What is the MOIC sensitive to in the context of data centers?

The Multiple of Invested Capital (MOIC) is primarily sensitive to the speed of tenant absorption in the context of data centers because this metric reflects how quickly a data center is able to lease its available space to tenants. A faster tenant absorption rate indicates strong demand for space, which can lead to higher rental income and, consequently, a more favorable MOIC.

When tenant absorption is rapid, it can significantly enhance the financial performance of a data center investment. This usually results in improved cash flows due to more leases being signed in a shorter amount of time, ultimately maximizing the returns on the initial capital invested.

Understanding the dynamics of tenant absorption is crucial for assessing the viability of a data center project. If tenants are absorbed quickly, it can lead to higher occupancy rates and reduced vacancy risks, which in turn positively affects valuations and potential exit strategies for investors.

In comparison, interest rates, construction costs, and market demand fluctuations can impact investments, but they play different roles. Interest rates affect financing costs, construction costs relate to the capital needed for development, and market demand fluctuations influence the overall demand environment. However, the direct and immediate impact on the MOIC is largely tied to how quickly tenants can be secured.