The Bank of England has begun questioning lenders about loans extended for data center projects that lack pre-arranged tenants. This inquiry is part of a broader effort to assess the risks associated with financing in the data center industry, according to sources familiar with the matter.
The focus is on so-called speculative financing, where construction starts before any tenant commits to leasing the completed facility. Such loans are considered riskier due to the uncertainty of securing future occupants.
The central bank's move highlights growing concerns over potential vulnerabilities in the lending practices for data center developments. The industry has seen significant growth, but the lack of guaranteed income streams from some projects raises red flags for regulators.