Data centres as hybrid real estate assets: key legal complexities
05 May 2026
In today’s digital economy, data centres have become strategic pieces of infrastructure and constitute a rapidly growing real estate asset class driven by the ever-increasing need for secure and large-scale data storage. This evolution is illustrated by the scale of the world’s largest data-centre facilities, such as those of Equinix and NTT Global Data Centres, which demonstrate the sector’s strategic importance. While offering attractive opportunities for investors, their hybrid nature combining real estate, energy and technology aspects raises legal, regulatory and operational complexities.
For investors, developers and lenders, a data centre transaction entails a distinctive combination of legal questions that usually go beyond those encountered in conventional real estate deals. The following overview highlights the most significant of these considerations, from asset classification and planning constraints to VAT structuring and foreign investment screening.
REAL ESTATE CONSIDERATIONS
A data centre is a functionally integrated infrastructure whose value lies in operational continuity. While the building itself is undoubtedly immovable, the key legal question concerns the qualification of its technical components: which components become immobilised, on what legal basis, and what consequences this has for investors, lenders and operators.
Data centres generally operate under four models, each defined by specific ownership structures and infrastructure management models:
Enterprise data centres: owned and operated by a single company for its internal needs, which assumes full responsibility for maintaining its IT infrastructure.
Managed data centres: the owner outsources the centre’s management and maintenance to an external service provider. The company may lease rather than own its IT components.
Shared data centres: a company rents space within a data centre owned by another entity (colocation). The essential infrastructure is provided, but the tenant is responsible for its own IT components.
Cloud data centres: the company’s data is stored by cloud service providers (Amazon Web Services, IBM Cloud, Microsoft Azure…), without it being tied to a specific physical facility owned by the user. Cloud providers themselves, however, operate large-scale physical data centres.
What sets data centres apart is the extent to which their economic function depends on technical components — to a degree not found in conventional real estate. A data centre relies on essential components such as the building’s structural envelope, its power supply and electrical distribution systems, cooling and thermal installations, safety and fire-protection components, and passive or active digital infrastructure.
The heterogeneous nature of these components has a direct legal consequence: a data centre cannot be viewed as a uniform immovable asset, and determining whether specific components qualify as movable or immovable requires careful assessment of both the physical setup and the contractual structuring.
The building envelope clearly qualifies as immovable by incorporation. Several major technical elements such as cooling systems, fire safety installations and structural electrical systems may also qualify as incorporated insofar as they are necessary to the physical or functional substance of the building, even if they are technically removable.
By contrast, active IT equipment (servers, switches, storage devices), unfixed racks or mobile cooling units typically remain movable: they serve operational purposes rather than the intrinsic functioning of the building. Certain components that are not themselves incorporated may nevertheless be drawn into immobilisation if they are functionally inseparable from an incorporated system (e.g. integrated backup-power modules).
Lastly, qualification as an accessory requires that the owner of the component also be the owner of the principal immovable — a condition frequently unmet in data centre operational models.
Because the qualification of technical components as movable or immovable depends on criteria such as physical attachment, functional necessity and ownership, contractual structuring can play a decisive role in determining outcomes. In practice, the qualification of key components directly affects the scope of real estate security interests, enforcement scenarios and insolvency risk allocation. For instance, core infrastructure related to energy or cooling treated as immovable by incorporation will fall within mortgage security, whereas movable components may fragment security packages and weaken the bankability of the asset.
The classification of equipment as movable or immovable also has direct VAT consequences, as discussed below.
PUBLIC LAW AND ENVIRONMENTAL IMPLICATIONS
The development of a data centre begins with identifying a suitable location — a step that involves navigating a complex web of urban planning requirements. Data centres typically require large plots capable of accommodating substantial building footprints or vertical constructions, and proximity to a power substation is often essential.
Once a potential site has been identified, regional, provincial and municipal zoning designations and regulations must be carefully reviewed to confirm that data centre operations are permitted at that location. Because many zoning plans predate the rapid expansion of the data centre sector over the past decade, it is not always easy to determine whether a data centre falls within a given zoning category. Questions frequently arise as to whether data centres qualify as SMEs, services, general industry, environmentally sensitive industries, mixed-use economic zones, etc. A case-by-case assessment is therefore required for each project.
In addition to a building permit, constructing and operating a data centre will typically require an environmental permit — or, depending on the region, an integrated permit combining both approvals. Technical installations such as backup power systems or fuel storage facilities are critical to ensuring a data centre’s operational continuity, and many of these installations will themselves trigger permit requirements. Permits are often subject to strict conditions relating to fire safety, emissions, noise and water consumption.
Data centres generate considerable heat and therefore require efficient cooling systems, which in turn drive high energy consumption and water use. Given these intensive resource demands, data centres are subject to ongoing regulatory oversight throughout their operational life cycle. At the European level, the Energy Efficiency Directive (EED) requires large data centres with an IT capacity of 500 kW or more to report annually on key energy performance indicators such as Power Usage Effectiveness (PUE), Water Usage Effectiveness (WUE), renewable energy share and waste heat recovery. The European Commission is currently developing a “data centre energy efficiency package” expected later in 2026 that will introduce a labelling scheme providing information on energy and water consumption as well as renewable energy usage.
Energy regulation is an additional key constraint. Data centres are very power-intensive, and access to sufficient and reliable grid capacity is critical. Grid congestion, connection queues and curtailment regimes can delay projects or limit usable capacity. Conducting an early assessment of grid connection agreements, capacity reservations and the regulatory framework governing on-site generation and storage is, therefore, essential.
FOREIGN DIRECT INVESTMENT REGULATION
Within the European Union, data centres are increasingly regarded as strategic assets and critical infrastructure. This is also reflected in the Belgian Foreign Direct Investment regulation, according to which data centres fall under three different categories simultaneously: “digital infrastructure”, “data processing / data storage” and “sensitive information” – all of which are high-priority sectors for national security review.
As a result, any investment aiming to establish or maintain a direct and lasting link between a non-EU investor and a company whose activity is linked to data centres – whether through the acquisition of shares of the company operating the data centre, the acquisition of data centre-related assets or even the acquisition of land on which a data centre is built – may qualify as a foreign direct investment that could potentially impact public order, security, and strategic interests of the concerned regions. Such qualification triggers an obligation for an ex-ante notification under the Belgian Foreign Direct Investment regulation. This procedure is important to take into account, as it can have a significant impact on the timing of the transaction and content of the transaction documentation.
VAT IMPLICATIONS
Given the scale of investment involved, a detailed VAT analysis at the earliest stage of a data centre project is essential to ensure that VAT remains as neutral as possible — i.e. a mere cash-flow item rather than an irrecoverable cost — throughout the project’s life cycle.
During the construction and development phase, data centre projects are typically developed through a dedicated SPV, whose timely VAT registration – possible before any turnover is generated, provided the SPV can demonstrate an intention to carry out taxable supplies – is a critical first step enabling the deduction of input VAT on construction costs as invoices are received, thereby avoiding significant VAT prefinancing. This requires that the intended downstream activity (taxable lease, colocation, hosting) qualifies for full deduction and that the conditions of any VAT option for letting are carefully observed.
The VAT treatment of each technical component must also be assessed: equipment that becomes part of the immovable property is treated as a service connected with that property, taxable where the data centre is located regardless of the supplier's establishment. Movable equipment (servers, switches, unfixed racks) follows the usual place-of-supply rules for goods. Where a domestic reverse-charge mechanism applies, the SPV self-accounts for VAT, further reducing cash-flow exposure. Equipment sourced from outside the EU may be subject to customs duties (a definitive, irrecoverable cost) making correct tariff classification and the use of preferential trade arrangements essential. Deferred accounting schemes such as the “ET 14.000” licence in Belgium allow the SPV to report and simultaneously deduct import VAT on its periodic return rather than pay it.
Once the data centre is operational, the VAT treatment of its revenues depends on the nature of the supply made to the customer. Three main models can be distinguished:
Real estate lease: the owner grants a passive right to use the building and the transaction qualifies as a letting of immovable property, in principle VAT-exempt, resulting in irrecoverable input VAT on all attributable costs, unless the parties opt for VAT taxation of the lease (option available in most Member States, subject to varying conditions).
Lease of capacity: colocation and similar arrangements (combining rack space with power, cooling, connectivity, security and monitoring capacities) generally qualify as a composite taxable supply of services rather than a letting, provided the contractual arrangements genuinely reflect a capacity-based service (SLA commitments, power density, managed access) instead of a real estate lease. The operator’s input VAT is in principle fully deductible.
Self-exploitation (owner-operator model): the owner operates the data centre for its own business (delivering cloud, managed hosting or SaaS services), therefore there is no lease nor separate supply of space. The data centre is an operational asset producing taxable outputs, and input VAT on all costs is in principle fully deductible without any option to tax.
On exit, a sale of shares in the SPV holding the data centre is in principle outside the scope of VAT (or exempt), meaning no VAT is charged on the purchase price and no real estate transfer tax is triggered in most jurisdictions, making this the most common exit route. By contrast, a direct sale of the data centre as an asset constitutes a supply of immovable property, which may be subject to VAT (typically where the building is still “new” for VAT purposes) or to real estate transfer taxes, potentially triggering negative VAT adjustment or “revision” obligations in respect of input VAT previously deducted during the construction and operational phases.
Authors: Ylenia Alonso Murciego, with the contribution of Ive Serneels, Olivier Drooghmans, Anthony Macri (PwC Belgium) and Lionel Wielemans (PwC Belgium)
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