An AI data center is quietly breaking ground in the South Loop, and developers aren’t talking

Residents of Kissel Kar Lofts, an apartment complex adjacent to the site, have mixed feelings about being neighbors to the two-story data center. Resident Ashlyn Sisco says she wasn’t thrilled that her roommate — not the company — was the one to tell her that this new data center was moving in next door.

“We have a really nice city view and everybody is wondering if we’re going to be completely blocked once this place is up,” she says.

On the other hand, James Buelow, another Kissel Kar Lofts resident, feels AI is a good development. He believes that “AI is the future” and “it would be a great investment for the city.”

Although there are mixed opinions from local residents living next to HydraVault, Chien believes there could be positive impacts for the neighborhood as well, like new construction jobs and the filling of vacant land.

He added that data centers are a part of a wave of progress, but that they should balance development with minimizing damage.

“This isn’t a ‘stop and make it go away’ problem,” he says.

HydraVault says they will use a “closed-loop” system, meaning that the material used to cool the data equipment will repeatedly cycle through the center’s system. Chien points out this that closed-loop systems can use 20% to 30% more electricity because of the energy required to run equipment that chills data processing units.

“The disadvantage of using these closed loop systems is that they are well known to consume a little bit more of electricity,” he says.

However, Chien says for someone living close to a data center, their power is more likely to be reliable because that is what the data centers themselves are seeking. As a small-scale data center, HydraVault is expected to have a smaller energy footprint compared to hyperscale centers in states like North Virginia, Texas and California.

One of the major concerns with data centers is their use of power and the lack of regulation around water and power usage. According to the Environmental and Energy Study Institute, large data centers can consume up to five million gallons of water per day, equal to the water use of a town of 10,000-50,000 people.

Helena Volzer is the senior source water policy manager at the Alliance for the Great Lakes, a nonprofit that focuses on protecting the Great Lakes. She says less than a third of data centers track their water use. In a 2025 report, the Alliance called on the federal government and local municipalities to impose water reporting requirements and establish stronger frameworks to regulate data centers.

“The industry has very much downplayed the indirect water use, (and) because it’s not within the four corners of the data center, they can claim that they are not causing this additional water use, but really, new natural gas generationis being brought online for data centers,” she says.

Volzer says Illinois does not have a comprehensive scheme for regulating groundwater usage.

The concern over the impact of data centers can be a result of the lack of transparency between those responsible for building them and not letting communities know details about the project.

At the Feb. 12 “Communities First: Why Local Engagement is the First Step in Data Center Site Selection” panel hosted by AFCOM, a professional association for data center and IT infrastructure professionals, Dale Lewis, who is the director of Data Center Project Development for The Boldt Company, spoke about how the industry’s use of non-disclosure agreements limits the public’s ability to understand projects that will directly impact them.

Lewis emphasizes that the lack of communication between these companies in the industry can be rooted in the common practice of signing NDAs to maintain a competitive edge. However, he says, “it was never intended to shield the community from knowing what companies are doing, although it did accomplish that.”

However, when communities demand to know what is going on, Lewis says, “We can’t be hiding our development plans or intent from the community … that’s something as an industry that we are trying to grow into and that’s one of our biggest challenges right now.”

Regulation may ramp up in Illinois

As a data center promising sustainable practices in a low-income area, HydraVault says on its website that its clients may be eligible for certain tax exemptions under the 2024 Illinois Data Centers Investment program.

However, at the Illinois “State of the State” address on Feb. 18, Gov. J.B. Pritzker proposed to pause new tax incentives for data centers for the next two years. This decision would need to be approved by the Illinois General Assembly.

“With the shifting energy landscape, our growth mustn’t undermine affordability and stability for our families,” Pritzker says. He also called on grid operator PJM] , the main electric transmission system for Illinois and the largest power grid operator in the U.S., to pay for its own power to prevent rates from going up.

Just under 40 states have adopted data center tax incentive programs to encourage investment. To qualify in Illinois, data centers must be carbon neutral after two years of service.

More data center accountability may be coming to Illinois with the POWER Act — which stands for “Protecting Our Water, Energy and Ratepayers” — a bill introduced by State Sens. Ram Villavalam, Mattie Hunter and Rachel Ventura in early February.

If passed, the law would require data centers to track and report their water usage and puts restrictions on where data centers can be located.

“The way that the language is designed right now is actually to create a race to the top,” Samira Hanessian, the energy policy director of the Illinois Environmental Council, said. “What that means is, providing a carrot and stick for data center developers to actually want to implement some of these best practices, and establish a more competitive marketplace for these more sustainable data centers.”

Chien, who has studied the issue as a computer science professor, says data center companies have “bred a lot of distrust” in communities by being secretive about their plans and use of resources, and federal guidelines requiring more transparency would be positive.

“These data center companies are very secretive by nature,” he says. “I don’t know if there’s really any good reason for it.”

Chien has worked on research with Google, Microsoft and the National Renewable Energy Laboratory.

He says that the Federal Energy Regulatory Commission (FERC) sent out a directive last year to PJM to encourage the AI data centers on its grid to protect consumers and maintain a fair, consistent energy supply. (Note: PJM’s deadline to implement these changes is Feb. 16).

“The problem with data centers is that they actually often require a load that is very steady and doesn’t fluctuate,” Chien says. “So that’s actually good from a predictability point of view, but the problem is now the power grid is increasingly powered by variable resources, such as solar and wind power. A lot of people have been trying to figure out how to have the data centers reduce their load at times when the grid is under stress.”

Electric bills in Chicago could go up as much as $70 in the next three years because of data centers, according to the Citizens Utility Board.

Ensuring affordability and reliability also requires not only technical and legislative solutions but also meaningful community engagement and clear communication.

“How are you ever going to get those communities to appreciate what you’re doing — they’re just going to read about all the bad stuff in the paper — unless you have people in the community that are a part of it and can explain it to the community,” the UChicago professor says.

HydraVault has broken ground and according to their website there will be “early user access” in December 2026.