It absolutely is (cheaper, and a good argument). As an example: we're in the process of switching from Digital Ocean to Hetzner for a project, that will increase infrastructure performance (roughly memory/cpu/storage) by 4x and decrease costs by 4x. And no driving to the colo center is neccessary, as it's their dedicated server, so their on-site engineers do the hardware replacement.
Also, if you are not okay with your site being down for a few hours, you can always buy two, like you would with a sensible cloud setup. It'd still come up way cheaper (+ get more perf if you can do load balancing for your usage).
Also, I don't look at it from "colo is cheaper" point of view. To me, it's "I can have several times more performance and hire a full time sysadmin to worry about it, for the same price".
Even a cloud setup needs good management and contingency planning, and in absence of such it can fail just as hard as a colo setup.
if it's a test/development system that's meant to possibly break, you shouldn't be driving anywhere at 0300 in the morning anyways.
Until the server breaks and you have to drive over in the middle of the night and try to replace it but the only available server right now is a shitty one and oh shit only half the backups work cause the onsite backups are fried too etc etc etc.
There's many good arguments against high-level BaaS such as Firebase but I'm not sure that "colo is cheaper" is one.