The UAE’s colocation market is entering a rapid growth phase: a new supply-and-demand study projects revenue will climb from roughly $448 million in 2024 to $1.736 billion by 2030 — a compound annual growth rate of about 25.3% — driven by hyperscaler expansion, sovereign-cloud initiatives, AI workloads, 5G rollouts and a busy pipeline of new facilities.
Background / Overview
The UAE has been building a dense digital backbone across Abu Dhabi, Dubai and a growing set of secondary emirates. Two Microsoft Azure regions (UAE North in Dubai and UAE Central in Abu Dhabi) and the arrival of multicloud products and partnerships have anchored demand for local colocation and cloud-on-ramps. These in‑country cloud deployments help enterprises meet data residency requirements while reducing latency for AI and real‑time services.Market research compiled in the October 2025 report (distributed through industry outlets) identifies roughly 34 existing colocation facilities in the UAE and 23 upcoming sites identified in developer pipelines and vendor announcements — a mix of retail cages, wholesale halls and specialized AI-ready campuses. Abu Dhabi and Dubai dominate the inventory today (roughly 10 facilities in Abu Dhabi, 21 in Dubai), while Sharjah, Ajman and Al Ain are beginning to appear on plans and masterplots.
Why the acceleration matters now:
- Hyperscalers and managed cloud vendors are expanding regionally, adding local cloud products and marketplace services that pull enterprise workloads on‑shore.
- National AI and smart‑city programs are converting policy into capacity requirements for high‑performance compute and sovereign enclaves.
- Subsea and terrestrial cable investments, plus 5G backbone rollouts, are improving connectivity and making multiple cities viable colocation hubs.
Market size and forecast: what the latest reports say
Headline numbers
- Reported market value (2024): approximately $448 million.
- Forecasted market value (2030): approximately $1.736 billion.
- Reported CAGR (2024–2030): ~25.3%.
Cross-check and variance
Independent analysts produce differing estimates. A separate market‑data provider shows a noticeably lower 2024 base and a more conservative CAGR (for example, a mid‑teens CAGR in alternate outlooks), highlighting methodology sensitivity (definitions of colocation revenue, inclusion of in‑house hyperscale spend, and accounting for preleasing vs. live utilization all change outcomes). Readers should treat any single forecast as directional and consult multiple data views for procurement or investment decisions.Supply landscape: existing inventory, the pipeline and key operators
Existing footprint and white‑space inventory
The UAE’s existing colocation base skews toward two patterns:- City‑centred retail and wholesale facilities in Dubai and Abu Dhabi serving banks, telcos, cloud providers and government agencies.
- Specialist and sovereign-focused sites that combine compliance controls, confidential compute options and local professional services.
Notable operators (existing & new)
- Existing operators called out in the market study include Khazna Data Centers, Gulf Data Hub, Equinix, Moro Hub, e& (UAE), Pacific Controls and Core42 (Injazat) among others.
- New entrants and announced newcomers include Pure Data Centres Group and XDS DATACENTRES, which are positioning to capture wholesale and hyperscale preleases.
Demand drivers: AI, cloud, enterprise transformation and government projects
Cloud and hyperscaler pull
Major cloud platforms — Alibaba Cloud, AWS, Microsoft Azure and Oracle Cloud — have anchored regional demand through in‑region services, marketplace tie‑ins and managed database offerings. Oracle’s Database@Azure program and other multicloud integrations have further smoothed enterprise migration for transactional and AI workloads. The presence of hyperscaler services inside UAE regions materially raises colocation demand for high‑throughput, low‑latency interconnect and dedicated cross‑connect services.AI workloads and the GPU factor
AI training and inference are the most capacity‑intensive and revenue‑driving classes of demand. Projects such as regionally significant AI campuses (for example large-scale initiatives planning hundreds of megawatts) create pull for GPU-dense racks, liquid cooling systems and firm power contracts. International policy shifts that enable higher volumes of high-end accelerators to ship to the Gulf also matter materially to availability and timing.Public-sector modernization, sovereign cloud and smart cities
UAE government programs for digital services, e‑gov and smart cities explicitly require onshore processing for regulated data and many AI workloads. Sovereign‑cloud designs (local governance overlays on hyperscaler platforms) are driving demand for colocation that can host both hyperscale service endpoints and local control planes. These public procurement programs act as anchor tenants and accelerate private‑sector cloud adoption.Vertical concentration
Key industry demand drivers include:- BFSI (banking, financial services & insurance) for latency-sensitive payments and fraud detection.
- Government and regulated agencies for residency and audit requirements.
- Telcos and CDNs for 5G, edge services and low-latency routing.
- Large enterprises and system integrators migrating mission‑critical apps and data for AI modernization.
Supply constraints, risks and the physical realities of scale
Power, grid and permitting are the gating factors
Building usable IT capacity is not just about concrete and racks; power availability, utility interconnection and permitting timelines are the primary gating constraints. Developers routinely cite multi‑quarter waits for substation upgrades, long lead times for firm PPAs and utility coordination that can push delivery windows far beyond construction timelines. This reality raises the risk that announced projects remain on the drawing board unless firm power and grid commitments are in place.Equipment and semiconductor supply
AI‑grade GPU and HBM availability remain a strategic supply risk. While export licensing shifts and vendor allocation policies can open shipment channels, procurement for tens of thousands of accelerators is still governed by fab capacity, packaging throughput and vendor allocation decisions — not merely funding. The pace at which these components arrive can compress or extend project commissioning schedules significantly.Cooling and density engineering
High rack densities for AI require advanced cooling (direct liquid cooling, rear-door heat exchangers, immersion) and thermal management expertise. Retrofitting older facilities to host modern GPU clusters is possible but expensive; greenfield AI campuses built with high‑density racks and integrated cooling are more efficient and attractive to hyperscalers and large tenants.Market concentration and lock‑in risk
Sovereign-cloud overlays and strategic hyperscaler partnerships deliver speed and compliance, but they also concentrate operational control. Vendor lock‑in and concentration risk — particularly where a small set of platform operators manage critical national workloads — must be actively mitigated by procurement clauses, exit pathways and multi‑vendor designs.Pricing, revenue mix and commercial implications
Retail vs wholesale
The market report separates retail colocation (rack-level, managed cage, turn‑key connectivity) from wholesale colocation (dedicated halls, long‑term power leases). Wholesale deals drive big upfront revenue and are favored by hyperscalers and large cloud customers that negotiate long-term power and space contracts. Retail continues to be important for ISVs, carriers and local enterprises seeking flexible month-to-month capacity.Pricing trends
Observed pricing themes across the region include:- Strong demand for bundled connectivity and cloud-on‑ramps (connectivity to native hyperscaler on‑ramps is a price differentiator).
- Add‑on services (cross‑connects, private interconnect, managed security) boosting ARPU (average revenue per user) for operators.
- Wholesale pricing pressured by large preleases but supported by long-term power contracts and volume guarantees.
Commercial risks
- Over‑optimistic pre‑leasing claims that are not backed by signed long‑form contracts create forecasting noise for developers and utilities.
- Rapid changes in energy pricing or grid policy can materially change operating expense assumptions baked into wholesale deals.
Sustainability, energy strategy and regulatory posture
Large colocation campuses are energy intensive. Developers and hyperscalers in the UAE are increasingly pairing capacity expansion with:- Long‑term PPAs and renewable‑energy procurement.
- Heat‑recovery and carbon mitigation strategies (co‑located industrial symbiosis or blue power / carbon capture partnerships). Evidence of cross‑border energy‑tech partnerships and sustainable supply experiments is emerging.
Competitive landscape: who wins and why
Hyperscalers as anchor tenants
Hyperscalers (Microsoft, AWS, Oracle, Alibaba) act as both demand drivers and competitive pressure. Their choices about where to place in‑region services influence which colocation operators thrive — those with direct cloud on‑ramps, robust connectivity suites and sovereign controls win first.Local champions vs global operators
- Local champions (Khazna, Gulf Data Hub, Moro Hub, e&) can win on regulatory alignment, government relationships and rapid local response.
- Global operators (Equinix and other global colo REITs) bring scale, proven interconnection ecosystems and rich exchange fabrics attractive to multinational enterprises.
New entrants
New wholesale developers and specialist AI‑ready operators (e.g., Pure Data Centres Group, XDS) are trying to capture prelease windows for hyperscalers and large enterprise customers; success depends on securing power, fiber and committed anchor tenants.Practical guidance for IT leaders, developers and investors
- Prioritize contractual guarantees for power and firm interconnects. Without firm PPAs and utility interconnection milestones, capacity commitments can slip.
- Insist on auditable compliance for sovereign-cloud promises — admin separation, personnel localization and confidential compute attestations must be contractually documented.
- Design for portability: demand data export guarantees, open data formats and documented exit/runbook plans to reduce vendor lock‑in risk.
- Treat AI capacity as a multi‑component procurement: space + power + network + kit (GPUs) — shortages in any single leg will delay projects.
- For investors: stress‑test pro forma models against delayed grid upgrades and slower equipment delivery; require milestone‑based tranche funding tied to commissioning and PPA execution.
Where forecasts diverge and what to watch
Research houses differ in methodology and therefore in headline forecasts. The high‑growth scenario summarized above (25%+ CAGR) assumes strong hyperscaler preleasing, rapid AI adoption and successful power/build projects. More conservative analyses assume slower enterprise migration and more constrained delivery timelines, producing mid‑teens CAGRs. That divergence matters — a developer or CIO should map model assumptions to observable milestones (signed PPAs, executed GPU delivery contracts, completed fiber routes) rather than relying solely on headline CAGR figures.Key indicators to monitor:
- Signed long‑term PPAs and published utility interconnection schedules.
- Hyperscaler public capacity availability statements for UAE regions.
- Major equipment allocation announcements (GPU and HBM supply commitments).
- Subsea / domestic cable commissioning events and on‑ramps to major cloud providers.
Final assessment: strengths, risks and strategic outlook
Strengths- The UAE has a clear market signal from both public and private programs that will sustain colocation demand: sovereign cloud projects, hyperscaler regional services and AI-enabled national plans.
- Strong connectivity and two active Azure regions, plus multicloud integrations (Oracle Database@Azure, etc.), provide a practical path for enterprises to host sensitive workloads locally.
- The industry’s busiest constraint is physical — power, permitting and equipment. Announced pipelines must be validated against power and kit delivery timelines to avoid stranded development risk.
- Concentration risk (few platform operators and large sovereign-cloud overlays) can create lock‑in and systemic vendor exposure if not managed with contractual safeguards.
- If the UAE and market participants convert announced projects into commissioned, powered capacity, the colocation sector can scale rapidly and capture a larger share of Middle East AI and cloud workloads. Conversely, if power and equipment timelines slip, growth will be uneven and pricing could harden for live, available capacity. Investors and enterprise buyers should balance enthusiastic forecasts with hard milestone validation — signed PPAs, installed substations, and delivered accelerator kits remain the most reliable predictors of near‑term capacity becoming usable.
Conclusion
The UAE colocation market sits at a pivotal inflection point. Ambitious forecasts — including a near‑quadrupling of revenue by 2030 in some studies — are plausible if hyperscaler pull, sovereign policy and infrastructure execution align. However, the industry’s true test is operational: who can secure firm power, who can guarantee low-latency cloud interconnects, and who can deliver GPU‑ready density at scale. For enterprises, operators and investors, the next 12–24 months will be decisive: validated contracts, utility milestones and equipment deliveries will separate credible capacity from aspirational pipelines. Strategic procurement, contractual discipline and technical due diligence will determine who benefits from the UAE’s fast-growing but materially constrained colocation opportunity.
Source: GlobeNewswire UAE Data Center Colocation Supply & Demand Analysis 2025-2030: $1.73 Billion Market Driven by Cloud Expansion from Alibaba, AWS, Microsoft, and Oracle Alongside 5G and Smart City Developments
