Turnkey creates more value in absolute terms, but the shell earns almost the same yield on less than half the capital and none of the equipment risk.
On the same 180 MW site, turnkey data centre development earns a yield on cost of 10.86 per cent against 10.22 per cent for a powered shell. Turnkey creates $794 million of value on $1,980 million of cost, a 311 basis point development spread. The powered shell creates $327 million on $900 million, a 272 basis point spread. The turnkey premium is 64 basis points of yield for more than twice the capital.
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 →
A powered shell is a finished building envelope with utility power delivered to the pad. The tenant funds and owns the mechanical and electrical fit-out. A turnkey facility is fully fitted, commissioned and delivered ready for servers. Both are judged by the same test: yield on cost, meaning stabilised net operating income divided by total project cost, set against the exit capitalisation rate a stabilised buyer will accept.
The comparison only means something on identical dirt. The illustrative case is a 240-acre site with a dated path to 180 MW of IT load. The shell is costed at $5 million per MW, the middle of the $4 million to $6 million band. The turnkey campus is dense and liquid-cooled, costed at $11 million per MW, inside the $9 million to $12 million band. Rents are quoted per kilowatt of IT capacity per month: $45 for the shell, $105 net of power for turnkey.
| Line | Powered shell | Turnkey |
|---|---|---|
| Cost per MW ($ million) | 5 | 11 |
| Project cost ($ million) | 900 | 1,980 |
| Rent ($ per kW-month) | 45 | 105 |
| Gross rent ($ million a year) | 97.2 | 226.8 |
| Net operating income ($ million) | 92 | 215 |
| Yield on cost (per cent) | 10.22 | 10.86 |
| Exit cap rate (per cent) | 7.5 | 7.75 |
| Stabilised value ($ million) | 1,227 | 2,774 |
| Value created ($ million) | 327 | 794 |
| Development spread (basis points) | 272 | 311 |
Turnkey wins on every line that measures size. It earns 64 more basis points of yield on cost, a wider spread, and creates $794 million of value against $327 million. But it needs $1,980 million of capital against $900 million to do it. Both spreads sit inside the 200 to 400 basis point convention for development over stabilised exit cap rates. Neither is a bad deal on paper.
The shell yields nearly what turnkey yields because the expensive part of a data centre is not the building. In an illustrative $10 million per MW turnkey build, the shell itself is perhaps $900,000 per MW. The electrical scope is the largest single item at $3.5 million to $4 million per MW. Mechanical is next at $2 million to $2.5 million. Electrical and mechanical together are roughly sixty per cent of the build, closer to two-thirds with backup generation.
A powered shell leaves all of that to the tenant, and prices the rent accordingly. The shell rent of $45 per kW-month is a fraction of turnkey rent because the tenant is paying for the fit-out itself. The developer gives up rent in proportion to the capital it no longer spends. That is why the two yields on cost land within one percentage point of each other.
The exit cap rates differ too. The shell is capitalised at 7.5 per cent, turnkey at 7.75 per cent. A buyer of the shell income stream is buying a simpler asset with no equipment to obsolesce, and pays a slightly richer multiple for it.
The wider spread is payment for risks the shell developer never takes. Turnkey carries commissioning risk, which on a serious project is a months-long structured programme. It carries equipment lead-time risk: in the 2026 market, substation transformers in the 5 to 50 MVA range have quoted at 75 to 110 weeks, and medium-voltage switchgear at 52 to 80 weeks. It carries PUE performance obligations to the tenant. And it carries a capital structure that must survive the gap between spending everything and collecting anything.
That gap has a price. On the turnkey campus, a twelve-month energisation slip costs $94.8 million: $74.8 million of extra interest plus $20 million of extended general conditions, insurance and overhead. That is 12.0 per cent of committed equity, or $527,000 per MW.
The larger yield is not the better return by default. Turnkey adds 64 basis points of yield on cost for more than twice the capital, and a single twelve-month delay costs $94.8 million. That is close to a third of the entire value the shell creates. The shell has no commissioning risk, a shorter schedule and no exposure to the long-lead electrical equipment that sets most delays.
The choice turns on capital and capability, not on the headline margin. Turnkey captures the full spread but requires equipment procurement, construction risk and an operating capability. Powered shell sits between selling powered land and building turnkey, and is often the best risk-adjusted trade for a developer without an operating platform.
Every figure above is reproduced by a live formula in the companion workbook for The Data Center Development Handbook, where the three business models sit side by side and each reconciles to the printed chapter.
An all-in turnkey data centre build runs $9 million to $12 million per megawatt of IT capacity in illustrative terms, and a powered shell $4 million to $6 million. In a $10 million per MW turnkey project, electrical scope is the largest item at $3.5 million to $4 million per MW, and mechanical the second at $2 million to $2.5 million.
Yield on cost is stabilised net operating income divided by total project cost. The working convention is a development spread of 200 to 400 basis points above the stabilised exit cap rate. A turnkey campus at 10.86 per cent yield on cost against a 7.75 per cent exit cap carries a 311 basis point spread, inside that band.
A powered shell is a completed building envelope with utility power delivered to the pad, with the mechanical and electrical fit-out left to the tenant. Because the tenant funds the fit-out, shell rent is a fraction of turnkey rent: illustratively $45 per kW-month against $105, on a build cost of $5 million per MW against $11 million.
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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