layers of the colocation infrastructure. Providers typically expose service-level agreements (SLAs), alarms, and tickets rather than raw telemetry, placing greater responsibility on enterprises to implement end‑to‑end performance observability across networks, applications, and user experience to ensure consistent service delivery.
  * Lack of satisfaction with monitoring tools. According to recent research from Enterprise Management Associates, only 25 percent of organizations feel they’ve been fully successful at managing hybrid and multicloud environments, and just 29 percent are satisfied with their current observability capabilities.

A few themes stand out from the data on colocation growth and adoption. More than two-thirds of enterprises now run a mix of on-premises, public cloud, and colocations to make up their infrastructure environment. Hybrid infrastructure strategy and design has become the default operating model. More than a quarter of organizations with colocations are using them to host latency-sensitive workloads, taking advantage of improved resilience and recovery capabilities.

Yet adoption is not universal, with some organizations remaining hesitant due to the physical distance between their facilities and major colocation hubs. The rapid expansion of edge computing and bringing micro colocation sites into regions closer to end-user communities is helping address this distance challenge. Other key concerns expressed by some organizations are the lack of performance assurance and the possibility of operational visibility gaps when workloads move into colocation environments.

The tools available to manage and troubleshoot performance or security issues are often limited to whatever the colocation provider offers, which may be incomplete and may not deliver the end-to-end insights enterprises need. The same limitations often apply within public cloud environments. The results of reactive troubleshooting are less than satisfactory. IT teams may find themselves navigating incomplete data, leading to longer, less productive multivendor war rooms and delayed issue resolution.

NETSCOUT nGenius solutions for observability eliminate visibility gaps across complex, multivendor, hybrid infrastructure environments with real-time, deep packet inspection (DPI) analysis at scale. By delivering end-to-end insights into the performance of any application, including low-latency services, NETSCOUT helps IT teams reduce mean time to restore (MTTR) services and shift from ineffective, reactive troubleshooting to proactive, predictive operations.

Upgrade your observability capabilities with NETSCOUT in your hybrid infrastructure environments. Learn more about what our solutions for colocation observability can bring to your team.