Will colocation outshine hyperscale - or power its next chapter?

We have had a look at how colocation is evolving alongside hyperscale data centres, shaping AI, cloud, and enterprise growth in 2025 and beyond. Here's what we think lies ahead. 

Market momentum: hyperscale vs colocation

Hyperscale data centres remain the dominant growth engine. As of 2024, they accounted for about 41% of global data centre capacity and are projected to surpass 60% by 2029, with capacity expected to nearly triple in the next six years. 

Meanwhile, colocation facility capacity continues to grow steadily, even while its share of total capacity declines slightly. 

What drives each model?

• Hyperscale providers (e.g. AWS, Microsoft, Google, Meta) build enormous bespoke campuses to serve AI, cloud and big data workloads with maximum efficiency and scale.  

• Colocation providers offer flexible, multi-tenant space ideal for businesses that want control, lower capital expediture, and cost-effective infrastructure access, without building their own fibre‑connected mega‑campus. 

Is the era of hyperscale winding down?

The short answer: no, not structurally. Hyperscale growth is sustaining aggressive expansion, especially to support surging AI workloads. Throughout 2024 and up to June 2025 alone, hyperscale capacity in top U.S. markets grew by 10 to 24% over the prior year. The global hyperscale market is forecast to grow at a compound annual growth rate of ~25% through 2030, reaching over US$600bn.

However, there are short-term cooling signs. Analysts report that AWS and Microsoft have paused or delayed negotiations for new colocation leases, though possibilities of broader strategic shifts remain unclear.  Historically such “digestion” phases last 6 to 12 months and have not signaled long‑term retreat. 

Colocation’s continued rise: why it matters

• Hyperscale providers increasingly lease components of their infrastructure from colocation operators, even as hyperscale-owned capacity grows. Synergy notes that roughly half of hyperscale capacity is already leased colocation space. 

• Regulatory pressure, grid constraints, and planning bottlenecks, especially in Europe, are making hyperscale developers turn to colocation partners for access to land, power or speed to market. 

Areas like London, the Docklands and West London (M4 corridor) in particular, remains one the UK's data centre hubs, accounting for over 60% of upcoing power capacity.  Slough, just west of London, is a major campus location. It is part of London’s broader footprint and home to facilities like Equinix LD6, benefiting from proximity to LINX and LoNAP exchanges. 

Manchester a key regional tech hub. Its growing ecosystem has attracted major colocation operators and upcoming projects, boosted by strong fibre connectivity and ambition under ‘Tech North’ initiatives. 

The South-West (Bristol, Swindon, Glocester)  - often referred to as Silicon Gorge - hosts important carrier points of presence (PoPs) and proximity to Cheltenham’s GCHQ-led cyber cluster, making it a niche yet fast-growing hub. 

Outlook to 2028: co‑existence, not collapse

• Hyperscale: will remain the largest single growth segment, but face rising barriers - e.g. electricity, land, ESG regulations.

• Colocation: will continue growing - offering flexibility, scalability and quicker deployment - especially as hyperscalers moderate selective leasing deals (though full buildout still continues individually).

Rather than decline, hyperscale may diversify its model: owning mega‑campuses while leasing edge or regional colocation sites for specific workloads.

Key takeaways for industry stakeholders

For investors & developers

• Hyperscale projects will still attract large-scale capital, but expect selective pauses or slower deployment from major providers in 2025–26.

• Colocation providers are becoming more strategic partners, especially in constrained markets where hyperscalers face delays.

For colocation operators

• Focus on scalable power, network connectively and local compliance, which remain an increasing bottleneck for hyperscale entrants.

• Serve as critical infrastructure partners for hyperscalers that need hybrid delivery models.

For governments & planners

• Grid upgrades, streamlined permitting and clear zoning policies can unlock faster colocation deployment and relieve hyperscale grid dependence.

The future is bright, and co-existence is key!