The Chicago Data Center Market

The Chicago Data Center Market

Chicago is the third largest city in the United States and has been a major financial and commercial hub in the American Midwest for decades. Numerous factors helped fuel and sustain data center growth in Chicago over the past five years. The Chicago market is attractive to data center users for its favorable business climate, competitive colocation/cloud environment, relatively low power cost, and low risk of natural disasters.

Downtown Chicago attracts enterprise users able to afford the higher overall costs of doing business within the urban core. However, the downtown data centers tend to be relatively small in size. Contrast that to data center development in the western suburbs of Elk Grove and Franklin Park where providers have more room to build large colocation facilities. Furthermore, colocation users find the Chicago market attractive because of its central location and proximity to large, corporate businesses. Companies searching for data centers in the Chicago market include those in the financial, technology, telecom, insurance, and healthcare industries.

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Power Overview

The Illinois General Assembly passed legislation in 1997 that deregulated the state's electricity markets. The law separated the business of generating and selling power from the business of transmitting and distributing it. This forced ComEd the monopoly supplier of electricity in Northern Illinois, to become a subsidiary of Chicago-based Exelon Corporation, one of the nation's largest power utility companies. ComEd sells and distributes the electricity generated by Exelon's plants that use a diverse mix of petroleum, natural gas, nuclear, and non-hydro renewable sources.

Connectivity Overview

An abundance of fiber providers and several Internet exchanges make Chicago a hub for content delivery services to a large portion of the American Midwest. On July 1, 2015, local Chicago politicians approved levying a 9% tax on local consumers of subscription cloud services such as Netflix, Spotify, and Xbox Live. Because enforcement of this so-called "Netflix Tax" on consumers will also add a compliance burden on the companies that deliver the services, data center providers should be aware of these potential added costs.

Hazard Risk Overview

The Chicago market has a low risk for natural disasters. Hurricanes are non-existent, and it is rare that seasonal storms result in flood or tornado damage. The United States Geological Survey (USGS) notes that while the New Madrid fault line runs through southern Illinois, the small earthquakes caused by it have limited effect on Chicago. In the past 100 years there have been eight earthquakes in northern Illinois registered by the USGS, but none have caused any significant damage to the Chicago area.

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