The world of big data just got smaller.
Digital Realty, the largest owner of data centers, which house the computers that run everything from telecom networks to financial exchanges, is buying DuPont Fabros for about $5 billion in an all-stock deal.
The marriage brings together the two biggest operators of data centers in Chicago, one of the world’s key intersections for the fiber-optic lines that power the internet.
San Francisco-based Digital Realty has the largest share of the Chicago market, at about 25 percent, according to an estimate last year by 451 Research. The company is best known for owning 350 E. Cermak, one of the world’s largest data centers, at 1.1. million square feet, which sits near McCormick Place and is housed in R.R. Donnelly’s former Lakeside Press printing facility and headquarters.
Digital also owns a big data center at 600 S. Federal and three facilities in Franklin Park on a former Motorola headquarters.
DuPont, which has an estimated 15 percent market share in Chicago, has two huge data centers in Elk Grove Village and is finishing up a third, which is rumored to have lined up Apple as a customer.
“Digital has three major facilities in Chicago; adding DuPont Fabros’ three Elk Grove facilities gives them a deeper footprint,” says Christopher Jensen, a partner at Anderson Pacific Group, a telecom investment firm in Chicago. “You will continue to see consolidation in the data center space over the next few years similar to what we’ve witnessed in the fiber space over the last five years.”
Data center space has been growing about 9 percent annually in recent years. Most of the construction has been in the suburbs, where land is cheaper. Suburban Chicago data center capacity expected to come online in the five years ending in 2018 will have risen 13 percent, compared with 4 percent in the city, according to 451 Research.
Even as the two big players combine, large newcomers are entering the market, including QTS, which opened a new data center last year in the former Sun-Times printing plant at 2800 S. Ashland Ave.
CyrusOne, another large data-center operator, recently bought the CME’s data center in Aurora and is building another facility.
The Digital-DuPont deal comes amid a recent surge in data-center construction that’s fueled by two major forces: increased streaming of movies to computers and phones, and the shift to cloud computing, in which companies store their data on huge banks of remote servers that can be accessed from anywhere, rather than on their own on-site equipment.
Digital and DuPont have the scale to serve the biggest customers in the world, who require massive capacity. The combined company would be the “home to the cloud,” Digital Realty Chief Executive William Stein said on a conference call on the deal, Reuters reported.
More: How Chicago became a key vertebrae in the nation’s digital backbone