SCALE, CAPITAL, AND COOLING: HOW THE NEXT WAVE OF DATA CENTERS IS REWRITING THE RULEBOOK
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The modern data center contract is being transformed by three converging forces: unprecedented scale, new sources of capital, and a rapid and ever-changing shift in the way data is processed and the spaces are cooled. Each is reshaping not only the engineering of digital infrastructure but also the legal and financial frameworks that support it.
The modern data center contract is being transformed by three converging forces: unprecedented scale, new sources of capital, and a rapid and ever-changing shift in the way data is processed and the spaces are cooled. Each is reshaping not only the engineering of digital infrastructure but also the legal and financial frameworks that support it.
From halls to campuses
The size of deployments has expanded dramatically. What would have been considered a major transaction only five years ago is now regarded as routine. Entire multibuilding campuses are being developed for single hyperscale tenants, often with phased capacity increases agreed years in advance. This growth in scale has forced contracts to become more modular. Multiple contracts are now used within a single site to manage different phases of construction and commissioning. Early termination rights, milestone triggers, and coordination clauses are being refined to accommodate projects that will not be operational for years to come. With such scale comes new complexity, as power availability, grid connection timelines, and environmental performance all carry greater strategic weight.
Capital flows reshape control
As investment requirements rise, a new class of lender and investor is entering the market. Traditional real estate funds are being joined by infrastructure investors, logistics specialists, and sovereign wealth vehicles that view data centers as long-term, yield-bearing assets. New debt is also entering the market. Their involvement is changing the balance of control. Lenders are seeking direct contractual relationships with tenants and more robust step-in rights if an operator defaults.
Termination clauses, performance guarantees, and escalation processes are now calibrated to satisfy financing committees as much as customers. The result is that bankability has become a defining factor in what can be negotiated.
Operators must balance commercial flexibility with the predictability required by debt providers, and many are adopting dual-structure models in which property ownership is separated from operational management to make this possible.
The cooling revolution
At the same time, the physical fabric of the data center is changing. The rise of AI and high-density computing has led to significantly increased heat production, making liquid cooling a mainstream consideration. Contracts that had settled into a relatively industry-standard risk allocation for air-based cooling infrastructure are now being rebased to accommodate a variety of cooling systems and their associated risk allocations in areas that were previously overlooked. Lawyers and engineers are working more closely than ever to bridge the technical and contractual dimensions of cooling.
The cooling revolution
At the same time, the physical fabric of the data center is changing. The rise of AI and high-density computing has led to significantly increased heat production, making liquid cooling a mainstream consideration. Contracts that had settled into a relatively industry-standard risk allocation for air-based cooling infrastructure are now being rebased to accommodate a variety of cooling systems and their associated risk allocations in areas that were previously overlooked. Lawyers and engineers are working more closely than ever to bridge the technical and contractual dimensions of cooling.
An industry in acceleration
These developments point to a market that is moving from niche to mainstream infrastructure status. Projects are larger; capital structures are more complex; and technology is evolving at speed. With new investors scrutinizing every risk and AI workloads demanding new forms of cooling and reliability, data center contracts are becoming multi-disciplinary documents that combine engineering specifications, financing structures, and environmental commitments.
Key takeaways
Scale, capital, and GPU and cooling technology advancements are together defining the next decade of digital infrastructure. The challenge for every participant, whether operator, investor, or customer, is to ensure that the contracts being signed today remain robust in a market that is changing faster than ever. Those who align legal clarity with technical and financial agility will be best placed to thrive in this new era of hyperscale growth.
Key takeaways
Scale, capital, and GPU and cooling technology advancements are together defining the next decade of digital infrastructure. The challenge for every participant, whether operator, investor, or customer, is to ensure that the contracts being signed today remain robust in a market that is changing faster than ever. Those who align legal clarity with technical and financial agility will be best placed to thrive in this new era of hyperscale growth.
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© Eversheds Sutherland. All rights reserved. Eversheds Sutherland is a global provider of legal and other services operating through various separate and distinct legal entities. Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed and affiliated firms and the members of Eversheds Sutherland (Europe) Limited (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements and operate in accordance with their locally registered names. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the Eversheds Sutherland Entities are in a partnership or are part of a global LLP. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client.
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