The data center sector has become one of the most compelling asset classes in commercial real estate. With global market value surpassing $383 billion in 2025 and demand fueled by artificial intelligence and cloud computing, investors are racing to acquire and build these specialized facilities. But securing a data center real estate loan requires a different playbook than traditional commercial property financing.
Whether you are acquiring a stabilized colocation facility, building a hyperscale campus, or repositioning an industrial property, this guide covers every financing option, lender requirement, and underwriting consideration you need to know.
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Why Are Data Centers Such a Hot Investment Right Now?
Data centers are experiencing unprecedented demand driven by three converging forces. AI workloads represented roughly 25% of all data center demand in 2025, and that share is projected to reach 50% by 2030 (JLL, 2026 Global Data Center Outlook). Hyperscale operators like Amazon, Microsoft, Google, and Meta committed to spending over $350 billion on data center infrastructure in 2025 alone, with plans to exceed $400 billion in 2026.
The fundamentals tell a powerful story for lenders and investors alike. Vacancy rates in primary North American markets dropped to a record-low 1.6% in the first half of 2025, according to CBRE's North America Data Center Trends report. Meanwhile, 74.3% of all capacity currently under construction is already pre-leased, meaning tenants are locking in space years before buildings are delivered.
For commercial real estate investors, this translates to strong cash flows, high occupancy, and appreciating asset values - exactly the characteristics that make lenders eager to finance data center acquisitions and development.
What Types of Loans Are Available for Data Center Properties?
Data center financing varies significantly depending on whether you are acquiring a stabilized asset, building from the ground up, or repositioning an existing property. Here are the primary loan types available.
CMBS/Conduit Loans are ideal for stabilized, income-producing data centers with strong tenants. These non-recourse loans offer competitive rates and higher leverage, typically up to 75% LTV with 25- to 30-year amortization schedules. CMBS issuance for data centers hit an all-time high of approximately $3.7 billion in 2025 year-to-date, demonstrating strong institutional appetite for the asset class (CRE Daily). Learn more about CMBS and conduit loan structures and how they apply to data center financing.
Bridge Loans work well for value-add data center acquisitions, lease-up situations, or properties needing infrastructure upgrades. With terms of 1 to 3 years and the ability to close in as little as 14 to 30 days, bridge financing provides the flexibility to acquire and improve data center assets quickly. Rates are higher (typically 8% to 11%), but the speed and flexibility offset the cost for time-sensitive deals.
Bank Loans offer competitive rates for borrowers with strong banking relationships and owner-occupied facilities. Expect LTVs of 60% to 70%, terms of 5 to 7 years, and a more rigorous underwriting process. These loans are especially attractive for smaller colocation operators or enterprise users.
SBA 504 Loans provide up to 90% financing for owner-occupied data centers. If you operate a small or mid-size colocation facility and occupy at least 51% of the building, SBA financing can minimize your down payment. The CDC portion offers fixed rates that are typically 1% to 2% below conventional bank rates.
Life Company Loans target the lowest-risk data center assets - think investment-grade tenants with long-term leases. These lenders offer the best rates (5.5% to 6.5%) but require lower leverage (55% to 65% LTV) and strong DSCR metrics of 1.35x or higher.
Ready to explore which loan type fits your data center deal? Contact our team for a no-obligation financing consultation.
How Much Does It Cost to Build or Acquire a Data Center?
Data center construction costs have been climbing steadily, and understanding the numbers is critical for structuring your financing.
The average global construction cost per megawatt is projected to hit $11.3 million in 2026, a 6% increase over 2025 (Turner & Townsend). However, costs vary dramatically by market. According to Cushman & Wakefield's Data Center Development Cost Guide, costs range from $9.3 million per MW in San Antonio to $15 million per MW in Reno.
Several factors drive these cost differences:
- Tier classification: A Tier IV facility can cost 25% to 40% more than a Tier III facility due to higher redundancy requirements
- Power density: High-density deployments supporting AI workloads require advanced cooling systems and beefier electrical infrastructure
- Labor markets: Established data center hubs face labor shortages that can increase costs by up to 30%
- Grid infrastructure: Sites requiring utility upgrades or new substations add significant upfront capital
For acquisitions, stabilized data centers are trading at cap rates between 4.4% and 6.5%, depending on tenant quality, lease terms, and facility specifications. Data center REITs have implied cap rates at just 4.4%, the lowest among all major real estate sectors (CRE Daily).
Use our commercial mortgage calculator to estimate monthly payments and total financing costs for your data center acquisition.
What Do Lenders Look for When Underwriting a Data Center Loan?
Data center underwriting differs meaningfully from conventional commercial real estate lending. Lenders evaluate a specialized set of criteria beyond the standard DSCR and LTV analysis.
Power Capacity and Redundancy is the single most important factor. Lenders want to see secured, redundant power capacity with utility contracts in place. In today's market, power availability has surpassed geographic location as the primary value driver. A facility with N+1 or 2N redundancy commands better financing terms than one with basic power infrastructure.
Tenant Credit Quality matters enormously in data center lending. A facility leased to investment-grade tenants like Amazon Web Services, Microsoft Azure, or Google Cloud will receive far more favorable terms than a multi-tenant colocation facility with small business tenants. Lenders evaluate weighted average lease terms (WALT), tenant concentration risk, and renewal probability.
DSCR Requirements for data center loans typically range from 1.25x to 1.35x for stabilized assets. Bridge and transitional lenders may accept lower DSCRs of 1.0x to 1.10x, while life companies often require 1.35x or higher. Check your property's debt coverage using our DSCR calculator.
Location and Connectivity remain important, though the definition of a "good" data center location has evolved. Lenders favor markets with abundant power, fiber connectivity, low natural disaster risk, and favorable regulatory environments. Primary markets like Northern Virginia, Dallas, Phoenix, and Chicago continue to attract the most financing interest.
Building Infrastructure includes cooling systems, fire suppression, physical security, and structural capacity. Lenders commission specialized data center appraisals that assess both the income approach and the cost-to-replace approach, often resulting in higher valuations than standard commercial appraisals.
How Is Data Center Financing Structured?
The capital stack for a data center deal often involves multiple layers of financing to optimize returns and manage risk.
A typical data center acquisition might be structured with 65% senior debt (CMBS or bank loan), 10% mezzanine debt, 10% preferred equity, and 15% sponsor equity. This blended structure allows sponsors to achieve higher leverage while keeping senior loan metrics within lender guidelines.
For development deals, construction financing typically covers 60% to 70% of total project costs, with the remainder funded through equity. Many developers secure pre-leasing commitments from creditworthy tenants before breaking ground, which significantly strengthens the loan application. Given that 74.3% of current construction is pre-leased (CBRE), lenders have become more comfortable extending construction loans to data center developers with strong track records.
For a detailed breakdown of what to expect at closing, review our guide on commercial loan closing costs.
What Is the Difference Between Financing Colocation and Hyperscale Data Centers?
The financing landscape differs considerably between colocation and hyperscale facilities, and understanding these distinctions is essential for structuring the right loan.
Colocation facilities typically range from 1 to 10 MW and serve multiple tenants with retail-style leases of 1 to 5 years. Lenders evaluate these assets similarly to multi-tenant office or industrial buildings, focusing on occupancy rates, tenant diversification, and rental rate trends. CMBS, bank loans, and bridge financing are the most common capital sources.
Hyperscale campuses are single-tenant or limited-tenant facilities ranging from 50 to 200+ MW, typically leased to cloud providers or Fortune 500 companies on NNN lease structures of 10 to 20 years. These assets attract life company lenders, large CMBS executions, and syndicated bank facilities. The strong credit profile of hyperscale tenants allows for more favorable terms, with cap rates compressing to 4.0% to 5.5%.
The colocation segment is growing at 19% annually, outpacing the broader market, as enterprises continue migrating workloads to third-party facilities (Grand View Research).
What Role Does Power Play in Data Center Loan Approval?
Power availability has become the defining factor in data center financing. Grid constraints are the biggest bottleneck in the industry, and lenders now evaluate power security with the same rigor they apply to tenant creditworthiness.
Key power-related underwriting considerations include:
- Utility contracts: Lenders want to see firm power purchase agreements with guaranteed capacity
- Redundancy level: N+1 redundancy (one backup for every primary system) is the minimum standard; 2N (fully duplicated systems) is preferred for mission-critical facilities
- On-site generation: Backup generators, battery storage, and increasingly, on-site renewable energy installations add value
- Grid proximity: Distance to the nearest substation and the capacity of the local grid infrastructure
- Power cost: Electricity rates vary dramatically by market, directly impacting NOI and DSCR calculations
Markets with constrained power grids - including parts of Northern Virginia, the world's largest data center hub - are seeing development slow despite strong demand. Conversely, markets with available power capacity like San Antonio, Phoenix, and parts of the Midwest are attracting significant new investment.
What Documents Do You Need for a Data Center Loan Application?
Preparing your loan package for a data center acquisition or development requires more documentation than a standard commercial property deal.
Beyond the standard documents, data center lenders often request:
- Detailed power and cooling system specifications, including redundancy levels
- Uptime Institute tier certification documentation (if applicable)
- Network connectivity maps showing fiber routes and carrier presence
- Equipment inventory and remaining useful life estimates
- Energy efficiency metrics (PUE - Power Usage Effectiveness)
- Compliance certifications (SOC 2, ISO 27001, HIPAA if applicable)
Having these documents organized and readily available can shave weeks off the underwriting timeline. For borrowers new to commercial real estate lending, our guide on commercial real estate loan requirements covers the fundamentals.
How Is the Data Center Market Expected to Grow?
The growth trajectory for data centers is staggering, and it directly influences financing availability and terms.
Global data center capacity is projected to double from approximately 100 GW in 2024 to 200 GW by 2030 (JLL). Companies worldwide are expected to invest nearly $7 trillion in building and upgrading data centers over this period (Programs.com).
The key growth drivers include:
- Artificial intelligence: AI workloads are projected to represent 50% of all data center demand by 2030, up from 25% in 2025. Training large language models requires enormous computing power, and the coming shift to inference workloads will sustain demand beyond the current training buildout.
- Cloud migration: Enterprises continue moving workloads from on-premise servers to cloud-hosted data centers. On-premises capacity is projected to decline 6% while colocation grows at 19%.
- Edge computing: The proliferation of IoT devices, autonomous vehicles, and real-time applications requires distributed computing infrastructure closer to end users.
- Digital transformation: Every industry is becoming more data-intensive, from healthcare and financial services to manufacturing and retail.
For investors, this translates to a strong financing environment. Lenders are competing for data center loan business, and the asset class has earned a reputation as one of the most resilient CRE segments. Data center REITs delivered year-over-year FFO growth exceeding 21% in early 2025 (Data Center REITs 2026 Update).
Looking to finance a data center acquisition or development project? Reach out to our experienced team to discuss your specific deal and explore financing options tailored to this asset class.
What Are the Risks Lenders Consider for Data Center Loans?
Despite strong fundamentals, lenders evaluate several risk factors when underwriting data center loans.
Technology obsolescence is a concern unique to data centers. As computing requirements evolve - particularly with the shift toward liquid cooling for AI workloads - older facilities may need significant capital expenditure to remain competitive.
Power grid constraints can limit a facility's ability to expand or maintain operations. Some markets have seen moratoriums on new data center connections, impacting both new development and existing facility expansion.
Tenant concentration risk is acute for single-tenant hyperscale facilities. The specialized nature of data center buildings makes re-tenanting more challenging than conventional industrial properties if a major tenant vacates.
Environmental and regulatory risk is growing as data centers face scrutiny over energy consumption and water usage. Some municipalities have restricted new data center development.
Market oversupply remains a longer-term concern. While vacancy rates are at record lows today, the massive pipeline of new construction could soften fundamentals in specific submarkets.
Mitigation strategies include securing long-term power contracts, diversifying tenants, investing in infrastructure upgrades, and targeting markets with supportive regulatory environments.
How Can You Improve Your Chances of Getting Approved for a Data Center Loan?
Securing favorable financing for a data center property requires preparation and strategy.
Secure pre-leasing commitments: Nothing strengthens a loan application more than signed leases from creditworthy tenants. For development deals, aim for at least 50% pre-leasing before approaching lenders.
Demonstrate power security: Lock in utility contracts and power purchase agreements before applying for financing. Show lenders that your facility has reliable, redundant power for current and future needs.
Highlight operational expertise: Lenders favor borrowers with a track record of operating data center assets. If this is your first data center investment, consider partnering with an established operator.
Invest in certifications: Uptime Institute tier certification, SOC 2 compliance, and industry certifications add credibility and reduce perceived risk.
Work with a specialized broker: Data center financing involves nuances that general commercial mortgage brokers may miss. An experienced broker connects you with the right capital sources.
Prepare a comprehensive business plan: For value-add or development deals, present a detailed plan with market analysis, tenant pipeline, capital expenditure budget, and financial projections.
Contact Clearhouse Lending to work with advisors who understand the unique demands of data center real estate financing.
What Is the Value-Add Opportunity in Data Center Real Estate?
Value-add data center investing offers some of the highest returns in commercial real estate but requires substantial capital and expertise.
Common strategies include:
- Industrial conversion: Repurposing warehouse or manufacturing buildings into data center facilities. These conversions can dramatically increase property value, but require significant investment in power infrastructure, cooling systems, and connectivity. Our value-add financing guide covers strategies for this type of project.
- Capacity expansion: Adding power and cooling capacity to existing data centers to accommodate higher-density workloads, particularly AI training and inference.
- Infrastructure modernization: Upgrading older facilities with modern cooling technology, improved power efficiency, and enhanced security systems.
- Lease restructuring: Renegotiating below-market leases or converting retail colocation leases to wholesale arrangements with larger, more creditworthy tenants.
Hard money loans and bridge financing are commonly used for value-add data center projects due to their speed and flexibility. Once stabilization is achieved, borrowers typically refinance into permanent DSCR-based financing or conduit loans for long-term hold.
What Are the Most Common Questions About Data Center Financing?
What is the minimum loan amount for data center financing?
Minimums vary by lender type. SBA 504 loans start at approximately $125,000, bank loans begin at $1 million, CMBS loans require at least $2 million, and bridge loans start around $500,000. For hyperscale projects, financing packages regularly exceed $100 million.
Can I use an SBA loan to finance a data center?
Yes, SBA 504 loans are available for owner-occupied data centers where the borrower occupies at least 51% of the facility. This option provides up to 90% financing with below-market fixed rates, making it attractive for small and mid-size colocation operators.
What DSCR do lenders require for data center loans?
Most lenders require a minimum DSCR of 1.25x for stabilized data center assets. Bridge and transitional lenders may accept 1.0x to 1.10x, while conservative lenders like life companies often require 1.35x or higher. The required DSCR depends on tenant credit quality, lease terms, and overall deal risk.
How long does it take to close a data center loan?
Timelines vary by loan type. Bridge loans can close in 14 to 30 days, bank loans typically take 45 to 60 days, and CMBS/conduit loans require 60 to 90 days. Construction loans may take 90 to 120 days due to additional due diligence requirements.
Are data center loans recourse or non-recourse?
CMBS and life company loans are typically non-recourse, meaning the lender's recovery is limited to the property itself. Bank loans and SBA loans usually require personal guarantees (recourse). Bridge loans vary but often include partial recourse or "bad boy" carve-outs for specific borrower misconduct.
What cap rates are data centers trading at?
Stabilized data centers are trading at cap rates ranging from 4.4% to 6.5% as of 2025-2026. Single-tenant hyperscale facilities with investment-grade tenants command the tightest cap rates (4.0% to 5.5%), while multi-tenant colocation facilities typically trade at 5.5% to 7.0%.
Can I convert an industrial property into a data center?
Yes, industrial-to-data-center conversions are a popular value-add strategy, but not every building is suitable. Key requirements include adequate power availability, sufficient structural capacity for heavy equipment, proximity to fiber routes, and appropriate zoning. Learn more about industrial property financing options.
Sources cited in this article include data from JLL 2026 Global Data Center Outlook, CBRE North America Data Center Trends H1 2025, Turner & Townsend Data Centre Construction Cost Index 2025-2026, Cushman & Wakefield Data Center Development Cost Guide, Grand View Research Data Center Market Report, Fortune Business Insights Data Center Market Report, CRE Daily, and Programs.com Data Center Statistics.