KBRA Releases Research – Data Center Leases: Variations on Established Themes

NEW YORK--(BUSINESS WIRE)--KBRA releases research examining lease structures in the data center industry. This industry continues to expand rapidly amid increasing demand for artificial intelligence (AI) compute capacity, cloud services, and the proliferation of data-intensive technologies. As the need for financing has also risen, data centers have become an increasingly popular asset type in the securitization market. Total new issuance volume in the space reached $27 billion in 2025 and is expected to continue increasing as the next wave of data centers currently under construction is completed and becomes eligible for takeout financing. Importantly, the vast majority of securitized issuance has been backed by wholesale hyperscale assets.

Against this backdrop of accelerating issuance, understanding how hyperscale data center leases are structured—and how they compare with traditional commercial real estate (CRE) leases—is increasingly important. This report examines the key structural features of wholesale hyperscale leases, highlighting similarities, differences, and the provisions that most directly influence cash flow stability and risk allocation. Retail colocation leases are generally excluded except where helpful for contrast.

Key Takeaways

• Data centers are more capital-intensive and power-dependent than traditional CRE, making expense pass-throughs, capital expenditure allocation, and power-related provisions central to cash flow stability. Power, not space, drives economics.
• Most hyperscale data center leases are structured as net leases, with variations reflecting differing allocations of operating and capital cost responsibility. The specific allocation of these obligations has direct implications for margin stability and capex exposure.
• Operational control and life cycle capex are shifting to hyperscale tenants under absolute triple-net structures, supporting near-term cash flow stability but potentially increasing residual value risk.
• Expanded termination, contraction, and assignment rights can reduce cash flow visibility and alter credit exposure, particularly in concentrated single-tenant assets.

Click here to view the report.

Recent Publications

• Data Centers: Developments and Trends in Project Finance
• Data Centers: Credit Strengths and Challenges for Public Power
• Data Centers: A Comparison of ABS and CMBS Structures
• Data Center MEP: More Than Meets the Eye
• Data Centers: A Deeper Dive Into Colocation Transactions
• Data Centers in U.S. Securitization: A Primer

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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