The Shape-Shifting Nature of Data Centers: Real Estate or Infrastructure?

This is the second of a series of blogs on Data Centers.  Catch up on the first blog Inside the Numbers: Project Finance for Data Centers.

These high-tech facilities blur the line between investment types — understanding them is key to building an effective financial model

Data centers are the quiet giants of our digital economy — part warehouse, part power plant, part internet backbone. But when it comes to financing them, are they real estate… or infrastructure?

Data centers store and process the information that powers our favorite online services, such as social media and streaming platforms. From an investment perspective, they generate predictable, long-term revenues, which makes them attractive business assets. Yet they are capital-intensive, requiring high upfront costs. So, how exactly are they financed?

Ultimately, not every project follows the same logic. Some investments depend on the bricks — the tangible value of physical assets — while others rely on the business, meaning the steady income it generates. In short, some projects behave like real estate, while others resemble infrastructure.

So where do data centers fit into that spectrum? To find out, let’s unpack the main differences.

Collateral vs. Cash-Flow Based Investments

Imagine pawning something valuable — a guitar, a watch or even a gold necklace. If you don’t repay, the shop sells your item to recover the money. That’s essentially how real estate lending works: if a homeowner defaults, the lender forecloses, sells the property, and usually recovers its funds. Real estate is therefore collateral based.

Infrastructure projects, on the other hand, are cash-flow based. Lenders focus less on resale value and more on the project’s ability to generate reliable income. For example, a toll road operator might not own the road itself, but holds rights to collect future tolls, concession fees, and service charges — a predictable stream of cashflows.

Feature	Collateral-Based (Real Estate)	Cash-Flow-Based (Infrastructure)
Main focus	Physical asset value	Predictable income stream
Security	Property as collateral	Future revenues as collateral
Typical investor	Real estate funds	Infrastructure funds, banks
Risk driver	Market value of property	Operational performance
Example	Office building	Toll road, power plant

What Pushes Data Centers Towards Infrastructure?

The distinction isn’t only about money — it’s also about complexity. Infrastructure projects are generally more intricate and require deeper structuring than typical real estate investments.

Think about airports, power plants, or renewable energy farms. These ventures involve layers of contracts, technical specifications, and long development cycles. They’re much more specialized than building an office block.

This is where Engineering, Procurement and Construction (EPC) contracts come in. They define who is responsible for each part of the building, how risks are shared, and what standards must be met. The more specialized and risk-managed a project becomes, the more it behaves like infrastructure.

Data Centers — The Shapeshifters of Project Finance

So, are data centers more like skyscrapers or more like power plants? The answer: a bit of both!

Data centers share the predictability of real estate, with steady, rent-like revenues from long-term colocation agreements. But they also layer in the complexity of infrastructure, with critical systems for power, cooling, and connectivity that must operate 24/7 without failure.

Smaller retail data centers might behave like real estate, being relatively simple, tenant-focused, and space-driven. Meanwhile, hyperscale facilities — the massive ones that can even operate their own on-site power plants — lean into the infrastructure category.

And now, with artificial intelligence driving demand for power and processing capacity, data centers are evolving. The intersection between AI, cloud computing, and digital storage may define the next frontier of infrastructure investment.

Ready to Model the Future of Data Centers?

Whether you’re analyzing data centers, renewable energy projects, or transport infrastructure, Pivotal180 teaches you how to build complete financial models from scratch and apply these skills to real-world projects.

Our courses break down the essential project finance concepts through hands-on, practical examples, so you don’t just learn— you do. Choose from self-paced online programs, live instructor-led sessions, or tailored corporate training designed to fit your organization’s needs.

Have questions? Reach out anytime at [email protected] and start your journey toward mastering project finance financial modeling.

Keep a eye out for our new course on Data Centers launching in November 

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