Data Center Demand is Strong, Debt Markets are Selective
Interview with John Day of CleanArc Data Centers
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The largest data center projects have a huge debt advantage, as well as a potential exti disadvantage, says John Day, Chief Commercial Officer of CleanArc Data Centers.
Speaking with Cool Vector on the sidelines of the 2026 Pacific Telecommunications Council in Honolulu, Day shares front-line market intelligence about the debt “hiccup” in the digital infrastructure market favoring projects with investment-grade tenants. But Day wonders whether the largest data center projects will have trouble monetizing down the road.
Key takeaways from the interview:
Debt markets have tightened sharply for hyperscale construction financing, effectively freezing out non-investment-grade tenants despite robust underlying demand.
Power availability is the defining constraint shaping where and how fast data centers can be developed in 2026.
The same massive projects that attract large investors may ultimately be too big to exit cleanly.
CleanArc’s Tier 1 location strategy is a bet on proximity to fiber and peering exchanges
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Data Center Demand is Strong, Debt Markets are Selective
What are the biggest challenges facing the digital infrastructure market now?
John Day: The biggest challenges right now are dealing with some uncertainty in the debt markets. There has been a tremendous amount of debt issued to support construction financing to build these massive projects, and that’s been one of the more difficult things to navigate in the last 90 to 120 days.
There was just a ton of hyperscale development debt that flooded the market this past fall, and it’s kind of shut off the taps for all tenant-driven projects except for those with investment-grade tenants. Some of the newer entrants to the market that have been getting traction from a leasing standpoint are now struggling to get their deals financed because of this hiccup in the debt market. The thing I’m going to be tracking more closely is whether the debt markets start to come back and whether they’re willing to absorb more debt from non-investment-grade tenants.
That said, demand is still very, very healthy. There’s really no concern about demand continuing to outpace supply. It’s a very healthy market.
The other challenge, which is longer term, is figuring out the takeout for large investors. Investors want to put a lot of money to work, but eventually they need to pull their money out. The individual projects and the sizes of the platforms themselves are getting so big that a lot of investors are thinking, “How am I going to get my money back out in three years, five years, seven years?” So the scale is good, the demand is big, but it does create some interesting challenges you’ve got to figure out how to navigate.
Why is CleanArc focused on Tier 1 cities?
John Day: The definition of Tier 1 cities has probably started to expand a little from the old days when it was three or four. The primary reason we want to focus on Tier 1, or what we would call Tier 1 adjacent, is to give our tenants optionality as to what kind of workloads they put there.
There are some really interesting projects that I’m sure are going to be very successful in more rural locations, but we’re not sure longer term whether there’s a lot of optionality about what type of workload you’re going to put there. We think that always being close to the fiber and to the peering exchanges — and therefore metaphorically closer to the eyeballs — will give our tenants lots of options as to what they want to put in that data center, as applications, AI, and traditional cloud continue to evolve.
What will you be following in the power markets in 2026?
John Day: I think it’s going to be how we continue to attack the power availability problem. The federal government is doing some things to try to shake that up — they may be productive, they may be counterproductive. It’s hard to tell right now.
The utilities continue to wrestle with these massive load requests coming in, so they are changing their rules and changing their processes. Sometimes people are getting caught a little flat-footed — they’re not sure what kind of commitments to make from a timing or financial perspective when the circumstances around contracting for power keep changing.
What do we do with natural gas? Does it become more accepted? Do we need to get relief from emission standards in places where we need to deploy a natural gas solution but the air permitting currently wouldn’t allow it? The power acquisition piece and the power development piece — from both a capital, development, and regulatory perspective — are going to be central issues.
Is there a recurring theme to the inbounds you have been getting from partners and investors?
John Day: It really does go back to power. Where are we going to find power? How are we going to satisfy it? Do you have anything in this timeframe, in this particular market? I often simplify it for people I’m talking to by saying we really only sell three things: how many megawatts, where, and by when. That’s the constant theme.
Another theme is how we’re handling community opposition to data center development. That is becoming a bigger and bigger issue. Some data center companies are already starting to make proactive, positive changes — positive in the eyes of the communities where they’re developing — to try to make data center development more palatable. That’s definitely something we need to attack as well.
What makes you bullish about the future of the digital infrastructure industry?
John Day: The thing I’m most bullish about is the pervasive demand we see in the marketplace. The data center market, the digital infrastructure market, was a fantastic place to be even before this AI wave hit — and that has only poured gasoline on the fire in terms of demand.
Everything you do on your phone passes through a data center somewhere. The amount of data we’re creating and utilizing, from AI to more traditional sources — I just don’t see the demand abating for years. And if you’re on my side of the table, the developer side, the supply side of data center capacity, I just don’t see the supply side catching up with the demand side anytime in the near future.
