Does Chicago Colocation Have Market Oversupply Problems?Chicago is a city of many names.

The Windy City

Chitown

“My Kinda Town”

The City of the Big Shoulders

Paris on the Prairie

One nickname you won’t likely find lurking around the internet is “The City of Too Many Data Centers”. Chicago colocation services are growing rapidly, and service providers are thriving.  

But if you go looking for data center executives on YouTube saying, “What was I thinking building a colocation facility in Chicago?” you won’t come up with any hits. 

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Why Chicago for Colocation?

Fact is – there are many Chicago colocation service providers that made a strategic decision to build their facility in the Chicagoland area, for reasons which include:

  • The climate is ideal for cooling with temperature and available water
  • An abundance of network service providers, prime telecommunication and power service providers
  • A dense concentration of financial services providers, Content Delivery Networks, and IT integrators
  • Strategic location for disaster recovery and business continuity
  • Ideal for transportation in and out of areas with the O’Hare Airport airline hub 

Chicago’s retail and wholesale colocation growth rate trails cities like New York, Dallas, Washington DC, and Silicon Valley, but it exceeds the national average for metropolitan areas.

Beyond the downtown core of Chicago, a number of data centers are being built and/or expanded in suburban areas like Oak Brook, Elk Grove Village, and Aurora. 

High Demand and Low Vacancy

Even colo service providers like Digital Realty Trust, which are slowing down their expansion in other cities across the U.S., continue to expand in “the Big Onion.” Colocation demand has exceeded supply in Chicago by as much as 50 percent in recent years, which continues to drive aggressive growth. The vacancy rate for area data centers is only three percent, which leads all U.S. cities.

Even though Chicago is one of the top markets for colocation, it doesn’t need any tax incentives for data center builds or expansions for the most part. Growth is fuelled exclusively to meet the constant demand, and much historic and/or prime Chicago real estate has been converted and retrofitted from industrial or retail to manage servers and data. 

Even the former Chicago Sun-Times printing facility has been converted into a hosting/colocation center to keep up with demand. Same for the historic Schulze Baking plant.

How Do Taxes Influence Chicago Data Center Trends?

The City of Chicago’s Chief Information Officer, Brett Goldstein, has a background from both the public sector (Chicago Police) and private sector, and he feels government CIOs should be as driven to create efficiency and data security as their private sector peers. 

With the financial and unemployment challenges which Chicago has been struggling with in recent years, the success of the colocation and data management industry is welcomed as a thriving economic engine. His department is considering outsourcing to a local provider, and outsourcing management of what is currently the city’s largest data center. 

Chicago recently instituted a “Cloud tax”, which some critics feel might drive data center providers to other cities. Changes are already being proposed to the tax, including breaks for startups and small businesses. 

Needless to say, if you think Chitown’s colocation supply exceeds demand, you’re wrong. The landscape of the Windy City may remain much the same as existing buildings are being transformed from the inside. The influence of the Chicago colocation and data services boom will be vital to the local economy. Technology executives and investors looking for colocation expansion will find that Chicago is their “kinda town”. 

Have you been considering a Chicago colocation center build or expansion? Does the Cloud tax or lack of tax incentives in the area factor into your decision-making? Tell us about it in the comments section below. 

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