The Great Colocation Convergence: Power, AI and Pragmatism
As digital transformation sweeps across industries, data centre colocation has emerged as a linchpin in how companies scale, safeguard and futureproof their digital operations. In 2025, demand for colocation is fuelled by the rise of AI, IoT and hybrid cloud strategies.
It all began as a straightforward proposition – rent rack space, share power and cooling. But colocation has evolved into something far more complex in recent years.
Vacancy rates in North America declined to a new all-time low of 2.3% in 2025, according to JLL. But it is not only a case of more demand by volume, the requirements of the demands themselves are also rising. As generative-AI training clusters routinely draw 40–80 kW per rack, data centre operators must evolve accordingly.
The numbers tell a compelling story. The global data centre colocation and interconnection market is projected to grow from around US$83bn in 2025 to over US$180bn by 2032 at an estimated 11.7% CAGR.
Equinix: The interconnection imperative
Equinix reported an outstanding 2025, with revenues up 5% as of Q3, hitting US$2.37bn. The Redwood City-based provider operates 270 data centres in 36 countries across five continents as of 2025.
“Our strong Q3 performance is a clear signal of accelerating momentum, for Q4 and into 2026,” said Adaire Fox-Martin, President and CEO. “We continue to serve the significant and sustained demand for our differentiated infrastructure and interconnection capabilities in support of our customers’ AI and non-AI workloads.
“We were built and continue to build for this opportunity, increasing our top-line revenue growth, improving profitability and scaling our metro-proximate capacity.”
The company’s interconnection-first strategy sets it apart. With the rapid growth of AI, digital infrastructure providers are critical in enabling companies to be at the forefront of innovation while ensuring long-term sustainability.
Sustainability remains central to the proposition. In 2024, all Equinix data centres in the Netherlands updated contracts with customers to allow for A1A standards, with the new temperatures expected to support reduced power usage effectiveness as they roll out at these sites in 2025.
Equinix tested hydrotreated vegetable oil, which can offer up to a 90% net CO2 reduction, as a drop-in replacement for conventional diesel in backup generators, now piloting the use of HVO within the London, Paris and Frankfurt metros.
The AI revolution has fundamentally altered the colocation industry. AI-specific data centre investments totalled US$57 billion in 2024, with capacity dedicated to artificial intelligence workloads expected to reach 156GW by 2030.
This explosion in demand has exposed critical infrastructure gaps. Alvin Nguyen, Senior Analyst at Forrester, notes: “Many organisations are finding it easier to work with a colocation partner, especially when looking at generative AI and the potential cost to support it on-premises.”
Yet the sector faces formidable challenges. Jon Hjembo, Senior Manager of Infrastructure Research at TeleGeography, points to restrictions in Singapore, Ashburn, Frankfurt and Amsterdam as culprits in creating congestion in high-demand campuses and pushing up prices.
“Hub market constraint is an impetus to push networks and data centres into new places,” said Jon. “But to capture opportunity in nascent markets, operators have to move fast. They need to watch key growth indicators closely and then jump in before these places get saturated with new infrastructure investment.”
Power availability has emerged as the industry's defining constraint, with operators in the Americas seeking two- to three-year delivery timelines but often facing delays of five years or more, according to Cushman & Wakefield.
Digital Realty: Scaling the platform
Digital Realty President and CEO Andy Power declared an impressive 2025 so far, with Q3 revenues of US$1.6bn in 2025, a 6% increase from the previous quarter and a 10% increase from the same quarter last year.
“These achievements are supported by a substantial backlog, providing clear visibility into 2026,” said Andy. “Robust enterprise demand continues to drive our 0-1 megawatt plus interconnection offering, with companies expanding on PlatformDIGITAL. With five gigawatts of buildable IT capacity worldwide, we are well-positioned to meet our customers' evolving needs.”
The company’s PlatformDIGITAL strategy emphasises connected ecosystems, with presence in high-growth markets and focus on sustainable infrastructure enhancing its market competitiveness.
As a global leader in the colocation segment, Digital Realty is ideally positioned to cater to burgeoning high-density colocation requirements of enterprises as they implement and leverage AI capabilities.
Environmental credentials strengthen the company’s value proposition. In 2024, Digital Realty’s energy conservation initiatives resulted in energy efficiency projects expected to have saved 42,400 megawatt hours and 28,500 metric tonnes of carbon dioxide equivalent annually, with 69% of US-managed portfolio certified by US EPA ENERGY STAR. 42% of Digital Realty’s irrigation and cooling needs came from non-potable water sources and the company reduced overall water usage intensity for its North American colocation portfolio by 14% year-over-year.
The sustainability imperative adds another layer of complexity for leading colocation providers.
Digital Realty achieved 75% renewable energy of its global electricity needs in 2024, a 9% increase from the prior year, reaching 1.5GW of renewable energy capacity under contract and matching 185 data centres with 100% renewable energy.
Since 2022, Equinix has maintained 100% renewable energy coverage across its entire North American portfolio through power purchase agreements with renewable energy suppliers and renewable energy certificates.
The market is responding with technical innovation. Operators are fitting liquid manifolds and immersion tanks to support GPU rigs that devour 3–5 times the electricity of traditional racks due to the elevated demands of AI tasks. Digital Realty supports ultra-high-density power deployments, offering scalable configurations up to 70kW/rack utilising innovative Air-Assisted Liquid Cooling.
CoreSite: Bridging the interconnection gap
CoreSite has emerged as a connector between enterprise requirements and cloud ecosystems.
The company released its 2025 State of the Data Center Report, finding that business and IT leaders are navigating a world where they must increasingly rely on digitisation – particularly emerging technologies like AI – to innovate, generate revenue and modernise their organisations.
The research reveals a critical market gap. The report findings show a decisive shift of AI workloads into colocation data centres, emphasising that AI is fundamentally reshaping enterprise infrastructure strategies.
Modern colocation facilities are rising to the challenge by delivering a mix of high-performance compute environments with specialised AI hardware, predictable cost structures for large-scale deployments, direct cloud interconnects and the flexibility to run workloads wherever they deliver the most value.
CoreSite’s strategic positioning addresses this need directly. The company owns and operates 30 network-dense, cloud-enabled data centres, totalling more than 4.5 million square feet, in 11 strategic US markets.
CoreSite has been certified as part of the Nvidia DGX-Ready Data Center programme. This demonstrates the company can host scalable, high-performance infrastructure for organisations looking to capitalise on rising demand for artificial intelligence, machine learning and other high-density applications – with certified locations including Los Angeles, Silicon Valley, Chicago and Northern Virginia.
Perhaps most significantly, the role of interconnection has shifted from nice-to-have to mission-critical.
To have a truly successful hybrid IT environment, one that creates a secure and low-latency competitive edge, companies need seamless integration and connectivity across applications and services
CoreSite's 2025 State of the Data Center Report found that 98% of respondents are implementing or planning a blend of public and private cloud, on-premises and colocation services, yet only 19% said their colocation data centre providers offer interconnection services.
The colocation market has transformed from a real estate play into a strategic technology partnership. Those providers that can deliver not just space and power but also connectivity, sustainability and technical expertise are positioning themselves to capture disproportionate value in the AI era.
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Executives
Adaire Fox-Martin
Chief Executive Officer & President
Andy Power
President & Chief Executive Officer
