601W Eyes Data Center Conversion for Chicago Office Building

601W’s difficulty refinancing its office project at Canal Station has led to discussions about transforming the South Loop property into a data center.

The New York-based developer known for revitalizing Chicago’s Old Post Office is grappling with a $265 million redevelopment of the former Northern Trust office building at 801 South Canal Street, Crain’s reported. The redevelopment, done a few years ago, cost $388 per square foot.

The 683,000-square-foot building, rebranded as Canal Station, was intended to attract tenants seeking modern, affordable office space near the Loop.

601W purchased the building for $68 million ($100 per square foot) in 2020, is considering a data center conversion after struggling to secure refinancing and attract more tenants. The first tenant to secure space in the six-story building was R.M. Chin & Associates. The firm inked a lease for 15,000 square feet last year, but it reportedly hasn’t moved in and is considering other options.

Conversion to data storage could offer 601W a more viable financial solution amid the advent of artificial intelligence and declining demand for office space. Downtown vacancies stood at 26.3 percent in the fourth quarter, marking an increase from 23.8 percent the year before.

Canal Station’s location offers some advantages that could make it an ideal candidate for a data center conversion. The building is situated near critical infrastructure, including fiber-optic networks, which are essential for high-speed internet connections. It is also near a power substation.

The pivot wouldn’t be without challenges. Converting an office building into a data center would require significant investment in infrastructure, including reinforcing the building’s structure to support heavy server equipment and ensuring access to reliable power sources.

While the nearby substation offers a potential power source, it is unclear whether it has the capacity to meet the high energy demands of a data center. If additional power infrastructure is needed, it could drive up the cost.

Telos Group previously marketed Canal Station as a budget-friendly Class B alternative to other downtown areas, with projected rents of $45 per square foot. Upgrades to Canal Station include an 8,000-square-foot outdoor terrace, improved streetscaping and a renovated lobby.

— Andrew Terrell