Quantum computers show promise to power up real estate demand

Across the country, parcels of underused real estate are setting the stage for a new wave of development sprouting up on the heels of artificial intelligence.

In Chicago, a sprawling steel mill complex is set to be transformed to house tenants across industries vying to boost technological breakthroughs. A weed-choked industrial site near Denver is targeted as a research facility with labs. In New York, a just-opened IBM building houses its most sophisticated computer, while tech giant Google plans to turn a vacant 8-acre California lot into a computing center to support its most cutting-edge software to date.

The projects are taking root in the service of quantum computing, a field using subatomic particles existing in more than one state to calculate at speeds far faster than traditional technology — and with a lower margin for error. Quantum processing is expected to lead to breakthroughs in how major tech firms from Google to IBM use artificial intelligence, as well as in such fields as cryptography, drug development and climate science.

Quantum computing has drawn the attention of economic development professionals as cities across the United States move to get ahead of what consulting firm McKinsey & Co. estimates could become a $2 trillion industry, and create hubs for research into the technology.

"We’ve seen infrastructure plays by real estate developers around AI, the cloud and data centers, and now they’re looking at locking down sites for quantum development as well," said Tracey Hyatt Bosman, managing director with New Jersey-based site selection and consulting firm Biggins Lacy Shapiro & Co.

PsiQuantum, a Silicon Valley company, recently chose the Chicago site to open a facility at an about 420-acre campus funded by Illinois and the U.S. Department of Defense. Developer Related Midwest is proposing a project that could include more than 59 million square feet of facilities, according to CoStar News reporting.

In Colorado, a state that beat out Illinois and others to land $40.5 million in federal funding from the almost $53 billion CHIPS and Science Act, a consortium called Elevate Colorado broke ground on a quantum computing research facility at an old industrial property in Arvada, northwest of Denver. The 70-acre property — formerly used as a mining research hub — is slated to be transformed into Quantum Commons, with labs, shared research facilities and office space to allow quantum startups to develop and commercialize their technologies.

Other regions such as Boston, New York, Maryland and the Washington, D.C., area are also vying with Seattle and the San Francisco Bay Area to become Silicon Valley-style clusters to develop quantum computers.

New York City officials last year partnered with Westchester County to launch a statewide group aimed at attracting quantum computing research and manufacturing to the Empire State, the corporate home of IBM. The tech giant, a leader in quantum research, this year opened The Think Lab, a cutting-edge facility at its research headquarters in Westchester County’s Yorktown Heights that houses what IBM calls the world's most advanced quantum computer.

"About six or seven regions across the country will see early investment in real estate around labs, research centers and first-of-a-kind pilot facilities before it starts to percolate to the rest of the country," Bosman said.

Quantum computing has "off-the-charts potential" to create demand for labs and support facilities around key technology hubs, said Rob Kolar, president of JLL Technologies, the Chicago-based global brokerage’s division that plans and manages facilities for some of the world's largest tech giants.

Still, like the technology itself, quantum computing's effects on commercial real estate is a work in progress that is likely to play out over the next decade or more, with projects to develop such computers remaining in the early stage, real estate professionals told CoStar News.

Illinois Gov. J.B. Pritzker, a self-proclaimed "geek for all things quantum," has led the state's efforts to develop the campus at the old steel mill site.

The state estimates that the PsiQuantum campus could generate as much as $60 billion in economic effects and create thousands of jobs by turning the area into “the Silicon Valley of quantum development.”

On the West Coast, IonQ, a firm focused on building quantum computing hardware and software, plans to invest $1 billion in the Seattle region over the next decade after opening a quantum laboratory and data center at a 105,000-square-foot plant in Bothell, near the home of Amazon and Microsoft and large operations for other tech giants such as Google and Facebook parent Meta.

The company, based in College Park, Maryland, aims to tap into the local talent base as it hires hundreds of employees, CEO Peter Chapman said in an interview.

IonQ chose the building that is owned by life science real estate investment trust Alexandria Real Estate Equities because it's next to the University of Washington's Bothell campus — and because the facility has a high-power electrical system used by a previous tenant, AT&T, that operated a data center at the site. Facilities that house quantum computers also need large refrigerators and other heavy equipment to cool superconductors to cryogenic temperatures to ensure error-free calculations.

The plant's 4,000-ampere, 480-volt power supply and raised-floor computer room that allows for HVAC cooling of computer systems gives IonQ the infrastructure it needs to build, test and get the computers into the hands of such customers and partners as Airbus, Hyundai Motor, Lockheed Martin, Nvidia, Microsoft and other tech giants, and the United States Air Force Research Laboratory.

“The Seattle region has been a hub of tech innovation and manufacturing for decades and has the skilled workforce we need to design, build and manufacture our quantum computers," Chapman said. "As we planned our expansion, the Seattle area was an ideal option for our new facility.”

In New York, IBM recently announced it has finished a major expansion of its quantum computing data center in Poughkeepsie, about 45 miles north of Yorktown Heights. The expansion is part of a $20 billion investment to bolster research and manufacturing of quantum and other technology.

Companies are just starting to ask questions about how they can use quantum computers amid heady projections about the revolutionary changes the technology could bring to solving business problems, Michael Marrion, senior vice president with tenant representative brokerage Cresa in Chicago, said in an interview.

"Quantum is really just starting in the U.S. and hasn’t had its kind of ‘ChatGPT moment' that puts the technology in the public eye — where people understand that this is a computer that can literally run a million times faster than classical computers,” Marrion said.

Regions with a strong tech company presence and talent pool, with universities clustered around federal laboratories and private research centers, will see the earliest benefits from quantum technology, Kolar and other real estate professionals told CoStar News.

Quantum computers operate on the principles of quantum mechanics, a subfield of physics that studies matter and its interactions with energy on the scale of photons, electrons, neutrons and other atomic and subatomic particles.

Quantum computing and generative artificial intelligence research is already helping to dramatically reshape the real estate footprints of large tech firms such as Google and IBM as they convert millions of square feet of traditional office space into laboratory and research facilities to test and prepare new products for commercial use, said JLL's Kolar, who has worked with the brokerage's tech-sector clients for two decades.

The world’s biggest tech companies have led research and development of quantum technology that could replace today’s silicon-based supercomputers, including the development of encryption protocols to defend their devices, operating systems and networks against future quantum computing attacks.

Google bought land last year in California’s Santa Barbara County that could include a research and development facility related to quantum computers. The property is expected to expand upon Google's Quantum AI facility located about 3 miles away that has a data center, research labs and what the search giant calls the "first quantum computer to ever demonstrate beyond-classical computational ability," according to the company's website. The large-scale, error-free quantum processors operate in extremely cold environments and could help with AI, machine learning and other difficult computer science problems.

On the startup front, prominent firms include D-Wave Systems, a developer of quantum systems for Volkswagen, Google and other notable companies. The firm has a 42,000-square-foot headquarters near Vancouver, British Columbia, and a smaller facility in the Silicon Valley city of Palo Alto, California. Quantinuum, a maker of trapped-ion quantum computers, has three locations totaling about 26,000 square feet, including its headquarters in Broomfield, Colorado, and an office in the United Kingdom’s Cambridge.

Quantum computers need to be supercooled by advanced liquid nitrogen units and isolated from other IT hardware to prevent interference that can introduce errors so they are so far too big to be housed in a typical data center, Andy Cvengros, managing director with JLL's U.S. Data Center Markets team, said in an interview.

While rising commercial adoption of AI has fueled demand for data centers and other properties, quantum technology is at present “so scientific and specialized that we haven’t really seen it yet outside the labs and research institutes,” Cvengros said.

“We don’t see large growth impacts coming any time soon from quantum in the data center space,” he said.

Today’s quantum facilities resemble laboratories, and it remains to be seen how quantum computing facilities will be designed and function in the long term, said JT Jacobs, principal and data center lead for architecture firm Corgan.

“If it’s anything like the other rounds of technology development that we’ve seen in the industry, I suspect in the beginning you’ll see limited implications in real estate,” Jacobs said. “As applications for quantum grow, that’s when you’ll see it explode.”

He compared it with artificial intelligence applications that just a few years ago gobbled up relatively little cloud storage — but now account for a huge share of overall data center storage capacity.

“I think we’ll see a similar trajectory for quantum computing,” Jacobs said.

Staff reporter Ryan Ori contributed to this report.