A new report from S&P Global Ratings is flagging up three critical risk dimensions for data centres which set them apart from other project finance asset classes – namely, real estate, traditional infrastructure, and technology.

While the relative importance of each may vary from project to project, all three are essential in S&P Global Ratings' risk assessment, according to its new report Decoding Data Center Risk: A Multi-Dimensional Analysis.

The real estate dimension reflects the physical durability of the building and/or land, often spanning several decades—like other long-term assets in the sector.

The infrastructure dimension centrer on the reliability and resilience of core systems, such as power supply and cooling. However, it is the technology dimension that most directly determines the useful economic life of a data centre, the ratings agency says. Rapid advances in IT hardware, software, and evolving tenant requirements can sharply reduce the period during which a facility remains competitive and fully utilized—even if the physical structure remains intact.

According to the assessment, interplay of risks has become even more pronounced with the rise of data centre financing structures that feature minimal amortization and large bullet payments.

While S&P’s criteria allow for asset lives of "up to 50 years" for some infrastructure assets, the risk of technological obsolescence often means the realistic operational life of a data centre is much shorter—typically around 25 years in the analysis.

“As such, we view asset life as a function of all three risk dimensions, with the sector's risk profile evolving alongside market and technological changes,” S&P says.

As technological change accelerates, the ratings agency says its assessment of data centres' operating risks continues to evolve. S&P is observing heightened exposure to reletting risk and more complexity associated with the inclusion of behind-the-meter power solutions within the scope of the same project.

“This combination is reshaping the view of future cash flow stability in the sector. The greater the exposure to reletting risk—especially over longer, less predictable horizons—the more robust financial cushions in key metrics we require to support an investment-grade rating. Same applies for inclusion of power assets within the structures,” the ratings agency says.

Separately, in a recent webinar in S&P’s Sustainability Insights series entitled “Can data centres be green”, the agency estimates that about 43% of existing data centrer are in water-stressed regions, a fact that is increasingly drawing scrutiny from permitting authorities.

The rartngs agency’s sustainability insights provide transparency on established and emerging environmental, social, and governance risks and trends—and how they impact economies, companies, and markets.

Decoding Data Center Risk: A Multi-Dimensional Analysis. - click here for more information

Click here for more information about S&P’s Sustainability Insights series