AI Boom Drives $17 Billion Surge in Data Center CMBS

The commercial mortgage-backed securities (CMBS) market is undergoing a significant shift as artificial intelligence drives a surge in data center deals. Approximately $17 billion in data-center CMBS has been issued since the start of 2025, with these assets now representing roughly 8% of new commercial property bond deals. Citigroup predicts issuance will jump another 50% next year, reaching between $18 billion and $20 billion.

Trepp and other market analysts note that these properties now function more like infrastructure or tech plays than traditional real estate, with value determined by electricity access and power grid capacity rather than location. This transition introduces new underwriting risks, including rapid hardware obsolescence and evolving cooling requirements. Investors have expressed concern over the opacity of lease agreements with hyperscalers and the difficulty of repurposing highly specialized facilities if tenants exit.

In separate economic developments, European Central Bank Executive Board member Isabel Schnabel warned in Berlin that rising costs for oil, diesel, and gas are concerning. Schnabel attributed these energy-price pressures to low European storages, competition with Asia for liquefied natural gas, and a drastic reduction in refining capacities. These warnings come as central bank officials weigh further interest-rate hikes.