A real estate firm has purchased the Northern Trust building at 840 South Canal street in Chicago, and plans to spend $200 million to convert it into a data center. The former check processing plant in Chicago's south loop was purchased by the Red Sea Group late last month for $35 million from Northern Trust Corp., Chicago Business reports (registration required).
Last November the Red Sea Group launched Server Farm Realty (SFR) with projects in Washington state and Santa Clara, California. Server Farm Realty builds wholesale data center space as well as custom solutions. The Red Sea Group, USA operates from El Segundo, California with CEO Avner Papouchado.
840 South Canal
Server Farm Realty plans to finish one floor of data center space at 840 South Canal by September, while converting the top two levels to office space suites designed for trading firms. The company hopes to have these three floors ready by September and is financing this $70 million phase 1 with funds from Red Sea and its partners.
Red Sea Group is building its projects on speculation, without tenants confirmed prior to construction. New space in downtown Chicago is at a premium because of dwindling space available at the city's primary data center hub, Digital Realty's huge carrier hotel at 350 East Cermak.
In a report released last week, Grubb & Ellis estimated that there is demand for about about 15 megawatts of space in the greater Chicago market and just 7 megawatts of supply available. Another 18 megawatts is expected to come online later this year, but most of that is in the western suburbs, where DuPont Fabros, Ascent and CoreLink are building data center space. Much of the demand in the Chicago market is driven by trading companies, who desire space in downtown Chicago.
Grub and Ellis says that with the addition of 840 South Canal the total amount of multi-tenant data center space in downtown Chicago would rise to 2.1 million square feet.
"Prospective tenants, from telecommunications providers to insurance companies to traders, aren't interested in signing up for spaces that aren't built and ready for occupancy," says Jim Kerrigan, a Chicago-based director of the data center group at Grubb & Ellis Co.
Where is that ready-built space? There's a small amount of space remaining at 350 East Cermak, while both CoreSiteSteadfast Networks and Digital Realty Trust operate downtown data center properties. There's also a new data center operated by which has about 6,000 square feet of finished space.