Colocation

colocation (colo) is the data centre operating model in which a facility owner leases physical space, power, and network connectivity to multiple tenant customers who install their own servers and networking equipment. The largest colocation operators — including Equinix, Digital Realty, and NTT — collectively operate hundreds of facilities globally, providing shared physical infrastructure to thousands of enterprise, cloud, and carrier customers.

colocation sits alongside hyperscale as a distinct segment in the data centre market. While hyperscalers build purpose-built owner-operated campuses, colocation serves smaller enterprises and cloud providers that cannot justify owning a facility. The AI infrastructure boom affects colocation through GPU-as-a-service demand: operators including CoreWeave, Lambda Labs, and others lease colocation capacity to run GPU clusters for AI training customers.

Grid-connection constraints affect colocation operators differently from hyperscalers. A colo provider cannot shift to behind-the-meter gas generation as easily as a hyperscaler with a single-operator power budget: it must serve multiple tenants with potentially different power requirements and sustainability commitments. This makes the queue problem particularly acute for colocation expansion in constrained markets like Dublin, London, and Northern Virginia.