IllinoisIndustrial Chicago takes fourth spot in global data center study Matt Baker January 27, 2020 Share on Facebook Share on Twitter Share on LinkedIn Share via email Chicago has long served as an important hub in the nation’s infrastructure, a pinch point through which air, road and rail all flow through to move goods about the country. Now it’s been recognized as a pivotal juncture for a different kind of transportation: the movement of ones and zeroes. Increasingly, Chicago is being recognized for its capacity—and suitability—for data centers. A new report gives Chicago the fourth spot globally, an enviable position in an increasingly digital world. Cushman & Wakefield recently evaluated 1,162 data centers across 38 global markets, scoring them primarily on cloud availability, fiber connectivity and market size, as well as factors like development pipeline, government incentives, market vacancy, political stability, sustainability, environmental risk, land prices, power costs and taxes. “Chicago has always benefited from being a key connectivity hub in the middle of the country, and we’ve definitely seen a recent boost over the past year with the announcement of incentives available for the data center industry from the state of Illinois,” said Alex Smith, vice chair with Cushman & Wakefield’s Chicago office. That legislation, which passed last summer, offers tax exemptions on qualified tangible personal property used for both existing and new data centers. A $250 million capital investment—and the creation of 20 full-time jobs—is required to tap into the program. “Although the $250 million threshold is higher than other smaller markets, the package adds another attraction to what was already a large data center market with one of the key carrier hotels in the country at 350 East Cermak,” Smith said. One of seven data centers that Digital Realty operates in the Chicago metro, 350 East Cermak is also one of the largest in the world at 1.1 million square feet. The 100-megawatt (MW) facility bills itself as “the most interconnected multi-tenant datacenter in the Midwest,” offering more than 70 network providers. According to the Cushman & Wakefield report, the Chicago metro ranks among the top 10 in fiber density of markets reviewed. There are nearly 50 MW of assorted projects now under construction across Chicago proper as well as in key suburbs such as Elk Grove Village, Illinois. T5 Data Centers recently acquired a 164,000-square-foot data center shell in Brennan Investment Group’s Elk Grove Technology Park in Elk Grove Village. The facility will provide 103,000 square feet of white space and 15.4 critical megawatts of power capacity. As data centers have grown from niche investment to cornerstone of the information economy, the asset class has seen approximately $100 billion in transactions over the past decade. And it’s not just that the corporate world is relying more and more on digital infrastructure, it’s increasingly offloading that burden to third party cloud providers. Enterprises have been transferring their digital footprints to colocation facilities for years now, but more recently they are opting for a mixture of colocation and public and private clouds. This shift has given even greater influence in many markets to the largest cloud platform providers—Amazon, Google and Microsoft. The market is exploding, but data centers themselves are also growing exponentially. The 10-MW facility that dropped jaws a decade ago is a Class B asset compared to the 30-MW leases that users are signing with increasing regularity. “The speed with which the industry is shifting makes the creation of a data center strategy a complex and daunting task,” said Dave Fanning, executive managing director and leader of Cushman & Wakefield’s data center advisory group. “Enterprises must determine what to do with their on-premises facility, which workloads to move to the cloud and how to implement a hybrid IT strategy.” “Developers and operators require a parcel with robust fiber and access to power as well as a thorough grasp of the permitting process and all risk factors,” Fanning continued. “Investors must be able to assess the long-term potential of a data center to hold its value and how easily it can be upgraded. All involved require access to capital and a clear understanding of objectives.” The top three markets in Cushman & Wakefield’s study—Northern Virginia, Silicon Valley and Dallas—had considerably higher scores than fourth place Chicago. The next 12 markets outside of the top ten were within 10 percentage points of each other, and most in ascension mode—suggesting that secondary markets may overtake Chicago’s position before it has a chance to catch up with the top three.