A client contacted me recently, a few weeks before they renewed a datacenter colocation contract they had held for six years. They planned the usual way: last year’s rate, plus a small uplift for inflation. Their provider’s opening offer came back almost 20% higher. The client had not leased more racks. The provider had repriced around power, and the client had not asked about it.
The market has flipped
For close to fifteen years, colocation prices largely moved one way: down. That has reversed, and IDC’s research shows prices up 17% over the last five years. AI is the cause, and so is the fight for the power to run it. IDC’s latest forecast puts worldwide colocation revenue at $61.0 billion in 2025, growing to $99.6 billion by 2030, a 10.3% annual growth rate. Asia/Pacific and Latin America are among the fastest-growing regions, at 12.5% and 14.1% a year, as AI-ready capacity attracts a growing share of investment.
Olga Yashkova, an IDC Research Manager covering this market, put it this way:
“
The colocation market has moved past its growth-story phase into something closer to a supply crisis… Providers that can secure power and execute fast are commanding real pricing power for the first time in over a decade.
The numbers back her up. U.S. colocation capacity grew 48% in a year, yet only 1.2% sits empty. Vacancy in Northern Virginia, the world’s largest colocation hub, hit 0.3% in early 2026. Atlanta hit 1%. Both are historic lows, and in my experience, these vacancy levels reduce a provider’s willingness to negotiate.
It’s kilowatts now, not cabinets
Buyers used to count the racks they needed and ask for a per-rack rate. That approach assumed power was a given, quietly bundled into the price of space.
Average rack power demand has climbed from 4-10 kW to 20-40 kW today, and every increase in density needs more cooling and more electrical infrastructure. Providers are planning 60-100 kW racks within two years, and some installations already exceed 200 kW.
IDC research projects a U.S. power shortfall of around 45 GW by 2028. Nearly 7 GW of planned 2026 U.S. capacity has already been delayed or canceled because of a lack of power. Providers are now building their own supply, and the largest cloud companies have signed 13 nuclear deals totaling more than 9.8 GW of capacity. Construction costs, which show up at your next renewal, have also risen from around $8 million per megawatt to $11.5-$12 million today.
What IDC benchmarks show
This is consistent with our most recent market price guidance, published in September 2026, which covers 51 markets worldwide. When we price in dollars per kilowatt, the differences between markets become clear.
| Market | Region | Monthly price per kW |
| Montreal | North America | $107-$157 |
| Dubai | Middle East & Africa | $165-$228 |
| Northern Virginia | North America | $195-$240 |
| Frankfurt | Europe | $238-$268 |
| Singapore | Asia/Pacific | $335-$480 |
Tier III wholesale asking rates for 250-500 kW requirements. Power pass-through charges, cross-connects, remote hands, and bandwidth are excluded.
Singapore costs roughly three times as much as a power-advantaged market such as Montreal, a gap a per-rack quote would not show you.
Certainty has a price, too
Some large buyers are making a different choice. A global financial markets operator I advise is negotiating its next colocation contracts on a fully allocated, all-in basis. They pay a flat rate that already includes the provider’s margin and risk premium, instead of paying for what they use. It is the more expensive path (at least in the near term), but they are choosing it anyway, for around three years of price certainty. The alternative is a metered structure tied to real cost drivers, where your bill will move with the market.
What to ask for, and what to do with it
Most of the quotes we benchmark lack the information buyers need because providers rarely volunteer it. Ask for the following:
- Facility tier. Get Tier III or Tier IV in writing. Ask for Uptime Institute’s “Constructed Facility” certification, since design documents alone don’t confirm it.
- Power. Get the figure in kW. If the provider quotes kVA, ask for the power factor too. Without it, the conversion will be wrong.
- Pricing basis. Find out whether the rate is all-in or metered. If it is all-in, check whether cooling and power are included or billed separately.
- Escalation. Are increases fixed or tied to CPI or RPI, and when does the first increase apply?
- Term. The contract term, checked against any ramp schedule or step-down, and any free period.
- One-off charges. Get every one-off charge up front, including installation, plus fit-out and customization work.
- Utility rate and PUE. Ask for both, if the provider will share them.
- What the rate includes. Confirm exactly what you get: space, power, cooling, security, cross-connects, bandwidth, and remote hands.
- Market and validity. Confirm the market so you can compare against the right benchmark, and check the quote’s validity date.
With this in hand, benchmark in dollars per kilowatt, not dollars per rack. Weigh the premium of a primary hub, such as Northern Virginia or Frankfurt, against a secondary market. Then decide deliberately whether you want metered exposure or fully allocated certainty.
The bottom line
Your provider has already repriced around power. They know their construction costs and their position in the grid queue. They also know how much leverage a 0.3% vacancy rate in Northern Virginia gives them. Most buyers still walk into a renewal, compare this year’s quote with last year’s, and call that preparation. In my view, the old colocation price is not coming back. The buyers who hold their ground bring an independent, power-normalized benchmark to the table before the conversation starts.
If you are approaching a datacenter colocation renewal, contact the IDC benchmarking team or me to discuss a power-normalized review before you negotiate.
