Data Center Debt Pushes CMBS Investors Into Uncharted Territory
Data center deals accounted for roughly 8% of new commercial mortgage backed securities issuance since early 2025, with about $17 billion sold — more than triple the volume of the prior two years. Citigroup expects issuance to reach between $18 billion and $20 billion next year, a 50% increase. AAA-rated data center CMBS now trade at spreads of 1.65 percentage points above floating-rate benchmarks, wider than office, retail, and industrial properties. Most transactions are structured as single-asset, single-borrower deals tied to individual facilities.
CMBS investors accustomed to evaluating office buildings and apartments now must assess grid capacity, power costs, cooling infrastructure, and computing density. Lease provisions covering minimum capacity commitments and downtime clauses determine who bears unexpected costs. Tenant identities often remain confidential, making underwriting more opaque. CWCapital Asset Management is developing new stress tests for the sector, while Axonic Capital has kept data center exposure small and emphasized geographic and tenant diversification.
Facilities designed for one generation of AI chips can become outdated within years as power and cooling requirements surge. If hyperscale tenants depart when leases roll, highly specialized buildings may prove costly to repurpose or release. Local opposition to new projects over utility strain and infrastructure concerns has made the regulatory environment harder to predict. A $356 million bond backed by a 30-megawatt facility near Elk Grove Village, Illinois, priced wider than guidance last week, the third such instance in recent months.
Data centers depend on access to cheap electricity and transmission capacity rather than proximity to city cores or transportation. The shift introduces risks that look more like infrastructure finance than traditional real estate. While demand for computing capacity remains strong, oversupply concerns are mounting as billions in new projects seek financing. One portfolio manager noted that if long-term tenants leave, owners could be left with buildings difficult to fill.
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