This CNA data center in Aurora now has excess capacity

CHICAGO—The world of high technology changes fast. And many corporations that built their own high-tech data centers have found the needed equipment getting smaller, shrinking their footprint and leaving excess capacity.

“I would say that there is a trend in the corporate world of not wanting to operate their own data centers,” Greg Gerber of the commercial real estate services firm Studley tells GlobeSt.com. The trend has developed relatively quickly. “Data centers built just five or seven years ago were generally built larger than most companies’ systems now require.”

As reported in GlobeSt.com, Gerber helped negotiate the recent $30 million sale of CNA’s 70,000-square-foot data center in suburban Aurora to ByteGrid Holdings LLC, which already operates centers in Georgia, Maryland and Cleveland. The commercial insurance writer’s primary data center was developed in 2008.

Adding these established data centers to the market should further boost the metropolitan area’s high-tech reputation among investors. Chicago has become one of the top cities for data centers, along with New York, San Francisco, Atlanta, Dallas and Washington DC, according to Patrick Davis, a senior design phase manager with Mortenson Construction who specializes in data centers.

“Of all of these cities, we have the lowest vacancy rates in our data centers,” he says, below five percent. And the growing use of computerized medical records, cloud computing and other factors has caused projections for “the demand curve for data centers to just go out of control.”

And that increased activity is occurring nationwide. As recently reported in GlobeSt.com, in the past 18 months, developers completed more than 1.5-million-square-feet of new data center space in the northern New Jersey market, and seem poised to build even more.

CNA briefly considered holding onto its building and renting out the excess space, Gerber adds. “That was an exercise we went through with CNA when we were brought on, but the idea was quickly dismissed since CNA decided ‘this is not what we do, running a data center is not our core business.’”

By selling the centers, corporations monetize these assets, and ensure the excess capacity gets rented out and administered by true professionals.

“We took the building out to the market and ended up with four solid prospective buyers,” says Gerber, which he considers a sign of strong interest.

The insurer plans to continue leasing a smaller space at the Aurora center for its data needs, so it did not necessarily consider the highest bidder the most attractive, he adds. “BYTEGRID represented the right mix of a good price and a lot of expertise as an owner-operator.”

“CNA wanted to recoup their expenses, which it did, and it can now avoid the capital requirement, a very expensive one, of maintaining a data center.”

Gerber believes this particular niche has developed enough to begin attracting interest from REITs, which may eventually purchase portfolios of data centers from the operators that bought them from the original corporate users. So far, however, this has not been done.

But whatever the future holds, he says, “right now, if you have a new data center with excess capacity, there are operators out there looking to buy.”