CHICAGO—North American data centers saw tremendous growth in 2015, which came as a bit of a surprise to many experts, but that expansion has built confidence in the sector's 2016 prospects, and Midwest cities like Chicago should get big shares of the new development.
"Cloud providers were very bullish on taking down space in 2015," Sean Reynolds, a regional director in JLL's data center solutions group, tells GlobeSt.com, and there was a worry that their customers would hesitate to change how they stored data, and leave much of this space unused. But "their customers followed," and the quick adaptations led to a healthy rate of growth.
Multi-tenant data center providers in the US earned revenues of $115.3 billion in 2015 and experienced 6.1% growth, according to JLL's new data center perspective report. And the metro regions of Northern VA and Dallas were the national standouts with 63 MWs and 42 MWs of net absorption, respectively. Northern VA has cemented itself as a data center hotspot through "its low latency, robust fiber networks, attractive incentives, broad-based competitive provider marketplace and largest market share of cloud operators," the report states.
And the expansion in Dallas was driven by the region's significant job growth and a set of headquarters' relocations. As reported in GlobeSt.com, Facebook has decided to build up to three 250,000-square-foot data centers in the AllianceTexas development in north Fort Worth near Dallas.
In the Chicago metro area, the data show 10% growth in 2015 over the current data center supply of 420 MWs. Furthermore, Chicago had more than 30 MWs of absorption in 2015. "We were happily surprised by Chicago," says Reynolds. And the metro area can probably expect more of the same in the coming year.
"Chicago is in need of new supply at this point," he adds. "There are a lot of new bodies coming into the CBD," due to relocations by corporations such as Motorola, ConAgra, GoGo and many others. Data center providers such as Digital Realty Trust, DuPont Fabros, Forsythe and QTS are already making significant investments in the metro area.
And those investments are not just about handling local needs. For financial firms, nanoseconds sometimes count, and to provide quick and efficient services across a wide geographic area, it makes a lot of sense for data center providers to place facilities in the nation's middle, making Chicago a particular favorite, Reynolds says. The city's tech infrastructure is already quite advanced due to the presence of so much electronic trading activity. "We have got a very good base."
Confidence is high that the sector will continue to see robust growth this year. Data hosting has grown so complex and expensive, especially as cybersecurity has increased in importantance, that an increasing number of firms will outsource these needs to specialists that use the most up-to-date technology. "Industry stalwarts such as Verizon, CenturyLink, AT&T, Windstream and others began to shed data center space last year as they return focus to core competencies," JLL notes. "These companies will continue to spin off space in 2016, opening up real estate opportunities in tightening data center markets."
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
