In last month’s blog entry, “5 Commercial Real Estate Trends to Watch in 2024,” one development we recommended keeping an eye on was the popularity of digital economy investments such as cell towers and data centers. Deloitte’s 2024 commercial real estate outlook noted that real estate owners and investors across North America, Europe, and Asia/Pacific identified these assets as the most attractive in the near future in terms of risk-adjusted opportunity.
As companies’ data storage needs increase along with reliance on advanced technologies like cloud applications and artificial intelligence (AI), demand for hyperscale data centers has grown. These centers commonly house hundreds of thousands of servers per building, according to the 2022 Chicago Tribune article, “Data centers booming in Illinois with addition of $2.5 billion site planned for former United Airlines headquarters.”
Chicago has emerged as a hot spot for data center development in recent years due to numerous factors. The metro area is home to one of the largest data center markets in the country, according to the December 2023 CoStar article, “Data Center Developer Buys Two Office Buildings Near Chicago’s O’Hare Airport.” There’s plenty of demand for data center space in the area: The Chicago market had a vacancy rate of just 6.7 percent as of Q1 2023, as reported by Data Center Frontier.
Here are a few forces driving growth in the Chicago data center market.
1. Tax incentives.
In 2019, Illinois established the Data Centers Investment Program, which allows the Department of Commerce and Economic Opportunity to provide tax exemptions and credits to data center owners and operators that meet certain qualifications.
Between the program’s launch and February 2023, it directly drove $4.2 billion in new investments in Illinois, according to a report from Magnum Economics. Major corporations such as Microsoft and Meta have invested millions in data center developments in the region since the state implemented the new tax incentives.
2. Reliable and affordable power.
Data center providers, developers and operators have flocked to Chicago partly because the area offers access to reliable, reasonably priced, and clean power, ComEd CEO Gil Quinones said in a statement issued to the Tribune.
3. Fiber internet connectivity.
With its geographically central location in the U.S., Chicago serves as a major hub for all kinds of infrastructure, including internet connectivity, according to the Data Center Frontier article “Illinois Data Center Tax Incentives Bring $4 Billion in New Development.”
The Windy City offers multiple options for high-speed fiber internet for businesses, according to HighSpeedInternet.com. That makes the metro area appealing for data center development and investment.
If you’re interested in learning more about the Chicago data center market or exploring other commercial real estate categories in the area, don’t hesitate to reach out to the Avalon Realty Associates team. Start your commercial real estate search today by calling 847-506-1000 or emailing info@avalonreal.com. You can also get in touch with us by visiting our Contact Us page.