Emerging Markets Outpace Traditional Hubs in Data Center Growth
The global landscape for data center development is undergoing a significant transformation, as colocation operators increasingly turn their attention from established technology hubs to rapidly expanding emerging markets. Cities like Lagos, Warsaw, and Dubai are now at the forefront of this shift, with metropolitan areas across the Asia-Pacific and EMEA regions demonstrating a notably faster pace of expansion compared to traditional data center strongholds.
Recent data from Synergy Research, which ranks locations based on colocation revenues generated over the past four quarters, highlights this evolving dynamic. While the top ten metropolitan markets collectively account for a substantial 41 percent of the global colocation business, their growth rate averaged a modest 8 percent over the last year. In stark contrast, the next 30 metropolitan markets experienced a more robust average growth of 12 percent, and the subsequent 30 markets surged by an impressive 17 percent. Together, these 60 second-tier markets now represent approximately 39 percent of global colocation revenues. Although these emerging regions are not poised to immediately eclipse the current top ten in sheer scale, their accelerated growth signifies a clear shift in focus for data center operators.
Northern Virginia, widely recognized as the world’s data center capital due to its immense compute capacity, continues to lead the top ten global markets. This elite group also includes major economic powerhouses such as Beijing, Shanghai (which has recently surpassed London in ranking), London, Tokyo, New York, Frankfurt, Singapore, Silicon Valley, and Chicago. Synergy’s chief analyst, John Dinsdale, emphasizes that customer proximity remains a pivotal driver for the colocation market, explaining why data centers are typically concentrated in metros with significant corporate presence and economic activity. Despite some internal shifts, the composition of the top ten markets has remained largely consistent over the past year.
However, the real story lies in the burgeoning growth of “tier 2” and “tier 3” metros. These rapidly expanding regions encompass cities like Warsaw, Poland; Dubai in the UAE; and Lagos, Nigeria. The trend extends to the United States, with Austin, San Antonio, and Quincy in Texas also witnessing significant expansion, alongside Johor and Kuala Lumpur in Malaysia, Johannesburg, South Africa, and Portland, Oregon. Dinsdale notes the compelling growth rates in many of these emerging markets; while the top ten grew by 8 percent, no fewer than 17 tier 2 metros recorded growth of 20 percent or more. This dramatic acceleration, he suggests, is a clear indicator of how the market will evolve, with rapidly developing regions becoming increasingly crucial.
Several factors are propelling this geographic redistribution of data center infrastructure. Earlier reports indicated that the North American colocation market was grappling with unprecedented occupancy rates and hurdles in constructing new facilities, potentially contributing to the overflow into less congested regions. Traditional data center hotspots often face significant barriers to further expansion, including power supply constraints, a scarcity of suitable real estate, and opposition from local communities. These challenges can prompt a spillover into adjacent geographies. For instance, Malaysia’s Johor and Kuala Lumpur benefit from a confluence of factors: high economic growth, relatively lower costs, and the extreme restrictions on future data center growth imposed by neighboring Singapore.
Synergy’s comprehensive analysis spans over 300 colocation companies, providing granular data for 59 countries and 91 individual metropolitan markets. While colocation retains strong local and national characteristics, the global market is dominated by major providers such as Equinix, Digital Realty, NTT, China Telecom, CyrusOne, GDS, KDDI, and Chindata, all of whom are keenly observing and participating in this evolving global shift.