A colocation centre (also spelled co-location, or shortened to colo) or "carrier hotel", is a type of data centre where equipment, space, and bandwidth are available for rental to retail customers. Colocation facilities provide space, power, cooling, and physical security for the server, storage, and networking equipment of other firms and also connect them to a variety of telecommunications and network service providers with a minimum of cost and complexity. The term "carrier hotel" can refer to a data centre focused on connecting customer and carrier networks together. Colocation centres often host private peering connections between their customers, internet transit providers, cloud providers, meet-me rooms for connecting customers together Internet exchange points, and landing points and terminal equipment for fibre optic submarine communication cables, connecting the internet, for example at the network access point known as NAP of the Americas, which connects many Latin American ISPs with networks in the US.

Many colocation providers sell to a wide range of customers, ranging from large enterprises to small companies. Typically, the customer owns the information technology (IT) equipment and the facility provides power and cooling. Customers retain control over the design and usage of their equipment, but daily management of the data centre and facility are overseen by the multi-tenant colocation provider. They may also have a network operations centre (NOC), a help desk, and offices for customer employees, and they may offer remote hands or smart hands service in which on site technicians employed by the colocation provider are allowed to access customer equipment on request to solve customer issues. Some providers also provide roof access to customers for mounting wireless equipment.

Buildings with data centres inside them are often easy to recognise by the amount of cooling equipment located outside or on the roof.

Colocation facilities have many other special characteristics:

Colocation data centres are often audited to prove that they attain certain standards and levels of reliability; the most commonly seen systems are SSAE 16 SOC 1 Type I and Type II (formerly SAS 70 Type I and Type II) and the tier system by the Uptime Institute or TIA. For service organisations today, SSAE 16 calls for a description of its "system". This is far more detailed and comprehensive than SAS 70's description of "controls". Other data centre compliance standards include Health Insurance Portability and Accountability Act (HIPAA) audit and PCI DSS Standards.

Colocation facilities generally have generators that start automatically when utility power fails, usually running on diesel fuel. These generators may have varying levels of redundancy, depending on how the facility is built. Generators do not start instantaneously, so colocation facilities usually have battery backup systems. In many facilities, the operator of the facility provides large inverters to provide AC power from the batteries. In other cases, customers may install smaller UPSes in their racks.

Some customers choose to use equipment that is powered directly by 48 VDC (nominal) battery banks. This may provide better energy efficiency, and may reduce the number of parts that can fail, though the reduced voltage greatly increases necessary current, and thus the size (and cost) of power delivery wiring. An alternative to batteries is a motor–generator connected to a flywheel and diesel engine.

Many colocation facilities can provide redundant, A and B power feeds to customer equipment, and high end servers and telecommunications equipment often can have two power supplies installed.