A new report from JLL said a total of 42,500 square feet of data center space was under construction at the start of this year, enough to add 12 megawatts of capacity. But another 140,000 square feet of projects are planned with the potential to add 20.5 more megawatts of capacity.
Until now, supply has been in line with demand, and there hasn’t been enough of a surge in inventory to put force rent declines, said Sean Reynolds, who leads JLL’s data center practice in the Midwest. But that could change in the next two years with the number of new projects set to come online, he said.
The Chicago area had 4.3 million square feet of data center space at the end of 2018, with a total capacity of 555 megawatts, according to the JLL report. The industry uses the amount of electrical capacity as a gauge of the market because of the enormous amount of power the facilities need to operate.
Growing demand from businesses for cloud-computing storage has boosted the industry, and only 5 percent of existing data center space was vacant at the end of 2018, according to the report.
Reynolds said Chicago’s rise as a data center hub is led by its existing fiber and connectivity networks. Fiber easements historically follow rail lines, and Chicago serves at the nation’s railroad crossroads. Chicago also has low utility costs and is far from the coasts. Those factors make it appealing to users looking for either primary data centers or disaster-recovery sites, Reynolds said.
In Chicago, the main hub of data center activity is northwest suburban Elk Grove Village. But as space in the area becomes scarce, developers will look to surrounding towns, like Northlake, Franklin Park and Des Plaines, where Iron Mountain plans to convert a former clothing factory into a massive data center.
“The data center land market has a herd mentality,” he said. “There’s a value to being near those existing successful data center markets.”
IPI Partners last year bought a 10-megawatt Elk Grove Village data center for $118.9 million from T5 Data Centers.
Not far away in Wood Dale, San Francisco-based Element Critical bought two data center for $18.5 million with plans to spend an additional $22 million expanding and redeveloping them.
The South Side of Chicago, meanwhile, is gaining interest from developers, in part because of its proximity to a data center on Cermak Road that is among the biggest in the world. CIM Group and 1547 Critical Systems Realty last year bought a data center in the South Loop, only months after buying another property on the South Side with plans to turn it into a 24 megawatt data center.
Hilco Redevelopment Partners, meanwhile, plans to build a large data center campus on the site of a former coal-burning power plant in Pilsen.