Illinois Data Center Tax Incentives Bring $4 Billion in New Development

Data center incentives in Illinois have rejuvenated the Chicago-area cloud ecosystem, helping the state attract more than $4.2 billion in new investment, according to a new study. 

The research by Mangum Economics finds that the incentives helped Illinois attract 13 data center projects, which have created more than 8,000 jobs for construction workers. Newly-announced projects are poised to bring an additional $4.3 billion in investment into the Greater Chicago market, which includes clusters of data centers Downtown and in Suburban Chicago near O'Hare Airport.

“We’ve invested heavily in data centers because we know that they are a key part of the future of tech and construction across the country, and I’m thrilled to see that the data industry has recognized those investments and the value of opening data centers in Illinois,” said Governor J.B. Pritzker. “As our position in the data center economy continues to grow, we look forward to welcoming more business to our state and creating thousands of jobs to make our state even stronger.”

The Mangum study quantifies the impact of a 2019 tax incentive plan designed to jump-start data center development in Illinois, which had stalled as projects shifted to other states. Data center projects now receive exemptions from state and local sales taxes on data center equipment for 10 years, if they invest a minimum of $250 million in the facility and create 20 high-paid full-time jobs. 

In 2020, six new data center developments committed to investing at least $1.7 billion, and in 2021, seven additional data center developments committed to investing at least $2.5 billion. Already, as of May 31, 2022, these projects had delivered on $3.3 billion of that total investment. The study was supported by the Chicagoland Chamber of Commerce and the Data Center Coalition

“The data center industry in Illinois is growing rapidly with substantial investment from new entrants to the Chicagoland market and from companies growing their current footprint to provide more capacity,” said Josh Levi, president of the Data Center Coalition. “Illinois’ data center program has increased the state’s competitiveness and provides certainty to data center businesses as they make long term decisions and plan large capital investments in new and expanded facilities.”

A Central Place in U.S. Digital Infrastructure

Chicago has long been one of the nation’s premier markets for data center services, occupying a central place in America’s geography and mission-critical infrastructure. The Windy City is also a major hub for Internet and financial infrastructure, with active communities of data-center users and service providers. 

The Illinois study offers insights into the importance of tax incentives in established data center markets. Critics argue that incentives offer tax breaks to large corporations with plenty of resources to fund their business infrastructure projects, and are unlikely to abandon strategic markets.

The Illinois data suggests that incentives are indeed a key factor in data center site selection. Development activity slowed in the Chicago area in 2017 as other Midwest states like Ohio and Iowa used incentives to land major campuses for Microsoft, Google, Amazon Web Services, Meta and Apple. The 2019 Illinois tax package was a turning point in the region's competitiveness, Mangum noted.

"Over the two-year period before the incentive was enacted, data center capacity in Chicago increased by a total of 1.4 percent; whereas in the two-year period since the incentive was enacted, Chicago data center capacity increased by a total of 19.4 percent," the report said. 

That included investments of $800 million by Meta in DeKalb, and three Microsoft projects in Suburban Chicago totaling $913 million.

“Illinois has seen tremendous success since first establishing data center incentives in 2019 and is now the second largest market in the country,” said Jack Lavin, President and CEO of the Chicagoland Chamber of Commerce. “As tech becomes an increasingly important part of every business, the data center industry will be the foundation that provides the digital infrastructure we need to attract tomorrow’s high-growth sectors.”

Most of the projects to use the tax incentives have been focused in the Suburban Chicago market, including five new data centers in Elk Grove Village, which is next to O'Hare Airport. 

Here are some recent examples of this new construction:

• CloudHQ has broken ground on a $2.5 billion data center campus in Mount Prospect, Illinois. The 1.5 million square foot campus marks CloudHQ’s entry into Suburban Chicago
• Aligned Energy has opened its ORD-01 data center in Northlake and is under construction on ORD-02, a 228,768 SF building scheduled to support between 36 and 52 megawatts of capacity.
• Skybox Datacenters and Prologis have opened a 30-megawatt, 189,000 square foot project in Elk Grove Village the leading data center hub in the Suburban Chicago market.
• Meta will invest more than $1 billion to add three more data centers to its cloud campus in DeKalb, Illinois, which will bring its campus to 2.4 million square feet of data center space, and support 200 jobs.
• Metro Edge has begun development on the company’s flagship data center in the Illinois Medical District campus on Chicago’s West Side. The 5-story, 184,720 square foot facility will serve hospitals, healthcare providers, universities and corporations. 
• Prime Data Centers will invest $1 billion to create a three-building, 750,000 square foot data center campus in Elk Grove Village.
• NTT Global Data Centers Americas is nearing completion on the second building on their Itasca campus.