Office conversion projects are all the rage in today’s sophisticated commercial real estate market. Most focus on converting office space to residential space, although there are examples in other asset classes as well. One of the more interesting projects to come underway recently is Compass Datacenters’ project to add five hyperscale data centers to the 2.4 million square foot former Sears headquarters in suburban Chicago.
Demand for data centers has skyrocketed in recent years with the growth of artificial intelligence. Northern Illinois has become one of many significant data center hubs due to its vast supply of reliable, clean electricity. Local utility Commonwealth Edison reports that about 30 new data centers in its service area have announced development plans in the past five years. Data from the U.S. Energy Information Administration shows that nuclear, wind and other carbon-free sources account for over 60 percent of Illinois’ electricity generation.
Abundant clean energy resources in Chicago’s suburbs made Compass Datacenters’ repurposing of the former Sears headquarters a more attractive option. The nearly 200-acre campus was sparsely used after Sears filed for bankruptcy in 2018. Compass purchased the site in September 2023 for $194 million, beginning one of the most notable national examples of repurposing an outdated corporate campus for new uses.
Typically, data centers create few jobs, but Compass’ redevelopment of the former office site is expected to generate significant property tax revenue for Hoffman Estates, Illinois. Construction of the data centers will create 1,000 jobs, and once they’re operational, the entire project is expected to represent about $10 billion in local investment. Hoffman Villages, northwest of Chicago, recently changed the zoning of the former Sears commercial district to allow data centers. When completed, the proposed Compass site will be one of the largest data centers in Illinois.
Dallas-based Compass Datacenters designs, builds and operates data centers for the world’s largest hyperscalers and cloud providers. Founded in 2011, the company delivers dedicated enterprise data centers, serving organizations requiring one to three megawatts of daily IT load and supporting mission-critical data center applications. Compass has grown rapidly in recent years along with the hot data center market and is backed by some deep-pocketed investors such as Brookfield Infrastructure and Ontario Teachers’ Pension Plan.
The site of the new hyperscale data center in Illinois is being prepared for demolition, which is scheduled to begin this summer. Compass expects construction to begin next year. “At Compass, we’re going slow before we go fast,” said Compass CEO Chris Crosby. “We’re being methodical with our demolition and doing everything we can to minimize waste. It will take over a year to complete this work.”
Several design aspects of the hyperscale data center complex are unique. Once operational, the data centers will utilize a 400- to 500-kilowatt, outdoor free-cooling solution that uses no water and has been standardized across all Compass data centers. Newer models of the free-cooling solution can achieve energy efficiencies of less than 1.20 and increase energy efficiency by up to 50 percent. The system is the most widely deployed pump-based refrigerant economization data center system on the market, with over 8,500 installations worldwide.
Compass has other plans to increase the sustainability of the complex. The company plans to salvage and reuse crushed concrete, stone blocks and asphalt from the old Sears buildings. They will be used as fill to level the site and as material for on-site concrete production. Compass is using an artificial intelligence tool to optimize locally available materials and reduce cement requirements for building its data centers by 25 percent.
The company will also use technology to blend carbon dioxide extracted from industrial sources into concrete mixes to strengthen them and reduce cement requirements. Compass uses this in all of its new builds and the technology has enabled it to reduce the CO2 emissions of its precast and cast-in-place concrete by four to six percent.
Another sustainability feature of the data center properties will be a roofing material that reduces the urban heat island effect that traditional roofing materials sometimes cause. Compass spokespeople say the roofing material will reduce greenhouse gas emissions at the site by up to 4,813 tons per year.
Local utility ConEd expects to have a new substation to power the data center site up and running in mid-2026. Compass, meanwhile, has not yet announced a completion date for the project. However, company spokespeople say they are using modular designs and prefabrication of components, which greatly speeds up the development process.
Given the lack of available land for new data centers, Compass’ redevelopment project could provide insight into a potential strategy for developers. A recent report from JLL North American Data Center finds that the Chicago data center market is tight due to unprecedented leasing. The report highlights significant power constraints and limited available land for new development opportunities. Repurposing legacy properties – such as old corporate campuses – could benefit data center developers with limited land availability and represent a sustainability strategy.
In a recent essay, Sean Farney, vice president of data center strategy for the Americas at JLL, writes, “Sustainability is becoming increasingly important. Refurbishing older buildings can be an effective way to reduce a building’s carbon footprint and meet the increasing demand for new data centers.” Farney argues that with a circular economy, any commercial building with the right structure and adequate power could be converted into a data center. Repurposing old buildings into data centers could reduce carbon emissions in concrete and steel, as well as across the entire construction value chain.
At a time when real estate conversions are gaining momentum, Compass’ repurposing of the former Sears headquarters is a project that could be replicated by other developers. Demand for data centers isn’t expected to subside anytime soon, while the utility of sprawling corporate campuses has diminished in the era of remote work. Compass’ idea of repurposing offices into data centers may not work in every case, but it could be an effective way for some developers to solve multiple challenges at once.
