April 9, 2018

They aren’t sounding any alarms, but CEOs’ perception of the Sioux Falls business climate is showing a drop.

In March, 46 percent of CEOs surveyed by SiouxFalls.Business and the Augustana Research Institute said the city’s business climate is excellent. That’s down from 64 percent in January.

In March, 51 percent said it was good, up from 33 percent in January. In both months, 2 percent rated it as fair.

That’s consistent with what developer Norm Drake is experiencing on the ground.

“I would say the level of business activity is good to very good based on the pipeline of activity we are seeing right now,” said Drake, the CEO of Legacy Developments. “We are especially seeing an increased demand for potential tenants on our properties.”

In the multifamily market, where vacancy in January reached 10.7 percent, a high not seen in years, Drake said he’s seeing “a significant increase in inquiries and lease signings from last quarter, and it is an even more significant increase when you look at how it compares to this time last year.”

In the retail and office markets, “it’s good and comparable to last quarter and last year,” he said.

The CEOs surveyed also showed a slight drop in their assessment of the national economy. Thirteen percent rated it excellent, which is down 5 percentage points from the beginning of the year. Another 13 percent called it fair, which is up 4 percentage points, and the remainder said it’s good.

“Respondents continue to report overwhelmingly good news for their businesses as well as the local and national economies,” said Robert Wright, the Nef Chair of Political Economy at Augustana University. “For the vast majority of respondents, total revenues continue to increase or hold steady. As a consequence, most respondents continue to maintain or increase their employment and capital bases.”

CEOs were split in assessing expectations for business activity at their companies in the coming quarter, with 51 percent expecting it to be above average and 49 percent expecting average activity.

More than half – 56 percent – expect average hiring in the coming quarter, with 34 percent expecting above average and 7 percent below average.

Most businesses – 68 percent – expect average capital expenditures in the coming quarter, with 15 percent expecting above average and 15 percent below average.

“Since the last survey, planned capital expenditures are down, probably because sentiment about the national economy has become slightly less optimistic, possibly in response to the Trump administration’s tariff policies,” Wright said.

The survey will be conducted again at the end of the quarter.