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Data Center Industry Back On The Path To Growth In Chicago

CoreSite's CH1 data center at 427 South LaSalle St. in downtown Chicago.

The development of new data centers is about to ramp up in much of the Chicago region. Developers had taken a breather in 2018, but the ever-growing demand for cloud services and social media led many to announce new projects that will deliver in 2020, according to JLL’s latest Data Center Outlook.

A steady amount of new development over the next few years is also likely, as many significant providers on the East and West Coasts consider it essential to have a Chicago location, which assures they can continue serving clients if other regions experience blackouts or other disruptions, JLL reports.

“First, we have a very large metro area with a lot of content demand, and second, even though geographic diversity is very important for data centers, there are a lot of groups that are not here yet,” JLL’s Sean Reynolds said.

Iron Mountain, CoreSite, Equinix, Element Critical and 1547 all recently announced plans for new data centers, according to JLL.

These companies have also begun spreading out. In the past, most suburban centers were in Elk Grove Village, but new development will now take place in a much wider arc around O’Hare Airport, including Des Plaines, Northlake and Franklin Park, Reynolds said.

In December, for example, Iron Mountain officials said they were ready to construct a $75M data center in Des Plaines on the former site of clothing manufacturer Hart Schaffner Marx at the corner of Maple Street and Touhy Avenue.   

“They are now building in pockets that are a little outside of Main and Main,” Reynolds said.

Downtown Chicago also remains desirable for data center developers. CoreSite bought 2 acres at 550 West 14th Place in 2018 to build a 175K SF, four-story data center with 18 megawatts of power capacity that will complement its facility at 427 South LaSalle St., about 1 mile to the north. The Denver-based company will construct the building in three phases, with a total estimated cost of $190M to $210M at full build-out.

Developers should not have difficulty finding users for this new capacity, Reynolds added. A lot of Fortune 1000 firms still make due with aging data centers, and over the next few years, will need upgrades or switch to co-location providers.

“We don’t see that demand going away,” he said.

The Chicago region now has about 4.3M SF of data center space, with 555 MW of power capacity. Only 200K SF with 25.6 MW is vacant, a sign that Chicago maintains a healthy balance between supply and demand.

“We have not seen downward pressure on rental rates like other markets,” Reynolds said.