Data-centre CMBS issuance has topped $17 billion since 2025, forcing bond investors to underwrite risks, from power constraints to secretive tenants, that traditional commercial real estate never required.
The commercial mortgage-backed securities market, long built around financing offices, apartments and malls, is being reshaped by a surge in data-centre deals. About $17 billion of data-centre CMBS has been issued since the start of 2025, more than triple the volume sold over the previous two years combined, according to Bloomberg. Data centres now account for roughly 8% of new commercial property bond deals, and with billions more in the pipeline, CMBS investors are actively rewriting their risk-assessment playbooks.
Traditional CRE lending relies on standardised leases and reasonably transparent tenants. Data centres break both assumptions. Facilities depend on a small handful of hyperscalers whose future space needs are genuinely hard to predict, and many of these tenants insist their identities and lease terms stay confidential. "Traditional CRE investors know how to underwrite offices, apartments, warehouses and retail because leases tend to be relatively standardised and tenant information is reasonably transparent," Ben Hunsaker, a portfolio manager at Beach Point Capital Management, told Bloomberg.
"Data centres are much more opaque." Lease provisions covering power costs, minimum capacity commitments and downtime now directly determine how much cash is actually available to service the underlying debt, terms that are harder to scrutinise when tenants demand confidentiality.
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The variable that used to define a prime commercial property, proximity to transit, amenities, or a city core, has been replaced by something entirely different for data centres: access to cheap electricity and available transmission capacity. That single factor increasingly determines how competitive a facility remains and what it's worth by the time its loan matures.
In an office or apartment building, losing a tenant mostly means finding another one. In a data centre, the bigger question is whether the building's bespoke electrical and cooling infrastructure can even accommodate a different operator, and what it would cost to retrofit it if not. For CMBS investors, that raises the odds of heavier capital spending, longer stretches without rental income, and weaker recoveries if a borrower defaults, risks that simply don't exist in the same form for a vacant office floor.
Perhaps the least familiar risk for CMBS buyers is technological obsolescence. AI chip requirements are evolving quickly enough that a facility built around one generation of hardware can become functionally outdated within just a few years, denting its value and complicating refinancing well before the underlying loan term is even up.
Data centres are also facing a level of local and national political opposition that's rare elsewhere in commercial real estate. Concerns over utility costs and strain on local grids have already fuelled pushes to restrict new developments in some communities, making the regulatory environment surrounding this asset class unusually hard to forecast compared to conventional property types.
India's own data-centre buildout is running on a similar scale and timeline. Telangana alone is looking at roughly ₹1.5 lakh crore in cumulative data-centre investment this year across just a handful of projects, Fortune Hospitality's ₹60,000 crore, 170-acre hyperscale park in Ranga Reddy district (potentially reaching ₹1 lakh crore at full build-out), TCS-HyperVault's proposed 1 GW campus in Hyderabad, Amazon's Bharat Future City facility, and a project from UPC-Volt.
As Indian developers and lenders start financing data centres at this scale, the same underwriting questions Wall Street is grappling with now, tenant concentration, power access as the real location premium, and how fast the hardware inside these buildings ages, will apply here too, whether that financing runs through bank debt, REITs, or eventually India's own securitisation market.
