DC colocation vs. Build-to-Suit transactions: Yield comparison Germany/Poland

The European data centre market in transformation

The data centre market is one of the most dynamic segments of European commercial real estate. Driven by cloud migration, AI workloads, and data sovereignty requirements, demand for computing capacity is growing at a pace that hardly any other asset class can match.

According to CBRE, the European data centre supply reached approximately 5,000 MW of IT capacity by end of 2024, with growth rates exceeding 20% per annum (CBRE, 2024). JLL estimates the European investment volume in data centres for 2024 at approximately €15–18 billion (JLL, 2025).

For investors, one central question arises: Which transaction structure – colocation or build-to-suit – offers the more attractive risk-return profile? And how do yields differ between the established German market and the emerging Polish market?

At Prime East, we support investors, developers, and operators in precisely this analysis. In this article, we provide a structured comparison.

Definition of terms: Colocation vs. Build-to-Suit

Colocation (Colo)

In colocation data centres, an operator leases rack space, power, and connectivity to multiple tenants. The operator bears the operational risk and responsibility for occupancy, SLA management, and technical operations.

Characteristics:

• Multi-tenant structure
• Shorter lease terms (typically 3–5 years)
• Higher operational complexity
• Greater dependence on location and connectivity

Build-to-Suit (BTS)

A build-to-suit data centre is purpose-built for a single hyperscaler or large-scale user (e.g., AWS, Microsoft Azure, Google Cloud, Meta). The user specifies the technical requirements; the developer constructs and leases on a long-term basis.

Characteristics:

• Single-tenant structure
• Long-term leases (typically 10–20+ years)
• Lower vacancy risk
• Tenant creditworthiness as core security

Yield comparison: Germany

Frankfurt am Main – Europe’s No. 1 Data Centre Hub

Frankfurt is the largest data centre market in Europe with over 800 MW of IT capacity (Cushman & Wakefield, 2024). The high density of internet exchanges (DE-CIX), carriers, and cloud on-ramps makes the location the preferred target for colocation operators and hyperscalers alike.

Colocation transactions (Frankfurt & surrounding area)

Metric	Range
Net Initial Yield	4.50% – 5.50%
Average Lease Term	3 – 5 years (average)
Typical Transaction Size	€30 – 150 million
Cap Rate Compression (2020–2024)	approx. 100–150 bps
Risk Profile	Medium to high (multi-tenant, re-letting risk)

The low yields in Frankfurt reflect the status as a Tier 1 location with high liquidity. Investors accept lower returns in exchange for market depth and fungibility.

Build-to-Suit Transactions (Germany overall)

Metric	Range
Net Initial Yield	5.00% – 6.25%
Lease Term	10 – 20 years
Typical Transaction Size	€80 – 500+ million
Tenant Creditworthiness	Investment Grade (Hyperscaler)
Risk Profile	Low to medium (long-income, single-tenant risk)

Observation: Despite longer terms and lower vacancy risk, BTS yields in Germany are only moderately above colo yields – an indicator of the strong investor demand for long-term, creditworthy cash flows in the 2024/2025 interest rate environment.

Further German locations: Berlin, Hamburg, NRW

Secondary markets such as Berlin, Hamburg, and the Rhine-Ruhr area are gaining importance, particularly for BTS projects. Yields here are typically 50–100 bps above Frankfurt, reflecting a premium for lower connectivity density and market maturity (Savills, 2024).

Yield comparison: Poland

Warsaw – CEE’s rising data centre market

Warsaw has established itself over the past five years as the most important data centre location in Central and Eastern Europe (CEE). With currently approximately 120–150 MW of IT capacity and a pipeline expected to double by 2027, the market is increasingly attracting international operators and investors (Cushman & Wakefield, 2024).

Growth drivers in Poland:

• EU data protection requirements (data localisation)
• Lower energy costs compared to Western Europe
• Growing cloud adoption rate in CEE
• Availability of skilled workforce and land
• Google, Microsoft, and AWS with existing or planned regions in/near Poland

Colocation transactions (Warsaw & Surrounding Area)

Metric	Range
Net Initial Yield	6.50% – 8.00%
Average Lease Term	3 – 5 years
Typical Transaction Size	€10 – 60 million
Market Maturity	Growing, limited transaction evidence
Risk Profile	Medium to high (market development, tenant mix)

Build-to-Suit transactions (Poland Overall)

Metric	Range
Net Initial Yield	7.00% – 9.00%
Lease Term	10 – 15+ years
Typical Transaction Size	€30 – 200 million
Tenant Creditworthiness	Investment Grade to strong Sub-IG
Risk Profile	Medium (country risk, but strong tenant)

Observation: The yield spread between Poland and Germany amounts to approximately 200–250 bpsfor colo transactions and approximately 200–300 bps for BTS transactions. This premium compensates investors for lower market liquidity, currency risks (PLN vs. EUR, although EUR-denominated contracts are increasingly common), and general CEE country risk.

Direct comparison at a glance

Criterion	DE Colo	DE BTS	PL Colo	PL BTS
Net Initial Yield	4.50–5.50%	5.00–6.25%	6.50–8.00%	7.00–9.00%
Yield Spread vs. DE	–	–	+200–250 bps	+200–300 bps
Lease Term	3–5 yrs	10–20 yrs	3–5 yrs	10–15+ yrs
Market Liquidity	High	High	Limited	Low to medium
Tenant Credit	Diversified	AAA/AA	Diversified	AA to BBB
Energy Costs	High	High	Medium	Medium
Land Availability	Constrained	Constrained	Good	Good
Regulatory Maturity	High	High	Growing	Growing

Strategic implications for investors

Core investors → German BTS

For institutional investors seeking stable, long-term cash flows with minimal management effort, German BTS transactions with hyperscaler tenants remain the gold standard. Yields may be compressed, but the risk profile is comparable to prime logistics or office investments – with significantly stronger structural demand growth.

Core-Plus / Value-Add → Polish BTS

Polish build-to-suit transactions offer an attractive yield premium combined with long-term cash flow security. Particularly when the lease is EUR-denominated and tied to a hyperscaler or large corporate user, the risk profile approaches the German market – at 200+ bps higher returns.

Opportunistic → Polish colocation

The Polish colo market is in a growth phase reminiscent of the German market 8–10 years ago. Operationally experienced investors who can manage platform risks will find yields here that are no longer achievable in Western Europe. However, the risks (occupancy, tenant mix, regulatory development) require active asset management.

The BTS-Colo yield gap

Interestingly, the yield difference between colo and BTS within each country is relatively small:

• Germany: approx. 50–75 bps
• Poland: approx. 50–100 bps

This suggests that the market may currently be insufficiently pricing the operational risks of colocation – or that investors are betting on the higher value creation potential upon colo exits.

Market outlook 2025–2027

Germany

• Yield stabilisation following the compression phase of 2020–2023
• Increasing scarcity of power and land in Frankfurt driving development to secondary cities
• Rising regulatory requirements (Energy Efficiency Act, waste heat utilisation) increasing development costs
• Expected yield range 2027: Colo 4.25–5.25% | BTS 4.75–5.75%

Poland

• Strong demand growth driven by hyperscaler expansion into CEE
• Google Cloud region in Warsaw as a catalyst
• Increasing professionalisation of the operator market
• Potential yield compression of 50–100 bps by 2027
• Expected yield range 2027: Colo 5.75–7.00% | BTS 6.25–8.00%

Poland offers the more compelling risk-adjusted return

For investors willing to look beyond established Western European markets, Poland currently offers one of the most attractive yield profiles in the European data centre market. Build-to-suit transactions with creditworthy tenants in particular combine:

Attractive yields (7–9% NIY)
Long-term cash flow security (10–15+ years)
Structural demand growth (cloud, AI, data localisation)
Convergence potential (yield compression towards Western European levels)

At the same time, Germany remains indispensable as a liquid, transparent core market for institutional portfolios focused on stability and benchmark conformity.

The optimal strategy? A complementary approach that combines German core positions with Polish yield-play investments.

Sources

• CBRE (2024). European Data Centre Market Report H2 2024. London: CBRE Research.
• JLL (2025). Data Centre Investment Outlook Europe 2025. Frankfurt: JLL Research.
• Cushman & Wakefield (2024). European Data Centre Report Q4 2024. London: C&W Research.
• Savills (2024). European Data Centres – Spotlight Report. London: Savills Research.
• Knight Frank (2024). Global Data Centre Report 2024. London: Knight Frank Research.
• DC Byte (2024). European Data Centre Market Analytics. London: DC Byte.
• Eurostat (2024). Energy Price Statistics – Electricity Prices for Non-Household Consumers. Luxembourg: Eurostat.
• Bundesnetzagentur (2024). Monitoringbericht 2024 – Energie. Bonn: Bundesnetzagentur.
• Polish Investment and Trade Agency (PAIH) (2024). Data Centre Sector in Poland – Investment Guide.Warsaw: PAIH.
• Uptime Institute (2024). Global Data Center Survey 2024. New York: Uptime Institute.
• Synergy Research Group (2024). Hyperscale Data Center Capacity – European Market Update. Reno: Synergy Research.
• Structure Research (2024). European Colocation Market – Quarterly Update Q4 2024. Toronto: Structure Research.