A decade ago, data centers might be viewed as specialized real estate. They were a roof over servers, competing on price and location. Today, they have become one of the most sought-after assets in the global energy and infrastructure markets. But the explosive demand from artificial intelligence and cloud computing is facing a severe bottleneck: a lack in available electricity. Goldman Sachs reported that data center power demand will grow 160% by 2030, from 3% of U.S. electricity consumption to 8%. This has sent rental rates soaring and shifted power into the hands of data center developers.
A shift in power from tenants to landlords
For years, data center tenants were able to secure short-term, flexible leases. That’s no longer the case. Now, data center developers with existing energy capacity hold all of the bargaining chips.
The entire market has shifted from being tenant-driven to landlord-driven. The enormous growth in data center demand has given data center owners more power when it comes to negotiating contracts. This has had a large effect on rental prices, with rates growing significantly over the past several years. According to CBRE, the average rental rate for data centers in primary US markets hit $188.75 per kW per month in 2025, a 56% increase from $120.76 in 2021.
Many data center tenants are now regretting their short term leases they once thought of as a good deal. Previous contracts, typically for 5 – 7 years, are coming up for renewal. But now, landlords are able to charge a whole lot more thanks to limited supply and skyrocketing demand. Those looking to re-lease are now facing huge price hikes. For new contracts today, leases of 10 to 20 years with the option to extend are becoming the norm. Over the next several years, locations that can provide both cloud computing and AI training capability will have incredible negotiating power.
Why Data Centers are the New Infrastructure Class
This shift to long-term contracts is making data centers behave more like traditional infrastructure, attracting a new class of capital and risk-averse lenders. For data centers with long-term leases, banks have become comfortable with debt structures that don’t require full repayment within the initial term, which is more typical of infrastructure project finance. Core and core plus infrastructure funds, which have historically steered clear of data centers due to perceived risks, are now taking an interest.
The model is also evolving from multi-tenant colocation facilities to massive, single-tenant campuses built for hyperscalers. These larger, more expensive projects require and justify longer-term commitments. As capital expenditure balloons, stable contracts allow developers to amortize massive investments over longer periods.
With greater leverage, developers can negotiate stronger contracts. Termination provisions, once the norm, are now unlikely. More importantly, creative risk-sharing mechanisms are becoming more and more common. The landmark $26 billion financing for Meta’s Louisiana data centerreportedly includes a residual value guarantee, where Meta would reimburse investors for losses if it terminates the lease early and the asset’s value drops.
Lease structures are also evolving. There is a move toward triple net leases (NNN), where the tenant, not the developer, is responsible for operating costs like cooling systems and internal power gear. This drives efficiency, since more capital will come into the market on this type of deal.
How this affects investors, policymakers, and utilities
The sector’s transformation has big implications. For investors, it signifies the maturation of a high-growth asset class that now offers the long-term, stable cash flows characteristic of core infrastructure. The recent entry of core plus funds is proof.
For policymakers, data centers’ energy appetite requires more urgent grid modernization and generation capacity. Data centers are now foundational, power-hungry infrastructure that will dictate regional energy planning.
For the utilities, data centers have both challenges and opportunities. They are the primary driver of new electricity demand in many markets, forcing providers to adapt and creating a strong customer base for new generation, be it from renewables, nuclear, or gas.
Data centers are no longer just real estate. They are critical infrastructure, and their owners now hold the key to shaping the global digital economy.
Fore more in the world of power, keep an eye out for the next issue of Electric Buzz!
