Wholesale vs. Retail Colocation Data Centers

Colocation is the practice of leasing rack space, cabinets or cages in a compliant, secure data center. Colocation generally falls into two categories: wholesale colocation and retail colocation. The primary difference comes down to the scale of space and power leased, the lease structure and the level of customization available.

What Is Wholesale Colocation?

Wholesale Colocation generally refers to the leasing of a fully built data center space — such as a dedicated suite, hall or entire building — by a single tenant. Large enterprises frequently choose to lease data centers wholesale instead of designing, financing and building their own data centers.

In contrast to retail colocation, wholesale colocation is ideal for companies with enterprise-scale power and data requirements.

Wholesale colocation may be a good choice for large companies that:

• Need a lot of space at a low cost per square foot
• Require at least 1 megawatt of power capacity
• Must meet stringent government regulations or compliance standards
• Need room for future expansion within the same facility
• Require a great deal of customization

Wholesale leases are typically longer-term and give the tenant far greater control over the configuration of the space, power density, cooling design, and physical layout.

What Is Retail Colocation?

A retail colocation data center arrangement is when a customer leases a designated space within a data center. In these cases, the customer’s IT requirements may call for a small rack or a larger caged-off area.

In contrast to wholesale colocation, which generally involves the leasing of a complete data center, retail colocation is ideal for companies that need a small amount of space or have a limited colocation budget.

Retail location may be a good choice for businesses that:

• Don’t require a lot of space, or only need it for a short time
• Don’t have the budget to consider leasing an entire data center
• Need to store and access smaller amounts of data in different geographic locations
• Have exceeded capacity at another facility
• Do not have the IT staff in place to manage and maintain server space

Wholesale vs. Retail Colocation: Key Differences

FAQs

How should I choose between retail and wholesale colocation?
Choosing the right colocation data center model depends on your power density requirements, growth trajectory and need for control:

• Choose retail colocation if you need a smaller footprint, want flexibility, prefer shared/managed infrastructure, or are scaling incrementally.
• Choose wholesale colocation if you require 1 MW or more of power, want a lower cost per square foot at scale, need heavy customization, or must satisfy strict compliance and expansion requirements.

Is wholesale colocation the same as building your own data center?
No, wholesale colocation is not the same as building your own data center. With wholesale colocation, you lease fully built, dedicated data center space from a provider while retaining control over your equipment and configuration. You avoid the capital expense, construction timeline and operational burden of building and owning a facility outright.

Which is more cost-effective, retail or wholesale colocation?
It depends on scale of your needs. Retail colocation has a higher cost per square foot but a lower upfront commitment, making it economical for smaller footprints. Wholesale colocation offers a lower cost per square foot at scale, making it more cost-effective for large, power-dense deployments. However, wholesale colocation typically also requires longer-term lease structure.

Can a company move from retail to wholesale colocation?
Yes, companies can and do move from retail to wholesale colocation. Many organizations start with retail colocation and migrate to larger wholesale arrangements as their space, power and customization needs grow.

Who typically uses wholesale colocation?
Large enterprises, cloud providers and hyperscalers with significant power and space requirements, strict compliance obligations or the need for extensive customization and room to expand are the kinds of businesses that typically use wholesale colocation.

Who typically uses retail colocation?
Retail colocation is typically used by smaller organizations, or those with limited or temporary needs, that want the benefits of a professional data center without the scale or commitment of a wholesale lease.

To learn more about the different types of colocation (wholesale vs retail), click here.