Rent, power and NOI per megawatt, and why the same building can show a 94.8 or a 65.7 per cent margin.
Rent revenue per MW is the rent per kW-month times 1,000 kW times twelve months, counted on leased critical IT capacity. At an illustrative wholesale rent of $105 per kW-month, one leased MW earns $1,260,000 of rent a year and about $1,194,000 of net operating income. Power billed through at cost can add another $558,000 of revenue per MW, but almost none of it reaches NOI, so it should be reported on its own line.
Worked in full in The Data Center Development Handbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Data centre revenue is quoted per kW-month because the tenant buys power capacity, not floor area. A hyperscale lease for 32 MW, a retail cage of 200 kW and a powered shell all reduce to the same unit, and the per-MW figure is what lenders, buyers and investment committees compare. Three things change the answer by far more than the rent itself: whether the MW is critical IT load or the utility connection, whether power is inside the revenue line, and whether the capacity is leased or merely built.
Rent per MW-year = rent per kW-month × 1,000 × 12 × share of IT capacity leased
Power revenue per MW-year = 8,760 hours × average IT load × PUE × power price
Excel: =Rent_kWm*1000*12*Leased and =8760*ITLoad*PUE*Price
The wholesale case is the 180 MW turnkey campus used throughout the book: $105 per kW-month net of power and $215 million of net operating income. The power and retail inputs are illustrative.
| Input | Value |
|---|---|
| Contracted IT capacity, campus | 180 MW |
| Wholesale rent, net of power | $105 per kW-month |
| Campus net operating income | $215m |
| Average IT draw as a share of leased capacity | 70% |
| Annual PUE | 1.30 |
| Power price, passed through at cost | $70 per MWh |
Step 1, rent. $105 × 1,000 kW × 12 = $1,260,000 per MW a year. On 180 MW that is $226.8 million, the campus's gross rent.
Step 2, net operating income. The campus earns $215 million, so NOI per MW is $215m / 180 = $1,194,444, a margin of 94.8 per cent on rent. Operating costs outside power are only $65,556 per MW because the lease is net and the hyperscale tenant owns and maintains its own servers and network.
Step 3, power. The tenant draws on average 70 per cent of its 1 MW: 8,760 × 0.70 = 6,132 MWh of IT energy. At a PUE of 1.30 the building takes 7,971.6 MWh, which at $70 bills $558,012.
Step 4, totals. Revenue including power is $1,818,012 per MW, of which power is 30.7 per cent. NOI is unchanged, so the margin on total revenue falls to 65.7 per cent. Nothing about the building got worse; the denominator changed.
| Line | $ per MW |
|---|---|
| Rent, $105 per kW-month | 1,260,000 |
| Power billed at cost | 558,012 |
| Total revenue | 1,818,012 |
| Operating costs excluding power | 65,556 |
| Net operating income | 1,194,444 |
The same MW earns very different amounts depending on what is sold. A powered shell, where the tenant builds and runs the mechanical and electrical plant, rents at $45 per kW-month on the book's campus and earns $92 million of NOI. Retail colocation charges more per kW, here an illustrative $180, but sells capacity in small pieces, carries far more staff and sales cost, and rarely sells the whole hall.
| Model | Rent per kW-month | Share sold | Rent per MW | NOI per MW |
|---|---|---|---|---|
| Powered shell | 45 | 100% | 540,000 | 511,111 |
| Wholesale turnkey | 105 | 100% | 1,260,000 | 1,194,444 |
| Retail colocation, 35% opex | 180 | 75% | 1,620,000 | 1,053,000 |
Retail looks 29 per cent richer than wholesale on rent per built MW and is 12 per cent poorer on NOI. Sold in full, the retail MW would bill $2,160,000, which is the figure that appears in sales decks and almost never in the operating account. How much of the wholesale figure a buyer is actually paying for under the signed term is a separate exercise, worked in how much of a data centre's price the lease covers.
| Rent per kW-month | 80% leased | 90% leased | 100% leased |
|---|---|---|---|
| $90 | 864 | 972 | 1,080 |
| $105 | 1,008 | 1,134 | 1,260 |
| $120 | 1,152 | 1,296 | 1,440 |
| $150 | 1,440 | 1,620 | 1,800 |
Each $15 of rent moves the figure by $180,000 per fully leased MW. Ten points of vacancy at $105 costs $126,000, nearly twice the wholesale operating cost line of $65,556, and almost all of it falls to NOI, because the fixed costs stay when the tenant does not arrive.
The book's campus, with every input on one sheet, is in the free workbook for this case.
At an illustrative wholesale rent of $105 per kW-month, fully leased, 100 MW of critical IT capacity earns $1,260,000 per MW, so about $126 million of rent a year before power. Pass-through power at 70 per cent load, a PUE of 1.30 and $70 per MWh would add roughly $558,012 per MW of revenue, almost none of it profit.
Wholesale leases and most market reports quote rent per kW of critical IT load, the capacity the tenant can draw for its servers. The utility connection is larger by the PUE: a 180 MW campus at 1.30 needs about 234 MW from the grid. Dividing rent by utility MW cuts $1,260,000 per MW to $969,231 without anything changing.
On a net hyperscale lease, operating costs outside power are small. The book's illustrative campus earns $215 million of NOI on $226.8 million of rent, 94.8 per cent. Retail colocation with an illustrative 35 per cent cost ratio earns about 65 per cent of rent, which is why its higher price per kW gives lower NOI per MW.
This article is one calculation from The Data Center Development Handbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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