AI Race Fires Up Market for Europe Data-Center Backed Bonds
(Bloomberg) — A spate of debt deals backed by European data centers is set to come to market this year as the region strives to catch up with the US in the race to capitalize on the booming artificial intelligence industry.
At least five issuers are looking at selling asset-backed or commercial-mortgage backed securities linked to European data center campuses in 2026, according to people familiar with the plans, who asked not to be identified discussing private information. The deals, which may total €3-€5 billion ($3.5-$5.8 billion), include previously-reported offerings from KKR & Co.-backed CyrusOne, Blue Owl Capital-owned Stack Infrastructure and EQT-backed EdgeConneX.
It’s a significant step for the market in Europe, where only two data center ABS deals have been publicly syndicated so far, both by Vantage Data Centers, to support campuses in Wales and Germany. This type of securitization, which allows investors to buy bond tranches of varying risk backed by data center leases, is already a key financing tool in the US, with issuance topping $15 billion last year, according to data compiled by Bloomberg.
“I expect quite a few deals in the next 12 to 18 months in Europe,” said Elisabeth Johnson, a partner at law firm Linklaters LLP who specializes in infrastructure finance. “The scale of capex and refinancing that is needed in this space is such that the capital markets will likely have to play a role.”
The offerings are coming as the region strives to catch up with the US and China in building data centers, which house the computer and storage systems needed to power AI. European leaders have pledged to make significant investments in AI and data centers, but the region’s stricter regulatory climate and the enormous energy and water demands of the facilities have slowed progress.
At the development stage, operators are usually able to access funds from banks or project finance. Securitization comes in once facilities are operational, with the deals typically backed by leases from the end user — big tech firms like Meta Platforms Inc. and Microsoft Corp.
In Europe, data centers have been particularly concentrated around Frankfurt, London, Amsterdam, Paris and Dublin. They are often run by large US operators — such as CyrusOne, Stack Infrastructure and EdgeConneX — which have already used securitization extensively in the US.
It would make sense for US operators to pursue the same funding strategy in Europe, said Darrell Purcell, who rates structured finance transactions at S&P Global Ratings.
Representatives for CyrusOne, Stack Infrastructure and EdgeConneX did not respond to requests for comment on upcoming deals.
Obsolescence Risk
US data-center backed bonds have generally seen strong demand so far, but the deals include both technological and real estate risk. Obsolescence — the possibility that rapid changes in computing needs will reduce demand for data centers — is a key risk factor that ratings firms take into account, according to Purcell. Last year, the release of a low-cost AI model from Chinese startup DeepSeek sparked a sector-wide rout on concerns about overspending on high-end chips and extensive computing power.
Other risks relate to the high power and cooling demands of the facilities, uncertainty around lease renewals by users, and the value of the real estate where the data center is developed, Purcell said.
“Technological changes, regulatory changes, electricity price changes — these kinds of developments can completely put at risk some transactions,” said Hubert Vannier, a fund manager at Amundi Asset Management. “And because these assets are extremely specific with very special use of the real estate, it seems very difficult to us to change their use by refurbishing the facilities without losing part of their value.”
Linklaters’ Johnson said that the number of securitization deals in Europe may be constrained by curbs on the underlying assets. “That is an increasing pain point for developers,” she said, particularly in Ireland, where the surging demand for electricity from data centers had prompted regulators to freeze new connections to the grid for several years. The moratorium has recently been lifted with new stipulations.
A major outage at a CyrusOne campus in Illinois last month — which took down markets operated by CME Group Inc. for more than 10 hours — served as a wake-up call for investors about the huge resource needs and fragility of these giant computer systems. CyrusOne said that staff failed to follow standard procedures for draining cooling towers ahead of freezing temperatures, resulting in the cooling system being overloaded.
The company subsequently pushed back a commercial mortgage bond sale linked to the US facility that suffered the outage, though that may be revived in early 2026.
More securitizations in Europe — and demand for the deals — will also be driven by sentiment toward AI. A frenzy of data center development and large amounts of leverage in the system have sparked some concerns about oversupply of the facilities, while talk of a bubble in AI company valuations is never far away.
Still, analysts believe that demand will remain robust for years to come.
“The growth of AI is pushing demand for data center capacity,” said Mirco Iacobucci, who rates commercial real estate transactions for Morningstar DBRS. “Though there has been some noise around AI in recent weeks, it’s difficult to see demand for computing capacity go down.”
(Adds quote from Amundi in twelfth paragraph.)
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