Case in point: In December 2025, Keppel DC REIT announced it would pay the final sum of $350 million to the sellers for an additional 10-year lease extension for the Keppel Data Centre Campus at Genting Lane. Of this, the land cost to be paid to the authorities is $9.9 million. Of course, the gross rental income, based on current rates, is likely to be $500 million for the period, say market observers.
For office and hotels, an extensive renovation could cost something like 20%–25% of the building value. For fully-fitted data centres, this could be as high as five to 10 times the building value, notes Benjamin Chow, Head of Private Assets Research for Asia at MSCI.
Where will that capital come from? You, the investor. And data centre REIT investors need to become more familiar with depreciation because they will be “topping up” the capex to keep these assets relevant.
Interestingly, NTT DC REIT, which was listed in July 2025, has set a new standard for pure-play data centre REITs. Unlike Keppel DC REIT and Digital Core REIT, NTT DC REIT’s 1HFY2026 financial statement for the six months to Sept 30, 2025, reported depreciation of US$16.27 million. When asked about its capex, Masayuki Ozaki, CFO of NTT DC REIT’s manager, confirmed in an earlier interview: “We’ve budgeted US$32 million over two years.”
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Going forward, Ozaki says maintenance capex is likely to be 5% to 8% of revenue. In 1HFY2026, NTT DC REIT’s revenue was US$49.52 million. “We do need to start reserving for replacement capex,” he acknowledges.
Different data centre infrastructures carry different depreciation. A battery lasts seven to eight years; generators can last as long as 40 years. If a generator is rarely used, it can last for even longer. “There’s an argument to be had that potentially the useful life is actually longer. So we have to take into account all these practical elements versus what an accounting standard might tell you,” says Ozaki.
All data centres require infrastructure. The landlord or owner is responsible for the infrastructure and its associated depreciation for colocation and fully-fitted data centres, while the tenant pays for the infrastructure in core and shell data centres.
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Colocation and fully-fitted data centres are the main assets in Keppel DC REIT (more than 90% of gross rental income), NTT DC REIT (51.8% monthly base rent with the remainder from hyperscalers) and Digital Core REIT (more than 90% of annualised rent). Only Mapletree Industrial Trust’s data centre portfolio in North America is mainly core and shell.
“Obsolescence in data centres is not a new trend. Many investors, both new-to-market and seasoned, have always faced this choice, particularly when operating turnkey/fully-fitted data centres, where the owner bears the cost for many components of data centre infrastructure,” Chow says.
What is new is the increasing focus on data centre investments, which have made their way into S-REITs, which revalue their assets at least once a year (rather than depreciate them).
“S-REITs have historically been industrial-focused before turning towards incorporating data centre assets more recently. Industrial also happens to be the real estate sector that requires the least amount of capex, in comparison with office, retail, hotels, etc. The risk, therefore, is if some of these new entrants don’t fully internalise what it means for 75% or 80% of your assets’ value to be depreciating towards zero,” adds Chow.
