Debt funds and real estate lenders have long focused on traditional commercial real estate such offices, living and warehouses. But many are considering data centers in order to spread risk among other sectors and take advantage of an ability to deploy at scale.

“Globally we expect to see a rise in more sophisticated structuring across the capital stack,” says Jackson.

He explains that real estate debt funds are an increasingly competitive alternative lender pool, while more creative and structured financing products like asset backed securitization, SASB (single-asset, single-borrower loans tied to the financial performance of a specific property), and Credit Tenant Lease financing agreements (CTLs) are on the rise.

Data center tenants are among the biggest investment grade companies in the world, making them perfect for CTLs, which typically involve long-term leases with a stable tenant that allows for higher loan-to-value ratios.

However, not all tenants or data centers are created equal, and location can impact occupier profile, significantly influencing the investment's risk and return profile for lenders.

“The highest liquidity and best pricing is for data center assets and developments within cloud regions” Jackson says.