Powered Shell vs Turnkey: Data Center Development Models Compared

Powered shell and turnkey are the two dominant data center development models, and they split the capital and control tradeoff in opposite directions. A powered shell delivers a building with utility power and fiber connectivity for roughly $10-25 per square foot, leaving the tenant to design, fund, and own the critical infrastructure inside. A turnkey facility costs several times more per square foot — historical Digital Realty pricing put it near $163 per square foot — because the landlord builds and owns the full power and cooling chain, ready for the tenant to plug in servers.

Key takeaways

• Powered shell = building + power + fiber, nothing else. The landlord delivers utility interconnection and a structurally ready envelope; the tenant installs generators, UPS, switchgear, and cooling.
• Turnkey = fully built, ready to plug in. The landlord owns and maintains all critical infrastructure; the tenant adds only servers, racks, and networking.
• Cost gap is roughly 6-7x on a per-square-foot basis in historical rate-card comparisons ($24 vs. $163/sq ft), though current pricing is usually quoted per kW or per MW instead.
• Shell-and-core construction averages $11.3 million per MW globally in 2026, up from $7.7 million in 2020 — before any tenant fit-out is added.
• Hyperscale build timelines run 18-24 months in 2026, stretched from roughly 12 months a few years earlier by switchgear and permitting lead times; turnkey suites add commissioning time on top.
• Powered shell shifts capital risk to the tenant, which is why it is almost exclusively a hyperscale and large-enterprise structure, not a retail colocation product.
• Build-to-suit is turnkey’s bespoke sibling — a single-tenant facility built to exact specification, with the landlord still owning critical infrastructure.

For live pricing benchmarks by market, see the colocation price index and the data center catalog.

What “powered shell” actually means

A powered shell is a finished building envelope — walls, roof, floor loading, structural capacity for generators and cooling equipment — with a utility interconnection agreement in place and fiber pathways to the property line. What it does not include is the critical infrastructure layer: no UPS, no generators, no chillers or CRAH units, no switchgear beyond the utility meter, and no raised floor or white space fit-out. The tenant designs, procures, and installs all of that itself, then owns and maintains it for the lease term.

This matters most for hyperscalers and large AI tenants who want a specific electrical topology (2N vs. N+1), a specific cooling architecture (direct-to-chip liquid cooling for high-density GPU racks vs. traditional air), or vendor relationships the landlord’s standard design would not accommodate. Renting a shell and building the inside lets the tenant match infrastructure to workload instead of adapting workload to a landlord’s generic spec — a distinction covered in more detail in our liquid cooling guide.

What “turnkey” actually means

Turnkey is the inverse allocation of scope. The landlord funds and builds the entire facility — envelope, power distribution, UPS, generators, cooling plant, and often the raised floor and white space — and owns and maintains that critical infrastructure for the life of the lease. The tenant’s only capital outlay is IT equipment: servers, storage, networking gear, and racks. This is the default model for retail and most wholesale colocation, priced per rack or per kW rather than per square foot, and it is what the majority of the colocation pricing guide describes.

Build-to-suit is turnkey’s single-tenant, bespoke variant: the landlord constructs a facility to one tenant’s exact electrical, mechanical, and layout specification rather than a standardized design, but still owns and maintains the critical infrastructure afterward. It sits at the high-customization end of the turnkey spectrum, not as a third, separate category.

Side-by-side comparison

Dimension	Powered shell	Turnkey
Landlord scope	Building envelope, utility power to the property, fiber pathways	Full facility: envelope, power, cooling, often white space
Tenant scope	Generators, UPS, switchgear, cooling, IT fit-out	IT equipment only (servers, racks, networking)
Ownership of critical infra	Tenant	Landlord
Typical pricing basis	$/sq ft, NNN lease	$/kW/month or $/MW, all-in
Historical rate example	~$24/sq ft (Digital Realty)	~$163/sq ft (Digital Realty)
Upfront capital burden	Landlord: low; tenant: high	Landlord: high; tenant: low
Typical tenant	Hyperscalers, large AI/enterprise deployments	Retail and wholesale colocation tenants
Design flexibility	High — tenant controls topology and cooling	Low to moderate — bound by landlord’s standard design
Delivery speed to occupancy	Faster to hand-off; tenant fit-out adds time afterward	Slower to hand-off; ready to occupy on delivery

Cost breakdown by model

Construction cost is now most commonly benchmarked per megawatt of critical IT capacity rather than per square foot, since power density — not floor area — is the binding constraint for AI-era deployments.

Build type	Cost per MW (2026 benchmark)	Notes
Shell-and-core (global average)	$11.3 million	Up from $7.7 million in 2020, roughly 7% annual rise
Standard hyperscale/build-to-suit turnkey	$10-12 million	Mainstream 2026 range before buyer-specific scope
AI-optimized facility (high density + liquid cooling)	$20 million+	Adds power density and cooling plant premium
Tenant AI fit-out inside a powered shell	Up to $25 million	On top of shell-and-core figures — this is the tenant’s own capital outlay

Source: Axis Intelligence and GigaCapacity 2026 construction cost benchmarks.

The powered shell tenant effectively pays the $20-25 million/MW AI fit-out figure directly and controls how it’s spent; the turnkey tenant pays that cost indirectly through rent and a power pass-through set by the landlord, with less ability to shape the underlying design.

Why developers like powered shell

Building turnkey capacity speculatively — before a tenant is signed — risks what one QTS executive described as “stranded capital”: a fully equipped facility with no tenant using it. Powered shell lets a developer advance a site past raw land (grading, utility interconnection agreement, building permit, structural shell) without committing the far larger sum required for generators, UPS, and cooling plant until a tenant is under lease. That capital is deployed in phases as the tenant’s actual megawatt requirement becomes clear, rather than all at once against an assumption.

This is also why powered shell has grown alongside the AI buildout: JLL’s 2026 Global Data Center Outlook projects roughly 97 GW of new capacity between 2025 and 2030 and up to $3 trillion in related infrastructure investment. Developers cannot fund that volume of turnkey capacity speculatively; shifting the critical-infrastructure spend to hyperscale tenants who have their own investment-grade balance sheets is what makes the pipeline financeable at that scale. Grid interconnection timelines compound the pressure — see our grid connection queues guide for how power availability, not construction, is now the primary bottleneck.

Why tenants choose one model over the other

Powered shell tenants (hyperscalers, large AI operators) choose it for:

• Design control. A hyperscaler’s electrical and cooling standards are proprietary and consistent across its global fleet; retrofitting a landlord’s design costs more than building to its own spec from day one.
• Capacity certainty. Securing the building and power now, then phasing in critical infrastructure and IT load as demand for that region firms up, avoids overcommitting to a fixed turnkey spec years before occupancy.
• Balance sheet advantage. Hyperscalers can finance and depreciate their own critical infrastructure more efficiently than paying a landlord’s embedded cost of capital through rent.

Turnkey tenants (retail and wholesale colocation customers) choose it for:

• Speed to occupancy. No fit-out project to run — servers go in and the facility is live.
• No infrastructure expertise required. The tenant does not need an in-house team capable of specifying, procuring, and commissioning UPS and cooling plant.
• Lower capital intensity. Renting per kW or per rack avoids the multi-million-dollar-per-MW capital outlay that powered shell requires. This is the model covered in the colocation vs. cloud TCO guide and the bare metal vs. colocation guide.

Timeline comparison

Hyperscale construction timelines extended to 18-24 months in 2026, up from roughly 12 months a few years earlier, driven mainly by switchgear and electrical-equipment lead times rather than civil or structural work. That base timeline applies to getting a powered shell delivered — envelope complete, utility interconnection live. From there:

• Powered shell tenant then runs its own procurement and installation of generators, UPS, and cooling — commonly adding several more months to a year depending on equipment lead times and the tenant’s own design complexity, but on a schedule the tenant controls.
• Turnkey tenant waits for the landlord to complete mechanical, electrical, and commissioning work before handover, then moves in with IT equipment — typically faster from “keys handed over” to “live,” since no further infrastructure build-out is required.

Neither model reliably beats the other end-to-end; the difference is who controls the schedule and where the risk of equipment delays sits. For due diligence questions to ask before signing either structure, see our data center due diligence checklist.

Contract structure differences

Powered shell leases are typically triple-net (NNN), priced per square foot, with the tenant responsible for its own capital improvements and maintenance of everything it installs. Terms commonly run 10-20 years to match the tenant’s depreciation schedule on the critical infrastructure it owns.

Turnkey leases are priced per kW or per MW of committed capacity, with a base rent plus a power pass-through that — as in most wholesale colocation deals — often exceeds the base rent itself. The landlord retains maintenance responsibility and typically offers uptime SLAs backed by service credits, since it owns the infrastructure those SLAs depend on. Contract terms that erode value in either structure — escalators, renewal re-rate clauses, ancillary fee caps — are covered in our colocation contract terms guide.

Hybrid and phased structures

Several large deals combine both models within a single building. A developer delivers a powered shell sized for, say, 24-36 MW, then signs an initial turnkey suite (commonly 5-6 MW) inside it — the landlord builds out just that portion while the tenant commits to phased turnkey expansions as its usage grows, or takes over the remaining shell space directly. This structure lets the landlord avoid stranding capital on unbuilt capacity while giving the tenant a working data hall immediately rather than waiting on its own multi-month critical-infrastructure build-out for the first phase.

What to do with this

• If you are a hyperscaler or large AI tenant evaluating a site, powered shell gives you control over electrical topology and cooling architecture — valuable if your rack densities or liquid-cooling requirements diverge from standard landlord specs. Budget $20-25 million per MW for your own critical-infrastructure and fit-out capital, on top of the shell lease.
• If you are a mid-size or retail colocation buyer, turnkey (or wholesale colocation priced per kW) remains the right structure — you get a working facility without building an internal infrastructure engineering function. Compare offers against index rates via our quote service.
• If you are underwriting or investing in a data center developer, powered shell exposure shifts risk toward tenant credit quality and away from speculative infrastructure capex — a materially different risk profile than a fully turnkey portfolio, worth flagging explicitly in diligence alongside the factors in our REIT analysis.
• In every case, get the ownership boundary — exactly which systems the landlord delivers versus what the tenant must install — written into the lease exhibit, not left as a verbal assumption. That boundary is where powered shell disputes originate.