Data centers keep coming, but not all deals will compute

After a record year for leasing in the sector, three sites in Chicago have varying chances of success. Proximity to ComEd substations is a major factor.

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A rendering of a data center planned at 21st Street and Calumet Avenue.

A rendering of a data center planned at 21st Street and Calumet Avenue.

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Chicago still has its mojo in the data center business.

Data centers aren’t the sort of real estate development that get much glory. There’s typically no reason for the public to visit them and their appearance can be drab. They are distinguished by the large quantities of space they require and the vast quantities of power they need.

They provide space for the equipment that does the work of all things in technology, allowing us to put documents in the cloud, execute financial trades in a flash and stream the latest goofiness on TikTok. Experts believe that as artificial intelligence gains acceptance, it will increase demand for data centers.

Chicago is well positioned for this. A 2023 report by Cushman & Wakefield said among global markets, Chicago is tied for 5th place in its appeal for data centers. The ranking is based on factors such as land costs, reliable utilities and state-authorized tax incentives.

CBRE said the sector saw record leasing activity in the Chicago area in 2022. With the help of ComEd, data center clusters have developed downtown and in Elk Grove Village and Franklin Park.

But not every such proposal is a slam dunk. Here are three properties for which data centers are in the mix. One is moving to official review, one is a maybe and one is like your computer stuck in an endless processing wheel.

An empty site where a data center is planned at 2100 S. Calumet Ave. To the left is the Lakeside Technology Center, another data hub.

An empty site where a data center is planned at 2100 S. Calumet Ave. To the left is the Lakeside Technology Center, another data hub.

Tyler Pasciak LaRiviere/Sun-Times

2100 S. Calumet Ave.

This is an empty site that’s more than an acre and a neighbor of McCormick Place and the giant Lakeside Technology Center, the old R.R. Donnelley printing plant that has a new life as one of the largest data centers in the world. Digital Realty Trust owns Lakeside and the empty property across from it on Calumet.

Digital wants city zoning approval to expand the Lakeside complex across Calumet, building a roughly 11-story addition with a walkway above the street to connect the centers. The project is in the 3rd Ward of Ald. Pat Dowell, who did not want to comment before a virtual meeting for the community scheduled for 6 p.m. Thursday.

The plan’s details were in a zoning proposal to the City Council last July. Rafal Rak, vice president of portfolio management at Digital, said the national company wants to add to its Chicago holdings because users want to be here. Reliable power and lack of hurricanes are draws for this business, along with state tax credits enacted in 2019.

If the community reception is positive, Rak said he hopes to get the proposal before the city this summer and then decide whether to start a project that’s worth $250 million to $350 million. “Our plan is to continue to build,” he said, adding inflation, especially in labor costs, could force a delay.

The building at 400 S. La Salle St. is the former trading center for the Chicago Board Options Exchange.

The building at 400 S. La Salle St. is the former trading center for the Chicago Board Options Exchange.

Tyler Pasciak LaRiviere/Sun-Times

400 S. La Salle St.

This is a chunky building, windowless on lower floors, that used to be for the Chicago Board Options Exchange. Michael Reschke, chairman of Prime Group, said he’s discussing a deal with the exchange’s owner, Cboe Global Markets, to buy the building and convert at least the lower floors to a data center. Space above it could become residential, he said.

A data center “is one of the uses that we’ve been looking at. We’re working with the Cboe, the current owner,” Reschke said. City Hall will be watching. Reschke has earned goodwill there for bringing Google into the Thompson Center and for other investments to perk up La Salle Street.

The Cboe building has a La Salle address but doesn’t feel like it. It’s tucked behind the Chicago Board of Trade complex, where ComEd is turning the old trading floor into a substation. Reschke said the proximity to all that electricity argues for the data center conversion.

A detail of the former Schulze Baking Co. building, with part of its facade shrouded, at Garfield Boulevard and Wabash Avenue.

A detail of the former Schulze Baking Co. building, with part of its facade shrouded, at Garfield Boulevard and Wabash Avenue.

Tyler Pasciak LaRiviere/Sun-Times

40 E. Garfield Blvd.

It’s far from any nexus for these things, and that may be its problem. The building at the northwest corner of Garfield and Wabash Avenue is the old Schulze Baking Co. property, with floors designed for heavy equipment. A data center seems natural and news stories from a few years ago said one was planned.

But nothing has moved forward and much of the building remains shrouded in tarp. South Siders say it’s been that way for months. Its owner is 1547 Critical Systems Realty, based in Matawan, New Jersey. A spokesperson for the company had no information about what it has marketed as the 230,000-square-foot Midway Technology Center.

The building dates from 1914 and is on the National Register of Historic Places but could be torn down. Preservation Chicago previously put it on its “most endangered list.”

If these projects go ahead, they’ll be for machines, not for human interaction or making goods. Data centers say a lot about where technology leads us, for better or worse.

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