The Chicago Region is a Dominant Player in the US Data Center Market

by Michael Rareshide, on Oct 21, 2020 8:49:16 AM

Given its prominence as the third largest metropolitan population center in the U.S., the Chicagoland region is the fourth largest data center market behind Northern Virginia, Silicon Valley and Dallas-Fort Worth, in that order. Chicago does have several key advantages in data center site selection that have contributed to its Top 5 status, including robust fiber connectivity, reliable power and minimal environmental risks. Chicago’s northern U.S. location also provides a climate benefit, as data center operators and cloud computing companies can utilize “free cooling” for the majority of the year, allowing these operators the ability to pump in outside cold air to lower their power costs.

Chicago has always been a financial hub with such well-known names as the Chicago Board of Trade and the Chicago Mercantile Exchange that have developed significant data center infrastructure both in the downtown core and across the region. But the region has remained a distant fourth place as it has also been limited by other factors including expensive land prices for new suburban developments, above-average construction costs and higher overall sales and property taxes.

Illinois has finally ratified economic incentives for data centers  

Economic incentives have always been an important component in many data center and colocation development decisions. The Northern Virginia region comprising Ashburn and Loudoun County is a great example of these incentives over the years providing the stimulus to locating in Ashburn versus another suburban market or state surrounding Washington D.C. Other markets such as Phoenix and Dallas-Fort Worth have also taken advantage of attractive incentive offerings to grow their data center and colocation community. 

In 2019, the state of Illinois passed an economic tax incentive geared toward large data centers, exceeding $250 million in total investment and at least 20 jobs. The incentive includes both state and local sales tax exemptions over a 10-year period on data center equipment purchases. Illinois also has additional incentives for investment in depressed areas, which has benefited some areas of Chicago for data center investment.

These incentives are important to level the playing field as Chicago competes with other U.S. markets. While Cook County and its county seat of Chicago still have very high taxes, including a 10.25% sales tax, nearby counties such as DuPage (with much lower sales tax rates), stand to benefit from these incentives if the development can meet the investment threshold.

Chicagoland Data Center and Colocation market history

In the late 1990s, during the internet growth-fueled expansion, Chicago’s primary and only expansion was focused in the downtown area in such ultra-connected carrier-neutral facilities such as Digital Realty’s 1.13 million-square-foot 365 Cermak building, its nearby 600 South Federal telecom hotel and with CoreSite’s 427 LaSalle. It was only after the dot-com bust that colocation operators considered larger suburban locations. In 2007, both DuPont Fabros (now part of Digital Realty) and Equinix pursued new developments outside of Cook County in Elk Grove Village. Then followed Microsoft’s 700,000-square-foot Northlake data center (originally constructed by Ascent). 

The pace of data center development and data center site selection in suburban Chicago accelerated in 2012 with Digital Realty’s purchase and re-development of its Franklin Park campus and Ascent’s expansion of its Northlake campus. Chicago has now drawn major new development and expansions from just about every major data center developer and wholesale colocation operator. 

The colocation and data center development landscape is very competitive

According to recent research from datacenterHawk, the greater Chicago market is home to more than 3.39 million SF of commissioned data center space, representing 325 megawatts (MW) of commissioned power. The competition in Chicagoland is comprised of all of the heavyweights in the wholesale colocation and turnkey data center sectors. The following are just some of the major competitors: 

  • Digital Realty (DRT): Downtown facilities include 350 Cermak, its massive interconnection hub. Of its three suburban campuses, DRT has two notable developments with its Elk Grove Village campus being 1.1 million SF and delivering over 60 MWs of critical load. The Franklin Park campus is expandable to ~32 MWs and over 500,000 square feet.
  • Equinix: The global colocation giant has almost 300,000 SF of colocation across five buildings with ~120,000 square feet of raised floor at Digital’s 350 Cermak and then the remainder in two suburban sites in Elk Grove and Westmont.
  • CyrusOne: In 2016, CyrusOne completed the sale-leaseback of the Chicago Mercantile Exchange’s 408,000-square-foot data center in Aurora and then expanded this footprint by another 428,000 SF to total over 50 MWs of critical load.
  • QTS Realty: Bought the 317,000-square-foot former Chicago Sun-Times printing facility where it can provide up to 40 MWs over 135,000 square feet of raised floor.
  • Stack Infrastructure: After acquiring the developer T5’s Elk Grove 220,000 SF data center with 13 MWs in 2019, Stack has expanded the site to include another 20 MWs of new critical load.
  • NTT Global Data Centers (RagingWire): its 19-acre Itasca location is planning and in pre-leasing phase of two 2-story buildings that can provide 72 MWs
  • TierPoint: with two Chicago locations as a result of acquisitions, this national colocation and cloud provider offers over 40,000 square feet of raised floor environment. 


Demand for data center and colocation space remains very strong across this major data center market, especially during this challenging times with the coronavirus pandemic as companies rely on robust IT infrastructure to deliver where their employees are now housed. Chicago will continue to benefit from market demand, despite its construction and cost challenges.


Topics:Economic DevelopmentReal EstateData CenterSite Selection GroupSite SelectionCOVID-19



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