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January 14, 2011

Chicago Property Gets $200M Makeover

January 14, 2011
By Barbra Murray, Contributing Editor

Now that Server Farm Realty Inc. has officially taken over ownership of 840 S. Canal St. in Chicago from Northern Trust Corp., the two-month-old company is preparing to shell out $200 million to transform the 443,446 square-foot property into a state-of-the-art data center.

In terms of use, 840 S. Canal has a storied history. Originally developed as a support station for General Electric’s manufacturing activities, the eight-story building has also served as a check-processing center and back-up operations site. The property’s many incarnations have left it with an infrastructure that will serve as the foundation for SFRI’s new facility, which will feature both data center and trading floor space.

“We see a robust demand with very little or no supply of good data center space in Chicago and we intend to fill this void,” Avner Papouchado, president and CEO of SFRI, told CPE. According to real estate services firm Grubb & Ellis Co.’s year-end data center newsletter, there is 15 MW of wholesale data center demand in greater Chicago but only 7 MW of existing supply. “It’s hard to find a building in Chicago that has all the attributes of this building: 250 pound per square-foot floor loading, reliable diverse power, numerous fiber optic transport providers, space to place standby generators and room for potential growth.”

SFRI has tapped CB Richard Ellis Inc. to market space in the new data center, which is on track to come online in September 2011. “The Chicago market needs a building that will serve as its next data center and connectivity hub,” Papouchado said. “We intend to make 840 S. Canal St. that building. We are combining our 45 years of development experience with the best resources available to achieve the best designed, most reliable and efficient building that can be developed today. ”

The very loud call for data center space–not just in Chicago, but also across the U.S.–is only going to get louder for a few reasons, one of which is the Reid-McConnell Tax Relief Act of 2010. As noted in the Grubb & Ellis report, “The bill calls for 100-percent bonus depreciation on deduction allowances for investments in new business equipment placed in service between September 8, 2010 and December 31, 2011.” New legislation or no, it is a high-tech world so the necessity for data center space will not abate anytime soon, and SFRI, only just established in late November 2010, has wasted little time making moves to address the growing need. The company, a subsidiary of global real estate investment and development firm Red Sea Group, is also in the midst of developing a 136,000 square-foot data center in the State of Washington with 10,000 square feet of computing space available this spring and the capacity to accommodate an additional 40,000 square feet. Additionally, SFRI is developing a 26,900 square-foot facility with 13,000 square feet of computing floor in Santa Clara in California’s Silicon Valley.