Yield on cost (YoC)

Yield on cost (YoC) is a real estate development metric that measures a data center's projected stabilized net operating income (NOI) as a percentage of its total development cost, including land, powered shell, electrical and mechanical infrastructure, and fit-out combined. It differs from a cap rate, which divides NOI by a property's purchase or market price rather than its cost to build; developers compare YoC against prevailing market cap rates to judge whether ground-up development creates a 'development spread' over simply acquiring a stabilized asset. This spread matters acutely in data centers because acquisition cap rates have compressed as demand has outstripped supply — CBRE reported North American data center vacancy at a record-low 1.6% in H1 2025, with Class A cap rates trading only 100-150 basis points above the 10-year Treasury yield. In this environment, YoC is highly sensitive to power procurement costs, prelease commitments, and construction timelines.