You are correct that the "location" field for an ExpressRoute circuit resource typically refers to the Azure region where the ExpressRoute circuit is configured or associated with. This location value does not directly represent the physical colocation facility where the circuit is terminated or connected to Microsoft's network infrastructure.
The location field in the ExpressRoute circuit resource is primarily used for administrative and organizational purposes within Azure. It helps users categorize and manage their resources based on their geographical or logical placement within Azure regions. Additionally, it may also influence routing decisions within Azure's networking infrastructure.
While the physical connectivity between the customer network and Microsoft's network indeed occurs at the peering location (colocation facility), the circuit resource itself is logically associated with an Azure region for management and routing purposes within the Azure ecosystem.
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hth
Marcin