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A 20-year data center lease gives you a long contractual commitment, not an automatic guarantee of power, usable capacity, or predictable total cost. Those outcomes depend on the lease’s definitions, delivery milestones, billing formula, operating-expense pass-throughs, escalation clauses, utility tariff, and remedies if capacity is late or unavailable.

Before signing, model the deal as a collection of separate obligations: base rent, committed power, metered electricity, cooling and distribution overhead, taxes, insurance, maintenance, and any minimum or take-or-pay payment. The term length matters because small drafting choices compound over two decades, but it does not supply a standard market price or a universal capacity right.

What the 20-year term actually commits you to

The term establishes how long the lease remains in force and how long each party may be exposed to its obligations. It does not, by itself, say how many megawatts you receive, whether that figure is usable IT load, when the power arrives, or whether you pay for consumption, reserved capacity, or both.

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Duration is different from capacity

A lease can run for 20 years while the landlord delivers capacity in phases. It might promise a gross utility connection but define the tenant’s right in terms of critical load, IT load, or another narrower measure. Conversely, a document may state a capacity number without clearly promising that the number is continuously available to your equipment.

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Read the definitions for utility capacity, committed capacity, available capacity, critical load, IT load, and redundancy. Ask whether the promise covers usable load at the rack, power delivered to the building, or an upstream utility allocation. Confirm the delivery date for each phase and whether the landlord can substitute, defer, or re-sequence capacity.

Why a long term increases exposure

A long commitment can support a dedicated build-out and reduce relocation risk, but it also limits your ability to respond to changes in workload, hardware efficiency, business strategy, or utility pricing. Rent escalators, demand charges, operating-expense reconciliations, and minimum payments can continue even when your actual compute load falls.

One company-specific disclosure illustrates that long leases are used in some portfolios: Core Scientific’s 2026 filing says most of its self-developed data centers are on properties held under long-term leases that generally have 15-to-20-year terms from inception. That statement describes its own properties; it is not a market-wide prevalence estimate or a forecast of what a tenant will pay.

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Define the power right before discussing price

Power language is the foundation of the economics. A reliable review starts with the physical and contractual meaning of every capacity number.

Questions to answer in the definitions and exhibits

  • Is capacity stated in utility megawatts, electrical-service capacity, critical load, or usable IT load?
  • Does the number include or exclude mechanical systems, lighting, battery charging, and other facility loads?
  • What redundancy standard applies: for example, a stated topology, independent paths, or a service-level outcome?
  • When must each block of capacity be delivered, commissioned, tested, and accepted?
  • Can the landlord reduce available capacity during maintenance, utility curtailment, or an emergency, and for how long?
  • Who pays for upgrades when your density, voltage, cooling method, or equipment changes?

SEC-filed lease exhibits show that electrical capacity, rent, utilities, and operating expenses can appear in separate, detailed provisions. Those forms demonstrate possible drafting approaches, not a definition that applies to every facility.

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Capacity, availability, and redundancy are separate promises

“Committed” capacity may describe what the operator has reserved for you, while “available” capacity may be the amount that can be energized at a particular time. A redundancy commitment may concern the configuration of paths or equipment rather than an additional block of billable megawatts. Require the lease and service-level agreement to connect each promise to a measurement method, test procedure, notice period, and remedy.

How a tenant may be billed for power

There is no universal billing model. The same facility can combine a fixed capacity fee with metered energy and separate charges for demand, standby service, or backup power.

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Billing basis What usually drives the charge Questions to put in the lease
Capacity-based Reserved or committed power, often expressed as a recurring amount per allocated unit Is payment due for the full reservation even when equipment is idle? Can unused capacity be reduced or released?
Usage-based Metered electricity consumed by the tenant’s load Which meter controls? Is the reading gross facility consumption or tenant-level consumption? How are calibration disputes handled?
Bundled or hybrid Base rent or a service fee includes some power, while energy, demand, or other components are billed separately Exactly which components are included, and what formula applies when utility rates change?

Capacity charges

A capacity charge can make costs predictable when your utilization is high and stable, but it can be expensive during a slow ramp or a workload transition. Clarify whether the charge is based on contracted capacity, peak demand, a rolling average, or another calculation. Check whether a later expansion increases the fee immediately or only after the additional block is delivered.

Metered consumption

With a usage-based structure, the invoice follows measured electricity rather than the amount reserved. The contract should identify the meter, reading interval, data-access rights, accuracy standard, and process for correcting an erroneous reading. Determine whether the meter captures only IT equipment or also cooling, pumps, distribution losses, and other building loads.

Cooling and electrical overhead

Energy costs may include an overhead for cooling and power delivery. ENERGY STAR guidance specifically recommends asking whether charges are based on capacity or actual power use and whether efficiency metrics and power procurement appear in the service-level agreement. Its checklist asks: “Are efficiency metrics and power procurement included in the service level agreements in your lease contract?”

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If a facility applies a power-usage-effectiveness methodology or another allocation factor, require the formula, the measurement period, permitted exclusions, and audit rights. A change in cooling design or operating practice can otherwise alter your bill without changing your IT load.

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Utility, demand, standby, and backup-power items

A filed Applied Digital lease exhibit illustrates how broad a power-payment clause can be. Its listed categories include electricity and backup power alongside capacity, availability, standby, demand, distribution, and other utility charges. Treat this as an example of possible scope, not a standard list imposed on every tenant. Your agreement should state which utility tariff components are passed through, whether the operator may procure power on your behalf, and whether an administrative markup is allowed.

How operating expenses are allocated

Lease labels such as triple-net and modified gross provide a starting point, but the defined expense categories control the result.

Structure General allocation What still needs definition
Triple-net The customer generally bears substantially all property taxes, insurance, and maintenance or facility operating expenses, in addition to rent. Excluded costs, capital expenditures, management fees, shared-area allocations, reserve funding, reconciliation dates, and audit rights.
Modified gross The operator typically retains some facility expenses, while power or other variable costs may remain separately billable. Which expenses are retained, the baseline year or expense stop, escalation method, and treatment of extraordinary repairs or taxes.

Core Scientific’s filing describes these general distinctions and notes that long-term take-or-pay arrangements may require payment for leased customer power capacity regardless of utilization. The labels do not replace a line-by-line review of exclusions, allocation formulas, caps, and reconciliation procedures.

Shared-cost allocation

In a multi-tenant building, determine how the landlord allocates security, staffing, generators, chilled-water systems, common electrical infrastructure, insurance, and property taxes. A fair formula might use leased area, connected load, peak demand, or a combination. Require enough data to reproduce the calculation and a right to inspect supporting invoices.

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Capital expenses versus operating expenses

Ask whether replacements, expansions, major repairs, and compliance upgrades are operating expenses or capital expenditures. If capital costs are passed through, establish useful-life limits, amortization rules, approval thresholds, and whether you pay for improvements that primarily benefit another tenant.

Take-or-pay and underutilization risk

A take-or-pay clause requires payment for a contracted amount regardless of actual use. It can provide the operator with revenue visibility and may be exchanged for a lower unit rate or a construction commitment, but it shifts ramp and demand risk to the tenant.

Read the clause with the capacity schedule. Identify the minimum payment in each phase, the date it starts, credits for unavailable capacity, and whether released capacity can be resold or returned. Check whether a force-majeure event, utility failure, delayed delivery, or service-level breach suspends the minimum payment. Also determine whether a parent guarantee, letter of credit, or early-termination fee secures the obligation.

Build a 20-year cost model instead of a headline estimate

No reviewed source establishes a universal 20-year total cost, industry-average escalation rate, or standard utility price path. Actual tariffs and regulatory constraints vary by site, and large-load electricity rate design remains an active policy and utility issue. A defensible model therefore uses the proposed lease, the applicable tariff, and multiple scenarios.

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Inputs your model should contain

  • Base rent, commencement date, free-rent periods, and every escalation formula.
  • Committed megawatts, usable IT-load definition, delivery phases, and ramp schedule.
  • Actual utilization by month or quarter, including seasonal peaks and workload migration.
  • Energy, demand, standby, capacity, backup-power, and distribution charges.
  • Cooling overhead or the facility’s stated efficiency methodology.
  • Taxes, insurance, maintenance, security, management fees, and other pass-through expenses.
  • Minimum payments, take-or-pay obligations, deposits, guarantees, and termination charges.
  • Expansion, contraction, assignment, renewal, and end-of-term restoration obligations.

Model these scenarios

Scenario Stress applied Decision it informs
Planned ramp Capacity and workload arrive on schedule with expected utilization Whether the business case works under the operating plan
Slow utilization Reserved capacity remains underused for an extended period Exposure to capacity fees and take-or-pay payments
Delayed delivery A capacity phase is late or unavailable while other commitments continue Value of credits, termination rights, and substitute capacity
Rate pressure Utility, demand, or standby charges rise faster than expected Need for caps, index definitions, procurement controls, or hedging
Workload change Density, cooling profile, or total demand changes materially Flexibility to expand, contract, reconfigure, or assign space

Use a transparent calculation sequence

  1. Separate fixed rent from every variable utility and operating-expense line.
  2. Map each payment to a defined unit: square footage, committed capacity, metered energy, peak demand, or another stated measure.
  3. Apply the exact escalation index, reset date, floor, cap, and compounding rule in the draft.
  4. Apply utilization and delivery assumptions by phase rather than treating all 20 years as one block.
  5. Include taxes, insurance, maintenance, reconciliation true-ups, and audit adjustments.
  6. Run the stress scenarios and calculate the cash requirement, not just the nominal unit price.
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Compare two actual offers on the same axes

Do not declare a winner from rent per square foot or a quoted power rate alone. Put both offers into a common worksheet and insist that each blank be marked “not stated” until the provider supplies a definition.

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Comparison axis What to verify
Usable capacity Committed IT load, gross utility amount, redundancy assumption, and delivery date
Service level Availability target, measurement window, exclusions, credits, and termination remedy
Billing basis Capacity, metered use, peak demand, hybrid charges, and minimum payment
Efficiency allocation Cooling and electrical-loss treatment, efficiency metric, formula, and audit data
Utility scope Energy, demand, standby, backup power, distribution, procurement, and markups
Operating expenses Included items, pass-through categories, exclusions, caps, and reconciliation timing
Escalation Rent index, utility adjustment, floors, caps, reset dates, and notice requirements
Flexibility Ramp, expansion, contraction, assignment, sublease, and release rights
Risk allocation Delay, outage, force majeure, change in law, insurance, indemnity, and liability limits
Exit and expiry Default, early termination, renewal, removal of equipment, restoration, and holdover terms

Delivery milestones, outages, and remedies

Capacity is valuable only when it is delivered, energized, tested, and usable. Tie each phase to objective acceptance tests and documentation. Specify what happens if the date slips: rent abatement, capacity-charge suspension, service credits, alternate space, a right to terminate the affected phase, or termination of the whole agreement.

Service-level language should identify planned-maintenance notice, emergency response, generator testing, fuel responsibilities, utility curtailment, and the measurement point for availability. A credit that is too small to cover replacement capacity may not protect a mission-critical deployment. Confirm whether repeated failures create a termination right rather than only another invoice credit.

Document limitations and evidence correctly

SEC-filed lease forms can reveal clauses that a sophisticated operator considers important, but they are illustrative. One filing states: “This Form of Data Center Lease Agreement (this “Form Lease”) includes the terms that Blackstone Digital Infrastructure Trust Inc. (“BXDC”) generally expects to be contained in the leases of data centers that it intends to target for acquisition.” The same filing cautions that the form is illustrative and should not be relied on as a guarantee or indication of exact terms in actual leases.

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That limitation matters when using public documents to benchmark your negotiation. A company filing can show that capacity, utilities, rent, and operating expenses are often treated as distinct subjects; it cannot tell you the economics of your site, utility, jurisdiction, workload, or draft.

Contract-review checklist before signing

  • Have counsel and an electrical engineer confirmed that the defined capacity equals the load your equipment can actually use?
  • Does the delivery schedule include commissioning, testing, acceptance, and consequences for delay?
  • Can you reproduce every utility and operating-expense invoice from the stated meter and allocation formula?
  • Are cooling, distribution losses, demand, standby, and backup power expressly addressed?
  • Does a take-or-pay commitment match your realistic ramp, and can you reduce unused capacity?
  • Are rent and utility escalators bounded by clear indices, caps, floors, and reset dates?
  • Do audit, data-access, dispute, and reconciliation rights survive for the entire term?
  • Can a sustained outage or capacity failure trigger meaningful abatement or termination?
  • What happens to equipment, cabling, deposits, and restoration obligations at expiry?

The practical conclusion is straightforward: a 20-year term is a duration, not a capacity guarantee or a cost forecast. The deal becomes understandable only when the lease states the usable power right, billing basis, expense allocation, escalation mechanics, delivery remedies, and exit flexibility, and when those provisions are tested against realistic utilization and utility-rate scenarios.

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