America's data center colocation market was valued at US$18.418 billion in 2019 and is projected to expand at a CAGR of 10.22% over the forecast period to reach US$33.023 billion by 2025. Information and communications technology is the heart of the digital economy, it is estimated that increasing investments in information and communications technology will positively impact the colocation market during the forecasted period. Major growth drivers of America's data center colocation market are the presence of a large number of small and big players, increasing adoption of cloud computing solutions, and rising demand from service providers. The other major factor augmenting the growth of the colocation market is the increasing focus on data privacy and regulation in the country. Enterprises operating in the entertainment and media, healthcare, communication, and government sectors are increasingly outsourcing their IT infrastructure needs as well as opting for colocation space to focus on their core business operations and reduce operating costs.
Major players like CyrusOne, Digital Realty, Equinix, and others have been rapidly expanding their existing product portfolio to cater to a wide range of customers. In fact, in June 2018, Rackspace Inc. launched the Rackspace Colocation to support organizations seeking to reduce the total cost of ownership while simultaneously improving the scalability and strengthening the disaster recovery capabilities. Similarly, in May 2018, Ascenty announced plans of investing over US$276 million on various projects which includes setting up its second data center facility in Brazil by the first half of 2019 that is likely to bring 80,700 sqft of colocation space to the market.
Additionally, 5G technology is expected to be launched during the forecast period which is further anticipated to increase the volume of internet traffic and the requirement of storage of digital data. This is expected to supplement the growth of the data center colocation market with an increasing amount of data that will be required to be stored in the cloud, and firms with a limited capacity will demand the colocation services to meet the growing demand effectively.
Furthermore, Mexico is slowly becoming a hub for Data Centers in the North American region, with major companies like IBM, Reddit and others have opened new Data Centers in the country. With more companies expanding their operations in the country, the demand for colocation space will grow, creating significant opportunities for colocation service providers. In fact, in January 2018, McAllen Data Center completed the acquisition of Verizon Data Center to expand its data center service offering in Mexico.
By industry vertical, data security compliance and requirement for huge data storage are the key aspects of technology deployment in the banking and financial services industry. The industry requires analyzing huge volumes of customer data gathered from different sources to provide efficient and customer-centric services. BFSI sector is witnessing growth across the world and enterprises are constantly upgrading their existing IT infrastructure while moving on to the latest solutions. In developing economies such as Brazil and Mexico, there is a renewed focus on social integration.
By the colocation model, the market is segmented into retail and wholesale colocation models which are offered by different colocation service providers. Retail Colocation accounts for the major market while wholesale colocation providers have started focusing on short-term deals to remain competitive. The retail colocation service providers have modified their existing strategy towards the challenge arising from wholesale colocation solution providers. To cater to a different segment of small customers, retail colocation service providers are buying out a large chunk of space from the wholesale colocation providers and are then reselling the space to small and medium enterprises, while catering to the additional requirement of the large enterprises.
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