The need for data centers existed well before the COVID-19 outbreak struck. But since then, many companies have had no choice but to resort to remote work. That means there's been an even greater need for data centers to support the growing number of devices employees are using to stay connected and productive. The coming years will see a continued need for data centers to support hybrid work plans and the continuous digitizing of so many businesses' operations.
It's not surprising, then, to see data centers popping up in different corners of the real estate market. And now, Chicago is the latest city that's looking at an influx of data centers.
Addressing a growing need
Though Chicago may not house the same number of financial firms as New York City, it's a pretty strong financial hub in its own right. The city needs data centers to support the growing number of businesses that are setting up shop there.
Enter Prime Data Centers. Prime is investing $1 billion to create a three-building, 750,000-square-foot data center campus in Elk Grove Village, a western Chicago suburb near O'Hare Airport. This represents Prime's first data center project outside of California and is expected to support up to 150 megawatts of capacity.
This move shows how the demand for data centers is exploding. As all kinds of businesses continue to invest in digital infrastructure, the need for more data centers will only grow. And that's why now's a good time for investors to look at data center REITs, or real estate investment trusts.
Prime's latest project could be a boon to Chicago real estate. Data center activity in Greater Chicago has soared since 2019, when Illinois approved new tax incentives to promote the development of these facilities. Adding data centers could drive more large companies to Chicago in the near term. That could mean added revenue for office building landlords, and it could raise property values in the city as a whole.
Prime, meanwhile, isn't the only data center developer to target the suburbs of Chicago. In recent months, Aligned announced the development of a 60-megawatt facility in nearby Northlake, and Skybox Data Centers is partnering with Prologis to construct a 30-megawatt data center in Elk Grove Village.
Good news for the Windy City
Like other metro areas, Chicago was hit hard by the pandemic and has grappled with a higher jobless rate than the national average. Of course, the reality is that Chicago was facing its fair share of financial woes before the pandemic began. Going into the outbreak, the city was carrying a massive debt load fueled largely by pension plan obligations.
At this point, Chicago needs as much tax revenue as it can generate, so the more businesses that set up shop in the Windy City, the better. Building out data centers could drive more commercial leases in the coming years, helping not just real estate investors but the city's budget on the whole.