Data centers have quietly become the backbone of modern digital life, yet most people rarely think about the infrastructure powering their daily cloud usage, streaming, collaboration, and increasingly, artificial intelligence applications.
Nikit Sawjani, Director, Securitization, RBC Capital Markets joined a panel at the Australian Securitisation Forum conference this November, exploring how securitization markets can unlock capital for digital infrastructure as global demand accelerates and why Australia stands on the brink of its first securitization deal in this space.
What are data centers?
Data centers are specialized real estate assets designed to house and operate computing equipment at scale, providing four critical functions: physical security, reliable power supply with backup systems, precision cooling infrastructure, and secure colocation space. Unlike technology companies that develop software and hardware, data centers focus exclusively on infrastructure – they provide controlled environments for clients to lease space, without exposure to semiconductor supply chains or technological obsolescence risk. This separation is crucial for credit analysis, as revenues depend on reliable service delivery rather than technological innovation.
Data centers are long-life assets with 50+ year useful lifespans, typically operating under 5-15 year lease agreements. This creates a unique financing dynamic as operators must continuously secure tenant renewals to maintain cash flows. Despite this shorter-term revenue visibility, the strategic importance of data centers to technology companies, combined with their capital intensity and limited operators, has made them an attractive asset class for institutional investors seeking stable, long-dated cash flows backed by investment-grade tenants.
Global securitization: from US leadership to international expansion
The United States leads the data center securitization market substantially. The US first securitized data centers in February 2018 with a US$900 million Vantage Data Centers transaction. Initial market adoption was slow – only three to four issuers emerged during 2018-2020. However, 2021 marked a breakthrough year, and by 2025, the market has matured dramatically, with approximately US$25 billion in annual issuance. Forward estimates project even greater growth, with some forecasting US$40-70 billion in the coming year.
Europe entered the data center securitization space only in 2024 with Vantage's £600 million UK deal, followed by a €640 million German transaction. Asia-Pacific development has been slower, though Australia appears well-positioned to pioneer the region's first data center securitization in 2026.
Market trends reshaping securitization
Two significant trends are reshaping the securitization landscape. First, Asset-Backed Structures (ABS) and Commercial Mortgage-Backed Structures (CMBS) dynamics have shifted. Historically, ABS dominated at roughly 70% of deal volume, with CMBS representing just 30%. However, 2025 has seen this split closer to 50% / 50% as issuers have successfully accessed both markets to finance their growth. The complementary nature of these markets is illustrated by Switch’s simultaneous ABS and CMBS issuances in March 2025, which were both oversubscribed, demonstrating each structure serves distinct investor needs.
“It's not been a case that ABS and CMBS compete, they're very complementary products. They have different investor bases and different structures and as such, given the size of the funding task facing data center operators, they have accessed both markets."
Nikit Sawjani, Director, Securitization, Australia, RBC Capital Markets
Second, warehousing – where banks utilise securitization technology to finance data centers ahead of, or in lieu of, accessing public ABS or CMBS markets – is becoming standard practice. This approach enables issuers to time market conditions rather than rushing during congestion. The flexibility and cost efficiency of warehousing structures provide significant benefits to data center operators planning staged expansion programs.
"Warehousing is a growing theme in the US market, and I think it will be prevalent in other jurisdictions as they build out the data center securitization market as well."
Nikit Sawjani, Director, Securitization, Australia, RBC Capital Markets
Structuring and market development
Data center ABS transactions typically feature fixed-rate structures with a five-year soft bullet repayment profile . Leverage typically ranges from 8-12 times operating income, translating to 65-70% loan-to-value ratios, depending on tenant quality and diversification. Master trust structures offer flexibility by allowing issuers to add additional data centers over time and increase leverage as lease capacity increases.
"As the APAC data center securitization market develops, it is important to ensure that the product is suitable for both domestic and offshore investors. Given the capital intensive nature of data centers, access to the broadest universe of investors will be critical."
Nikit Sawjani, Director, Securitization, Australia, RBC Capital Markets
This pragmatic approach leverages proven US market structures while adapting to local Australian conditions and investor preferences.
Future outlook
Panel experts project A$2-$7 billion in annual Australian issuance once the market matures. Initial expectations suggest a handful of issuers emerging within 12-18 months. Drawing parallels to the US market, which took seven years to move from infancy to maturity, Australian industry participants expect a similar timeline – gradual initially but accelerating as additional issuers enter the market.
The consensus is clear: Australia's data center securitization market represents a significant capital recycling opportunity, backed by essential national infrastructure leased to world-class tenants on long-term agreements – the foundations for a thriving securitization market.
