Financing the next wave: What makes European data centers bankable

Data centers are now part of a nation’s critical infrastructure. Tom Whelan explains what lenders and investors look for before they finance a data center.

Lenders and investors have always looked at tenant quality, rental yield, lease length, and location. Now they also need to know where the power is coming from: whether supply is contracted, committed, and long term, and what the backup arrangements are. They want assets that are future-proofed, so they are not financing a white elephant overtaken by better technology, and tenants with the creditworthiness to honor their commitments.

They will also scrutinize the carbon footprint of the assets they fund. Secondary markets bring a further risk, with no ready pool of replacement tenants if a tenant uses a break option. And because data centers are critical infrastructure, investors will likely need foreign direct investment clearances. Tom’s advice is to look at the project in the round, identify where you could lose money, and bring all the elements together, because capital providers will not commit without that.