Growth of Chicago area data centers taking off with no signs of a slowdown

Data centers — sprawling facilities that help power the tech behind everything from online shopping to scheduling dentist appointments — are popping up across the country, and Chicago has been recognized as one of the leaders.

Industry experts say Chicago and nearby suburbs will continue to be an industry powerhouse, with 30 data center projects planned over the next five years.

Utility infrastructure will also expand as companies look toward the suburbs to fit their land needs. But if large companies like Microsoft, Meta or Oracle secure agreements for new data centers, it could eat up the region's extra power capabilities.

The number of data centers in Greater Chicago shot up nearly 20% between 2020 and 2022, according to research firm Mangum Economics. It said over $4 billion has been invested in data centers since 2020 with an additional $4 billion in investments announced.

This means additional property tax revenue, thousands of construction jobs and a new life for vacant buildings. The train isn’t predicted to slow down as AI and other advanced technologies require colossal amounts of data, which needs to be stored.

Pete Marin, CEO and president of T5 Data Centers, said a big selling point is the reliability of the Chicago area's power. He cited its central location and lack of extreme heat, which can impact data centers.

“All these things contribute to that success,” Marin said, of the industry's growth in the region.

Georgia-based T5 broke ground in September on a 250,000-square-foot data center in Northlake. It continues to explore more opportunities for data centers in Chicago’s suburbs.

“The data center industry is the backbone of our modern economy,” said Brad Tietz, vice president of government relations and strategy at the Chicagoland Chamber of Commerce. The chamber has been a key player in promoting the growth of data centers and a growing sector of its members are in the digital infrastructure space.

Chicago hit record levels of data center growth in the first half of 2024 with 346 megawatts absorbed. In 2023, more than 204 megawatts total were absorbed in the Chicago market, said a report from commercial real estate firm Cushman & Wakefield.

The 1,279 megawatts in operation in the Chicago area is “basically like a nuclear power plant,” Alex Smith, executive vice chair at Cushman & Wakefield, said. “It’s a massive amount of power.”

Cushman & Wakefield named Chicago as one of the top 10 U.S. markets for data centers this year, with vacancy at 2% in June.

Tietz attributes the growth to city and state incentives and Illinois's business-friendly environment.

The state’s data center investment program, enacted in 2019, helped kickstart much of the region’s explosive growth. It provides owners and operators of qualifying data centers with exemptions from a variety of state and local taxes, according to the Illinois Department of Commerce.

Powering the demand

Melissa Washington, ComEd’s senior vice president of customer operations and strategic initiatives, said ComEd improved its reliability by more than 70% since 2012, a figure that is “extremely attractive” to data center companies, which can't withstand long lower outages because they need to continually store and manage a high volume of information.

ComEd has two main investment focuses: reducing the frequency of outages and improving power restoration time. It has invested in technology that makes it easier to isolate where power outages are and restore power, Washington said. It’s also replaced and refurbished infrastructure that reduces outage frequency.

But the growth of data centers also means a growing demand for power and infrastructure, costs that could impact a consumer's utility bill.

ComEd declined to comment on potential price hikes, and said in an emailed statement, "ComEd has an obligation to serve the load requests of our customers, regardless of industry. We remain engaged with policy makers and other stakeholders to monitor load growth and development of renewable energy resources, in accordance with the goals of CEJA."

Illinois has excess utility capacity — the ability to generate more electricity — that can be distributed to the grid, Smith, of Cushman & Wakefield, said. But if more land acquisitions and commitments for data centers are made in the next 12 to 14 months, that capacity will likely diminish, he said.

Washington said the issue isn’t power constraints: It’s evaluating if more infrastructure is needed in areas where data centers are proposed then building it.

“When you take a look at the grid, there may be upgrades that we need to implement in order to deliver the power,” she said. “The timing in which we're able to deliver the power depends on how big the ask is, and whether or not there's already infrastructure in that location. … If you’re asking for something huge, it may take a little longer.”

Sarah Moskowitz, executive director of the nonprofit Citizen’s Utility Board, said the growth of data centers is a piece of a larger issue, which is the growing demand for electricity and what that means for consumers.

“We need to take steps to ensure that electric customers aren't left unfairly shouldering the costs of [data centers],” Moskowitz said.

CUB, which advocates for utility consumers, is calling on regulators and grid operators to put structures in place that separate speculative projects from those that have been confirmed so utility customers don't subsidize unnecessary distribution and system build-outs.

"The concern arises when you have the electric utilities and the grid operators setting policies assuming that they're all going to get built and those policies can come back in and end up costing consumers of electricity unnecessarily," Moskowitz said. “There's a big difference between a data center that is knocking on the door of the utility and says it's interested in being there versus a data center that has entered into a contract and put down money. One of those is reasonable to include in a load forecast and another isn't.”

Future for data centers

Several data center projects announced or underway have the potential to bring new life to old sites in Chicago and its suburbs. CME Group and Google announced in July that they would build a colocation data center in Aurora, about 35 miles from CME’s downtown Chicago headquarters.

In Hoffman Estates, Compass Datacenters kicked off work to transform the former Sears headquarters into one of the largest data center campuses in the state. Demolition is underway on the 197-acre site, and it's expected to take about 18 months.

“Everything is going according to plan,” a Compass spokesperson said in an emailed statement. “Demolition efforts continue with the recycling and reuse of asphalt and concrete.”

Prime Group and Capri Investment Group — the developers overhauling the James R. Thompson Center — purchased the former Cboe Global Markets headquarters, 400 S. La Salle St., with plans to turn it into a data center.

"We are still in the preliminary stages of project concept and design, but there is a fair amount of interest even at this early stage,” Quintin Primo, founder and executive chairman of Capri Investment Group, said in a statement.

Smith said conversion projects like Prime and Capri's will likely be rare. Data centers are “specialized buildings,” and re-working an existing building can be difficult. But as office space remains in limbo, it's a way to re-energize those buildings.

ComEd expects data centers to continue their takeoff in Chicago. Data centers make for long partnerships, Washington said, and many are repeat ComEd customers who want to expand.

“I think Illinois has shown that it embraces data centers, and I expect that that's also a very attractive thing,” Washington said. “The things that they seek — whether it's competitive rates, reliability, the fiber optics and also great partners — that's going to stay and remain.”