Ground Leases for Data Centers: Terms, Rent, Financing and Reversion

A ground lease is a long-term lease of land only. The tenant finances, builds, owns and operates the improvements during the term; the landowner keeps the fee title and collects ground rent. Safehold, a listed company that invests in ground leases, reports that base terms typically range from 30 to 99 years, often with tenant renewal options, and the tenant is generally responsible for operating expenses, maintenance, real estate taxes, insurance, development costs and capital expenditures.¹

Developers usually prefer to own data center land outright or control it with an option, for reasons covered in buy, option or lease. Ground leases show up when the owner will not sell: a family that wants to keep the land, a university, a city, a federal agency or an economic development authority. They also show up when a developer wants to put less capital into land before power and tenants are secured.

Several data center ground leases are now public through securities filings and agency announcements, and they show how varied the terms are:

The term has to cover the financing and the useful life of what the tenant builds. Lenders want the lease to run well past the maturity of any leasehold loan, and the remaining term, including tenant-only extension options, is one of the first things they check.³ A traditional appraisal rule of thumb treats a lease with less than 20 years remaining as generally unsuitable for mortgage financing.⁵ That is why data center tenants ask for long initial terms plus extensions rather than short renewable leases.

Rent commencement is where data center leases differ most from other commercial ground leases. Power and entitlement timelines are long, so tenants push to defer rent until they are ready to build. In the Potter County lease, the 30-year term runs from the rent commencement date, base rent on each site area begins only when construction starts on that area, and the lease does not require construction to begin by any particular date.² Under the Texas Tech lease, the term on the main site commenced in September 2025, but the term on a 713-acre tract still awaiting transfer from a federal agency had not begun as of June 30, 2026.⁶

For a landowner, deferred commencement means the land can be tied up for years before full rent flows. Ask for pre-commencement rent or option-style payments, a firm outside date for commencement, and a right to terminate if it is missed. The option agreement guide covers similar protections in the option context.

Data center ground rent is commonly priced per acre per year, sometimes with different rates for different uses on the same tract. The Potter County lease sets $6,000 per acre per year on the data center area and $1,000 per acre per year on the solar area.² Other leases set a single monthly or annual figure; the City of Denton lease, for example, is about $53,950 a month.⁴ What a given parcel can command depends on the same factors that drive sale value, covered in what drives data center land value.

Escalation clauses come in a few forms. Safehold describes contractual increases set as a fixed percentage, tied to the consumer price index, or both, with percentage rent in some leases.¹ The Denton lease adjusts every two years by CPI-U for the Dallas–Fort Worth area.⁴

Older ground leases often used fair market value resets and percentage rents; newer institutional leases have moved toward predictable fixed and CPI-based increases.¹⁰ The reason is financing. Lenders care most about whether rent is predictable, and many will not fund leasehold improvements unless rent is prepaid or can be determined for the whole term.⁵ A landowner who insists on market resets may get a lease the tenant cannot finance.

A data center tenant will borrow against the leasehold and the buildings on it. A financeable ground lease either subordinates the landowner’s fee interest to the tenant’s mortgage, which is less common, or includes protections for the leasehold lender.³ Those protections typically include:³

• An express right for the tenant to mortgage the leasehold without landowner consent.
• Notice to the lender of any tenant default and a reasonable chance to cure before the lease can be terminated.
• A right for the lender to obtain a new lease on the same terms if the ground lease ends.
• Few personal covenants that only the original tenant could perform, since those can create defaults a lender cannot cure.
• A term that runs well past loan maturity, and lender rights to insurance and condemnation proceeds.

Subordination deserves special care. If the landowner subordinates the fee, a foreclosure on the tenant’s loan can reach the land itself. An unsubordinated lease with strong lender protections is the usual middle ground. Where the landowner has its own mortgage on the fee, the tenant will want a subordination, non-disturbance and attornment agreement (SNDA) so a foreclosure on the land does not cut off the lease; one law firm notes that an SNDA is an executory contract that a bankrupt fee lender may be able to reject.¹¹

In a classic ground lease, the landowner keeps the reversionary interest and the improvements pass to the landowner when the lease expires.⁵ The landowner also typically has the right to regain possession and take ownership of the buildings if the lease is terminated for the tenant’s default.¹

For a data center, the reversion is less simple than it sounds. A 50-year-old data hall may have little value, and the site may hold diesel generators, fuel tanks, battery systems, cooling equipment and a high-voltage substation. Some of that equipment may belong to a utility under a separate easement, and some may be financed or leased by the tenant. Clear lease terms should cover:

• Whether the landowner can require removal of improvements and restoration of the land, or must accept them as they stand.
• Security for removal costs, such as a bond or reserve funded in the final years of the term.
• Which equipment is a fixture that reverts and which is tenant property that must be removed.
• Environmental condition at surrender, including fuel storage and any releases; a baseline Phase I ESA at signing helps.
• Treatment of utility easements and substations that may outlast the lease.

If the lease includes a purchase option, the reversion may never arrive. The Potter County lease, for example, gives the tenant an option to buy the data center area at $100,000 per acre before on-site power generation begins commercial operation, or $135,000 per acre afterward.²

Public landowners often cannot or will not sell, so long-term leases are their usual tool. In September 2025, the Department of Energy issued a request for applications for long-term leases of Idaho National Laboratory land for AI data centers.¹² In July 2026, the National Nuclear Security Administration selected a developer to negotiate a phased lease for an AI data center and on-site generation at the Savannah River Site, while stressing that the selection was not a final lease award.⁹ The federal land guide covers those programs.

Universities and cities have also leased land for data centers. The Texas Tech University System lease to Fermi runs 99 years, with rent that rises over the first five years and then by a fixed 3% a year,⁶ and the City of Denton leases land to Core Scientific under a lease tied to a power purchase agreement.⁴

A different kind of lease appears in incentive deals. In many states, a development authority holds title and leases the project back to the company so that the company pays negotiated payments in lieu of taxes. In Butts County, Georgia, property for Amazon’s planned campus of up to about 12 data centers remains titled in the Development Authority’s name, and the PILOT payments equal the ad valorem taxes the project would otherwise pay.¹³ These are financing and tax structures more than land deals; see property taxes on data center projects and the PILOT glossary entry.

A ground lease can pay a landowner far more over its life than a sale, while keeping the land in the family or institution. It also ties the owner’s income to one tenant’s project for decades. The Fermi campus on Texas Tech land shows the risk: in December 2025 a prospective tenant ended an agreement to provide up to $150 million toward construction, and in April 2026 the company’s chief executive departed.⁷ A landowner in a lease carries that kind of project risk without the upside of owning the business.

Tax treatment of rent and sale proceeds differs and depends on the owner’s situation. Have a tax adviser model both paths before negotiating, and see selling or leasing land to a data center developer for the broader decision.

1. 01Confirm the land can support the use. A lease is only as valuable as the power, water and zoning behind it; a site review or our screening tools can frame that early.
2. 02Pin down rent commencement: pre-commencement payments, a firm outside date and a termination right if it is missed.²
3. 03Choose escalations that survive financing: fixed steps, CPI with a sensible cap, or both.¹⁵
4. 04Agree to standard lender protections, but resist fee subordination unless you are paid for the risk.³
5. 05Write the reversion: removal and restoration rights, security for removal, fixtures, environmental condition and utility facilities.
6. 06Review the tenant’s credit, parent-company support and conditions to commencement, and have a real estate attorney and tax adviser review the full draft.⁶