Omdia says that it has lowered its growth forecast for the colocation services market due to the effects of the COVID-19 pandemic. The market research firm now believes the market will see 6.2% expansion in 2020 versus the 9.2% it had previously projected.
This year will launch a five-year period in which colocation services revenue will enjoy a compound annual growth rate (CAGR) of 7.1% through 2024, Omdia says via its Cloud and Colocation Services for IT Infrastructure and Applications Market Tracker. Annual revenues for such services should reach $40.3 billion in 2024, an improvement over the $28.6 billion seen in 2019.
Omdia reports that colocation services providers have seen an increase in demand for their services; work-from-home policies implemented in response to the pandemic have increased demands for connectivity. Many such service providers also say that they have received only limited requests for rent concessions. Nevertheless, Omdia states that several colocation services providers have lowered their revenue forecasts in expectation that some rent concessions will become necessary later this year, some customer deployments may be delayed, and pandemic-related expenses will increase.
“The silver lining for colocation service providers is that the industry is very recession-resistant, with the business weathering the 2008 financial crisis rather well,” said Alan Howard, principal analyst, cloud and data center research practice, at Omdia. “Colo providers should remain in pretty good shape because they cater to larger businesses and high-credit tenants, which represent a more stable customer base. Furthermore, colocation facilities are benefitting from the fact that they don’t just link businesses; they also connect the millions of at-home workers and learners to critical content and services—including the cloud—which allow much of the world to keep operating despite the pandemic restrictions.”
Within the five-year forecast period, Omdia believes physical facilities will see a CAGR of 6.6%. Interconnection CAGR during the same period will total 12.1%, the market research firm states. By 2024, Omdia expects interconnect will represent 12% of colocation market revenue, up from 9.5% in 2019.
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