- The data centre industry is facing a significant shift in financing models due to rapid growth.
- Traditional lenders are being outpaced by the need for faster capital deployment in response to AI and cloud computing demands.
What happened: Financing the data centre boom
At the Datacloud USA keynote panel on “The Evolution of Data Centre Financing,” experts discussed the sector’s changing landscape. Kevin Mammel, CFO of Rowan Digital Infrastructure, noted that, just a few years ago, data centre projects were typically 20-30 megawatts, with investments of $200 million to $300 million. Today, the industry is focused on multi-billion-dollar developments.
The need for capital is intensifying. Felix Zhang, partner at Ares, highlighted that in 2021, $10 billion in asset-backed securities (ABS) were issued for data centres. This figure has since grown to $50 billion. However, it’s still insufficient to meet the projected $3 trillion in global capital expenditure needed in the next three years.
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Why it’s important
As the data centre industry grows, particularly with AI-driven cloud services, financing models must adapt. Traditional banks can’t keep up with the demand, especially in early-stage developments. Joan Hutchinson from Marathon Capital pointed out that banks are struggling to meet the $60 billion annual demand for construction debt.
Private capital is stepping in to bridge these gaps. Developers are turning to creative joint ventures, including partnerships with power and oil companies. However, financing remains difficult, particularly when working with “Neo Cloud” clients. These smaller tech companies have high demand but lower credit ratings.
As the market continues to evolve, new financing tools and diversified investor pools will be critical for the sector’s continued growth. Mammel is confident that the industry will find solutions in time.
