Unlike hyperscaler facilities locked into 10- to 15-year tenant agreements, colocation data centers rely on shorter leases across diverse tenants. With vacancy rates near 1%, colocation operators can reprice contracts upward more rapidly, allowing them to absorb elevated borrowing costs.
Data center operators typically secure long-term tenant leases well before issuing securitized debt on finished facilities. When interest rates surge rapidly, bond yields rise toward 8% while rental revenues remain locked in, creating severe margin compression and suppressing new bond issuance.