What Are Data Centers Actually Worth? When Real Estate Models Meet Infrastructure Risk

Data centers are transitioning asset classes faster than valuation methodologies can adapt, contributing to a surge in disputes. A valuations expert outlines what attorneys and their clients need to know.

Key Takeaways

• Hyperscalers—tech giants that design, build, and run massive data centers—are reshaping data center valuation models as they increasingly look to own, occupy, and lease back such assets.
• The shift from typical real estate valuation models will play a critical role in the growing number of data center disputes facing developers, operators, investors, and tenants.
• Executives and their attorneys must understand the valuation frameworks in play and how they may arise amid certain disputes.

Fifteen years ago, data centers were developed similarly to office buildings, retail complexes, and warehouse space. While costs were inordinately high and tenants demanding, the expense could be worth the trouble: these facilities commanded some of the highest rents of any corporate real estate asset class.

Recently, this state of play has accelerated exponentially. Demand has exploded, and the cost of building and maintaining data centers has soared. Tenants have become increasingly concerned about security, location, regulatory, community, and energy-related risks. Yet even as rents climb, occupancy rates remain at around 97 percent.

What has fundamentally changed is that hyperscalers—flush with capital, pressured to meet skyrocketing capacity needs, and faced with mounting infrastructure risks—have begun developing these assets themselves. Though some will fully occupy the resulting facilities, a hybrid model in which they also lease back space is becoming popular.

The result is a transformation not only in how data centers are built and leased but also valued, from traditional landlord-tenant arrangements to owner-occupier assets. The gray areas between those competing models are no small issue for key players and their counsel: valuation risk will increasingly surface in the rapidly growing volume of data center litigation, arbitration, and regulatory proceedings.

Emerging Data Center Dispute Areas

The data center sector is “experiencing an infrastructure investment supercycle,” with global capacity set to double between 2026 and 2030, netting out at $1.2 trillion in real estate asset value creation according to a 2026 JLL report. New data centers are growing larger, with hyperscalers increasingly dictating market pricing.

Alongside such rampant growth comes immense dispute exposure, much of which will revolve around where and how risk is transferred from landlord to tenant and how various owners, investors, and occupiers value these assets.

Data center stakeholders and their attorneys should therefore be aware of the following dispute risks and underlying valuation issues:

Power supply and utility contracts. As a CBRE executive put it, “The market is tight, and it’s going to stay that way. The biggest constraint now is power availability, not real estate.” In other words, data centers underwritten as real estate assets depend on electricity that utilities can’t always provide, making them more akin to infrastructure assets.

Disputes may arise related to failures to deliver contracted power, cost-allocation for grid updates, regulatory intervention in interconnection agreements, and “take or pay” power obligations.

Regulatory and community challenges. Communities and regulators increasingly challenge data center approvals and raise environmental issues. In Texas, the College Station City Council rejected a major data center project buildout due to community pushback, while a £1 billion initiative in the UK encountered legal setbacks due to a government planning error related to environmental impact assessments. Owner-occupiers may be less prepared to navigate these risks than property developers, underscoring the need for experienced counsel.

Construction and development claims. Between 2020 and 2025, the average global data center construction cost rose from $7.7 to $10.7 million per MW, equating to a 7 percent compound annual growth rate. These costs will continue to increase in the wake of new tariffs, export controls, and labor shortages. The volume and complexity of related disputes will surge in years to come, whether claims relate to contractors, schedule delays and overruns, or performance guarantees.

Data Center Valuation: Real Estate versus Infrastructure Risk

As data centers evolve from more conventional landlord-tenant investment assets to operationally complex infrastructure owned and operated by hyperscalers, the valuation frameworks used to price them will also undergo a fundamental shift—with significant implications for dispute resolution.

Traditionally, data centers have been valued as income-producing real estate. Under this model, asset value is derived primarily from the income stream generated by tenant leases. This framework assumes that risk is borne largely by tenants and that owners provide space and basic services in exchange for rent.

For the growing number of owner-occupied assets, however, the valuation logic shifts toward a cost-based approach (i.e., what it costs to develop, equip, and operate the facility at scale). Stakeholders are effectively pricing the replacement cost of critical infrastructure rather than a stabilized income stream.

This evolution has significant implications for risk allocation and potential disputes. For instance:

• Do hyperscalers have enough experience in data center development to assume responsibility for power procurement, grid interconnection, operational resilience, and geopolitical and compliance risks?
• When owner-occupiers enter into sale and leaseback transactions to raise cash, how will buyers price these assets (e.g., as a real estate investment or an infrastructure asset)?
• Will a facility that fails and goes into receivership have differing values if it is sold to an investor versus an owner-occupier?

Risk transfers are often imperfectly defined at the outset of transactions, leaving open questions about where risk truly resides and how it should be priced.

The Future of Data Center Valuation and Disputes

The above issues may be technical, but their consequences are tangible. When developments encounter delays, cost overruns, or operational failures, disputes often hinge on how losses should be measured and which valuation framework should apply.

Similarly, financing arrangements can become strained when lenders must determine whether they are underwriting real estate risk, infrastructure risk, or a hybrid. The answer in many cases is unclear, creating friction for not only investors and operators but also funders, regulators, and courts tasked with interpreting these assets through legacy frameworks.

The explosion of new data centers shows few signs of slowing down as capacity demands outpace the speed at which they’re built. As this momentum persists, so too will disputes. The question is not whether conflicts will arise, but whether market participants and their counsel are prepared for the valuation debates that will define them.