Operators of data centers in Colorado are venturing into emerging markets to establish new data centers

Emerging Markets Drive Growth in Global Colocation Services

Operators of data centers in Colorado are venturing into emerging markets to establish new data centers

Northern Virginia, long known as the datacenter capital of the world, is facing competition from emerging markets that are rapidly expanding their colocation services. These markets, including Lagos, Warsaw, and Dubai, are attracting attention due to their economic growth, untapped potential, and strategic advantages.

Factors Contributing to Growth in Emerging Markets

1. Market Demand and Expansion Potential: The economic growth in cities like Lagos, Warsaw, and Dubai is driving an increased demand for data storage and processing. This demand is fueled by the expansion of local businesses and the need for digital infrastructure. These regions offer untapped markets compared to more saturated traditional datacenter locations, providing opportunities for rapid expansion.
2. Proximity to Growing Customer Bases: As noted by John Dinsdale, proximity to customers remains a key driver of the colocation market. Emerging markets are attracting more businesses and consumers, making them ideal locations for data centers that need to be close to their customers.
3. Infrastructure Development: Cities like Lagos and Dubai are investing heavily in infrastructure, including telecommunications and transportation networks, which supports the growth of colocation services. Warsaw benefits from its strategic location in Central Europe, with good connectivity to both Western and Eastern European markets.
4. Government Support and Incentives: Governments in these regions often provide incentives for datacenter investments, such as tax breaks, subsidies, or streamlined regulatory processes, attracting more colocation providers.
5. Lower Costs and Competitive Advantage: Compared to traditional datacenter hubs, emerging markets may offer lower operational costs, including land acquisition, energy, and labor, making them more competitive for new entrants and expansions.
6. Technological Advancements and AI Growth: The rapid adoption of AI and other technologies in these regions is driving the need for more advanced data processing capabilities, further fueling the demand for colocation services.

In contrast, traditional datacenter hotspots are often more established and saturated, with higher costs and more stringent regulations, which can limit their growth potential compared to emerging markets.

Global Colocation Market Trends

The Asia-Pacific and EMEA regions are expanding more rapidly than traditional datacenter hotspots. Shanghai has leapfrogged London in the ranking of major economic hubs for colocation services. The top ten metropolitan markets account for 41% of global colocation revenues, while the 60 second-tier markets account for roughly 39%. The next 30 metropolitan markets expanded by an average of 12% over the last year, while these top ten regions expanded by an average of 8%.

These trends suggest that while traditional datacenter hubs continue to play a significant role in the global colocation market, emerging markets are rapidly gaining ground and offering attractive opportunities for growth.

[1] Data Center Knowledge. (2021). Warsaw Data Centre Market. [online] Available at: https://www.datacenterknowledge.com/europe/warsaw-data-centre-market

[2] Dinsdale, J. (2021). Colocation Market Expansion Driven by Emerging Markets. [online] Datacenter Dynamics. Available at: https://www.datacenterdynamics.com/content-hub/data-center-industry/colocation-market-expansion-driven-by-emerging-markets/

[3] Datacenter Dynamics. (2021). Dubai Data Centre Market. [online] Available at: https://www.datacenterdynamics.com/middle-east/dubai-data-centre-market

[4] Data Center Frontier. (2021). Lagos Data Centre Market. [online] Available at: https://www.datacenterfrontier.com/africa/lagos-data-centre-market/

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