The Bank of England has asked market participants to detail UK data center loans made without a tenant signed to pay rent. Bloomberg reported the questioning on Nov. 5, citing people with knowledge of the matter. Lending that funds construction before an occu
Featured: Wide landscape view of a commercial data center development under construction in Hertfordshire, UK.pier commits to a lease is known as speculative financing in commercial real estate.
The questioning is part of wider efforts to understand lending to the data center industry, where project costs have grown as facility scale has expanded, according to Bloomberg. The Bank is not opposed to speculative lending in principle, one of the people said, despite the practice being widely viewed as risky. The Bank of England declined to comment.
The Bank's Financial Policy Committee set out its concern in the record of a Sept. 25 meeting, published on Sept. 30. "The increasing indebtedness of AI firms combined with opacity and, at times, 'circular arrangements' that can be associated with this financing, can complicate the assessment of risks and could amplify losses if expectations disappoint," the committee wrote. The same record cites a Morgan Stanley estimate that $700 billion of data center capital expenditure between 2026 and 2028 would be financed by private credit, and that global AI-related debt issuance reached about $450 billion by early September.
Some lenders have already stepped back. The Bayes UK Commercial Real Estate Lending Report, published in October, found that four lenders had stopped lending to data centers, and that debt funds supplied almost half of the speculative finance advanced in the first half of the year for alternative assets including data centers, Bloomberg reported. The Bank for International Settlements has warned separately that thin disclosure of deal terms, particularly where data centers are leased to hyperscalers on long-dated contracts with exit options, creates a risk that the same asset is pledged more than once, Data Center Dynamics reported.
Tenant risk has already hit the UK market. Microsoft ended its agreement to anchor Nscale's 50MW Loughton campus in Essex on Oct. 18, Baxtel reported, leaving the £2bn project without its only publicly announced customer.
The UK government counts data centers as a growth industry, while local opposition and waits for grid connections have delayed projects. Bloomberg cited Blackstone's £10 billion ($13.5 billion) project in north east England and Google's facility on the outskirts of London, part of a £5 billion UK investment. On Nov. 3, Brookfield Asset Management and the Qatar Investment Authority agreed to invest £2.5 billion ($3.4 billion) in a data center project with Drax Group. Baxtel reported that Drax supplies the land, the Selby station's 4GW grid connection and 2.6GW of dispatchable generation, while Radiant, a Brookfield-owned AI infrastructure platform, designs, builds and operates the compute at Drax Selby 1. No tenant has been named for the first phase, which Drax targets for operation in the first quarter of 2028.
Baxtel tracks 624 data center facilities in the United Kingdom, operated by 223 providers. The largest is Vantage's CWL13 campus in Wales at 80MW. England holds 527 of the facilities, with 42 under construction.
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