Chicago – Tightest Data Center Market in the Country

National Highlights

  • As indicated at the end of 2010,the Reid-McConnell Tax Act has driven data center activity around the country with many tenants focused on the powered shell properties and incurring the capital expenses rather than interested in turn-key real estate solutions.
  • Chevron,Disney and Walgreens are a few of the companies that took advantage of the legislation during the first-half of 2011 for their new projects.
  • Wholesale lease transaction activity has been strongest in Santa Clara,Calif. and in suburban Chicago. The tenant composition has been less enterprise users and more Web 2.0 companies including,Zynga,Groupon and Server Central amongst others.
  • One of the biggest questions facing the industry is:  “How will the Aug. 23rd earthquake impact demand for space in Northern Virginia?”

Spotlight:  Metro Chicago

  • This year,the metro Chicago area has had one of the best leasing years ever for data center space.
  • Strong colocation and wholesale rental rates ($150/kwh to $600/kwh,respectively),low vacancy rates (1 percent) and continued interest by both colocation and wholesale users (22 MW of demand) has made downtown Chicago the tightest data center market in the country.
  • 350 E. Cermak Road is fully leased! The largest multi-story data center property in the world at 1.1 million square feet is 100 percent leased as SAVVIS reportedly leased the last pod to accommodate one tenant.
  • 725 S. Wells St. doubled the size of Steadfast Networks and is the largest absorber of space downtown year-to-date.
  • JRM Technology/McHugh Construction real estate project just west of 350 E. Cermak Road appears to be on hold with no preleasing nor financing.
  • There are several national players eyeing new opportunities downtown and we should see 15 to 20 MW announced before the end of the year.
  • The new speculative data center in Northlake has been very active with transactions completed by Comcast (2 MW) as well as Walgreens (4 MW).  Walgreens paid as much as $35.00 per square foot annually for a powered shell.
  • In February 2011,29 percent of DuPont Fabros Technology Phase II was preleased to existing tenants from Phase I. Recent expansion by Rackspace brings the property to over 70 percent leased. It’s likely the entire 18 MW will be committed to prior to its opening in early 2012 based on current market activity.
  • Equinix is delivering an additional 20,000 square feet in Elk Grove Village in January 2012,its third and final phase. They will continue to see competition from newly delivered space at Latisys and CoreLink.
  • Chicago Mercantile Exchange (CME) in suburban Aurora will be up and running on Jan. 1,2012 for trading. CME has been leasing colocation space to firms seeking low latency solutions with the matching engine. It is estimated that the first phase is 80 percent leased.

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