Data center lease structures in Opportunity Zones

It can be, but not if the landlord merely enters into a triple-net lease. A Qualified Opportunity Zone Business (QOZB), the operating company a Qualified Opportunity Fund invests in, must be engaged in the active conduct of a trade or business. The final regulations treat the ownership and operation, including leasing, of real property as an active trade or business, but provide that merely entering into a triple-net lease with respect to real property is not.^1,3

A triple-net (NNN) lease is one where the tenant pays the property's taxes, insurance and maintenance in addition to rent and utilities. Commentary on the regulations points to the description in Notice 2019-07, issued under a different provision, of a lease where the tenant pays taxes, fees and insurance and is responsible for maintenance.^2,7 The OZ regulations do not define the term themselves, which leaves the label less important than the facts.

What do the regulation examples say?

• Not active: a landlord leases an entire building to a single tenant on a triple-net basis. It is not engaged in an active trade or business even though it keeps an on-site office with staff to handle issues under the lease.^3,5
• Active: a landlord leases part of a building triple-net and actively manages and operates the rest through on-site employees who meaningfully participate in management and operations. It is treated as active for the whole building.^3,4

Four structures cover most deals. These definitions reflect common industry usage rather than a legal standard.

Lease terms are generally longer than standard commercial leases. Digital Realty reported in its FY2023 10-K that its average remaining lease term across the portfolio was about five years as of December 31, 2023, a mix that includes shorter colocation contracts.⁸ Rents have risen sharply: JLL reports data center rents up nearly 70% since 2020.¹³ For the deal type with the most risk, see powered shell and triple-net data centers.

It is the textbook risk case. Commentary from Dentons in April 2026 highlights the triple-net issue for hyperscaler data center deals, and no authority addresses hyperscaler leases specifically.⁶ A single-tenant powered shell where the tenant pays all costs and runs the building matches the regulation's "not active" example closely.

Analysis: a landlord QOZB in a single-tenant deal can strengthen its position by providing real operating services through its own employees, such as critical facilities staff, power and cooling plant operation, physical security and remote hands, and by using a modified-gross lease in which the landlord bears operating responsibilities. Alternatively, the QOZB can operate the data center itself and sell capacity as a service. This is a fact-specific question for tax counsel.

Ownership decides which property counts. A QOZB must have at least 70% of the tangible property it owns or leases be qualified zone business property.¹ Equipment the tenant buys and owns, such as servers and, in a powered shell, the mechanical and electrical fit-out, is the tenant's property and sits outside the landlord QOZB's test entirely.

• Landlord-owned shell, substation and plant: counted by the QOZB if bought new and used in the zone.
• Tenant-owned IT and fit-out: outside the landlord's test. Tenant improvements made by a lessee are treated as purchased property in the tenant's hands.⁹
• QOZB-owned servers: count in both the numerator and the denominator and must be replaced with qualifying property as they age. The regulations apply the same owned and leased tangible property rules to servers as to the shell, power and cooling, with no rule written for data center equipment.¹¹

See servers, equipment and the Opportunity Zone rules and the QOZB 70% tangible property test.

Then the leased property rules apply. Leased tangible property can count as qualified zone business property if the lease was entered into after the statutory start date and is on market-rate, arm's-length terms. The original use requirement does not apply to leased property.^1,10

Related-party leases face extra limits: no prepayment of rent for more than 12 months, and, for previously used property, a requirement that the lessee buy an equal amount of qualifying property.¹⁰ Analysis: ground-leasing land from an unrelated owner on market terms can let the land count as qualifying leased property without tying up OZ equity in non-depreciable land, while the building the QOZB constructs on it is purchased property. See leased property rules for Opportunity Zone businesses and related-party rules.

Rent counts toward the test only if it comes from the active conduct of a trade or business in the zone. A QOZB must derive at least 50% of its gross income from the active conduct of a trade or business in the zone, with safe harbors based on hours of services, amounts paid for services, location of tangible property and management functions, and a facts-and-circumstances test.¹²

For a single-asset data center QOZB, nearly all income is rent or service fees from the facility, and the property is in the zone, so the location prong of the test is usually met. The weak point is the word "active": if the leasing is a mere triple-net lease, the business may not be an active trade or business at all, and every test that depends on that status is in doubt.³ That is why the lease structure must be settled before the QOF invests.

Decide the operating model first and draft the lease to match what the landlord actually does. OZ Data Centers favors structures in which the operating business itself runs the critical infrastructure, because those facts are easier to defend than a passive lease.

Confirm the structure with your tax adviser before signing, because rewriting a 15-year lease after the fund invests is rarely practical. For the broader picture, see data centers in Opportunity Zones: the complete guide.