Colocation Is Growing, But Varies Significantly by Location

A number of metro areas have experienced growth in colocation capacity in recent years, but growth rates in many other traditional hub markets have slowed.

Based on telecom market research firm TeleGeography’s Colocation Database, colocation capacity growth in Dallas, Seattle and Toronto was notably high from 2010 to 2013. Capacity increased between 20 and 28 percent in each market, reaching 3.3, 1.2 and 1 million square feet of gross floor space, respectively. Even in the world’s two largest colocation markets, New York and Washington, D.C., capacity grew at 12 and 11 percent, respectively, to reach 5.5 and 4.8 million square feet.

Outside the U.S., in Europe, capacity grew the fastest in Paris than in other comparable markets, at 25 percent, to 2.6 million square feet. Growth was also evident in Frankfurt, Zurich and Moscow where gross colocation space increased between 16 and 18 percent compounded annually. London, Europe’s largest colocation market, increased only eight percent between 2010 and 2013.

In Asia, colocation capacity in both Singapore and Mumbai grew 15 percent compounded annually while Hong Kong grew 34 percent per year, mainly due to sizable investments by a few operators. Even though Tokyo has nearly 5 million square feet of gross floor space, capacity only grew 4 percent in the past four years.

In some markets, capacity increases have led to high vacancy rates and lowered expectations for future growth, TeleGeography said.

“Vacancy rates in New York, Frankfurt, Paris and London are now 40 percent, and most operators there indicate little need for further expansion in the near term,” said TeleGeography analyst Jon Hjembo. “However, vacancy rates fluctuate widely within metro areas. Colocation sites that are in high demand have consistently limited or non-existent availability, warranting expansion, while operators of other sites may struggle to gain a foothold.”