Digital Realty is doubling down in the Windy City. Just months after acquiring land for a major expansion in the Chicago suburbs, the data center developer has confirmed long-rumored plans for an expansion of its huge data center campus in downtown Chicago.
Digital Realty’s new project at 330 East Cermak will be a 12-story data center, allowing low latency connections to the critical mass of networks providers housed next door at 350 East Cermark, the primary data hub in downtown Chicago. The expansion aligns with Digital Realty’s connected campus strategy of bringing together real estate and network services by creating data centers adjacent to Internet on-ramps.
“With the expansion of our Cermak flagship, Digital Realty will be even better positioned to future-proof our customers’ growth, while simultaneously satisfying their most performance-sensitive requirements,” said William Stein, the CEO of Digital Realty.
The site for 330 East Cermak is “shovel-ready” and Digital Realty will break ground as soon as it signs an anchor tenant for the project, which is being described as an “annex” to 350 East Cermak. The final size, power density and redundancy configuration will be subject to market demand, according to CBRE, which is marketing the site for Digital Realty. The site can support up to 660,000 square feet and 54 megawatts of utility load.
Securing Runway for Growth
The expansion downtown comes just two months after Digital Realty locked down expansion capacity in the suburban Chicago market, acquiring a former Motorola headquarters building next to its existing data center campus in West Franklin Park. The deal provides room to grow for Digital Realty, which has already filled two large data center buildings at its Digital Chicago development and is building a third.The two-pronged expansion strategy reinforces the importance of Chicago as a growth market for cloud computing and financial services.
Leasing was strong during 2015, with net absorption of 27 MW of capacity. This robust leasing has prompted new construction, with up to 200 MW of additional capacity planned for coming years.
It also mirrors efforts by data center providers to lock down future capacity to support the growth of cloud computing and other emerging technologies. Similar activity is being seen in two other leading Noth American data center markets, in Northern Virginia and Silicon Valley.
“Data center demand is surging, driven by the rapid growth of cloud adoption and corporate IT outsourcing,” said Todd Bateman, North American Agency Practice Leader for CBRE’s Data Center Solutions Group.
“Demand is outpacing supply, both at the national level and within the Chicago area in particular. The state-of-the-art proposed design at 330 East Cermak, along with the proximity to Lakeside Technology Center at 350 East Cermak, would address market demand and provide prospective customers with the expansion capacity and network density to meet their colocation and interconnection needs.”
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The 330 East Cermak site is next door to the 1.1-million-square-foot data center at 350 East Cermak, which is the premier interconnection, colocation and telecommunications hub in the Midwest and the nucleus of Chicago’s commodity markets and financial firms.
The greater Chicago market is home to more than 1.85 million square feet (SF) of commissioned data center space, representing 210 megawatts (MW) of commissioned power, according to DatacenterHawk, a Dallas-based research firm that tracks the availability of data center space. Demand for space is strong, as reflected in the vacancy rate of just 8.5 percent for the region.
New Inventory Alters Market Dynamics
Downtown Chicago has primarily been a retail colocation market, offering connectivity and interconnection services but few large physical footprints. Space at 350 Cermak and other downtown hubs has been in short supply in recent years, with limited new inventory coming online.That has begun to change. QTS Realty Trust, Inc. (QTS) has just opened a data center in the former Chicago Sun-Times printing plant on South Ashland Avenue. Windstream is the first announced customer for the facility. Server Farm Realty has signed several tenants for its building at 840 South Canal Street. Other potential projects are in the formative stages. Ascent is planning a new facility on South Desplaines, and 1547 Realty is seeking to purchase the Schulze Banking Company building on the Chicago’s South Side and plans to convert it for mission-critical space.
It remains to be seen how the availability of space adjacent to 350 East Cermak may impact demand in Downtown Chicago.
For more on the Chicago market, we invite you to download the Data Center Frontier Special Report: The Chicago Data Center Market.