KBRA released research on the data center industry, which has experienced significant expansion over the past few years, driven by increasing demand for cloud services and the proliferation of data-intensive technologies.
Not surprisingly, the need for financing has also risen, and data centers have become an increasingly popular asset type within the securitization market. Total issuance volume in the space has reached $20.7 billion since 2021 and is expected to continue to increase with the emergence of AI, which has supported additional demand for data center capacity.
Data center assets provide specialized buildings, equipment and infrastructure relevant to the IT industry, and typically generate revenues that are significantly higher on a per square foot basis than office or industrial properties. The higher income-generating capacity of data center properties is a function of the rental levels they command from tenants that require robust infrastructure that supports reliable, “always-on” services to their customers. Infrastructure can include extensive mechanical, electrical and plumbing (MEP) system buildouts, which is the focus of this report.
The analysis outlines the difference in cost and complexity of data center MEP compared to other CRE asset classes as well as identifies the types of MEP in a data center and their respective estimated useful lives. In addition, the report detail owners’ and tenants’ wide range of responsibilities related to MEP and provide examples of KBRA assumptions as these relate to capital expense estimates in transactions that the company rates.
