Jan. 7, 2024

Want a quick glimpse inside the mind of the consumer?

Ask someone whose businesses include selling smartphones, pre-owned vehicles and fitness memberships, leasing apartments and serving beer by the glass.

I covered all of them with a call to Kevin Tupy in the last days of 2023 — which, he said, felt a lot like the last days of 2019. And that’s not exactly a bad thing.

“It’s still healthy, but it’s moderated,” he said. “Which is good because I think the strong survive in moderate growth, which by the way is where we were in 2019, growing 2 or 3 percent. It was single-digit returns, and they were not booed. You didn’t cheer, but it was a solid return, and that’s how we’re viewing things today.”

It felt like the right context for me to frame up my own thoughts on the year ahead.

I talked with many leaders in both the public and private sectors for an article at the start of 2024, and frankly I probably overreported it because I ended up with more interesting quotes than I could fit in the story. So you’ll get the benefit of that today as I do some of my own analysis on what the next 365 days could hold and in some future stories we have planned.

My take on the year is different from what it would have been even 60 days ago because there was a noticeable shift in business leaders’ mentality as soon as it appeared the Federal Reserve would begin bringing down interest rates this year and that inflation is abating.

After a solid few years of operating at a pace that most of us knew likely wasn’t sustainable, I’m sensing a blend between a little sigh of relief that more normal growth rates might be returning and a renewed push to make sure the business pipeline stays full enough for the future.

Running based on what collectively remains a fairly conservative nature, our businesses have taken advantage of the good times and might be even better positioned to grow now if the bad times many of us anticipated don’t actually end up that bad.

“Generally speaking, folks I know and compete against every day, they’re in fine shape,” said Chris Ekstrum, president and CEO of The First National Bank in Sioux Falls. “For us and a lot of other banks in town that are very well run, I look at the balance sheets and they’re fine.”

On the consumer side, however, there’s no question that a segment of people has spent down limited savings, now is beginning to accumulate debt again and is struggling to afford basic needs given that wage growth in many cases did not keep up with price inflation.

We can see it in the city’s sales tax revenue growth, which is still inching up but not even quite as much as 3 percent inflation.

“Our consumer loans are the first to be hit with inflation. People have to pay for gas and groceries, and we see that weakening the quickest,” said Dana Dykhouse, CEO of First Premier Bank. “Our consumer loans are starting to go back to pre-COVID delinquency levels, which in South Dakota are still very good compared to the rest of the country.”

And then, every time I think I know the mood of the consumer, I have a conversation with someone like Eric Sinclair, president of Montgomery’s.

“2023 has been a tale of two halves for us,” he said, reminding me of the terrible weather at the start and sharing how consumers pulled back the first six months of the year. “And it just loosened up from there, and it’s gotten better and better. The momentum we’re having going into the end of the year is crazy. These are huge months we’re having. I’m not sure why, but consumers are starting to spend money in their home again.”

The consumer is “trading down,” however, he continued. “Long-term financing is on the upswing. People that were spending $2,000 on a sofa are maybe looking at $1,000 to $1,500, and we’re adjusting price points accordingly and trying to get a lot more aggressive. Through COVID, people just wanted anything you had.”

Against this varied backdrop, it’s likely obvious why I chose the phrase “cautious optimism” for the headline of our story looking at the year ahead. And now, with that in mind, here are a few places, people and projects I’ll be watching in the year ahead.

The next big thing downtown

First, a reality check for myself. In an article early last year, I noted the spots I said we’d be watching in 2023, and I didn’t exactly hit the mark. To be fair, I think that’s also because rising rates and resulting uncertainty put the brakes on some things, but I should acknowledge some of the predictions I’m about to make also might happen in more like 2025 and beyond. Still, we need to acknowledge it’s time to think about what’s next downtown. With Cherapa Place and The Steel District close to done this year, it’s time to turn our attention to areas such as the remaining rail yard property, perhaps the balance of the Sioux Steel land and obviously the available land around the city’s parking ramp on 10th Street.

The Empire Mall

Dillard’s is set to open in March, which should give a spark to the city’s retail center and I’m guessing finally drive some additional redevelopment on the campus. Watch the former Sears “box” store, the former Royal Fork property and some of the smaller available out-parcels. Let’s hope we can see a reuse for the former Wendy’s and reinvigorate the food court, which has some vacancy.

Industrial parks

Could this be the year we see shovels in the ground for CJ Foods at Foundation Park? I wouldn’t rule it out.

“We had a good year in 2023 with a couple nice sales, and in 2024 we have a couple prospects that look promising,” Sioux Falls Development Foundation president Bob Mundt told me. “Warehousing and distribution are still going strong for the most part. Large-scale manufacturing is still going strong. We’re seeing some upticks in data centers and those types of things, so we’re seeing people kicking tires we haven’t seen kick tires in awhile.”

Watch the industrial land in the northeast too, including the Development Foundation’s expanded Park VIII and the industrial development where Maguire will move its headquarters this year.

Health care investments

I had a conversation with someone the other day that “5,000 or 6,000 could be the new 2,000 or 3,000” when it comes to Sioux Falls’ annual population growth, and that means a need for more health care infrastructure and personnel. Watch both major health systems as well as related entities like the Good Samaritan Society for building announcements this year, whether it’s expanding their base of clinics or growing their core campuses in central Sioux Falls.

Sanford Sports Complex

Might this be the year I get to bring you a fun announcement or two at or near the Sanford Sports Complex? Honestly, flip a coin. I don’t have a good enough sense for it other than there’s interest in additional development. Will the market bear it and developers choose to invest? Stay tuned.

The city’s fun — or not-so-fun stuff

The irony is that what you’d think would be the fun part of leading city government tends to be among the most controversial. Spend hundreds of millions on roads, water infrastructure and support for public safety? Most people sign off on it. Try to improve a city park, and niche user groups you didn’t even know existed line up to jockey for their interests.

This year, the city will have to tackle everything from the future of the Denny Sanford Premier Center campus to replacement swimming pools to the vision for the Riverline District, which could include anything from convention to recreation space, to future uses for the Great Plains Zoo and Butterfly House & Aquarium. There’s tons of potential and possibilities here, but will there be the consensus needed to get the big decisions done? Mayor Paul TenHaken has built up plenty of political capital heading into his last two years, but some of this would test anyone’s leadership.

Our next 30 Under 30

And finally, on the topic of leadership, 2023 marked the first year SiouxFalls.Business recognized 30 up-and-coming members of our business community in partnership with MarketBeat. This week, we again launch a call for nominations. Please have them in by the end of the day Jan. 31. Click here to submit, and make sure you give me enough detail to assess their early-career achievements and potential for future impact. I can’t wait to see who we are able to feature next.

Business leaders: Cautious optimism leads Sioux Falls into 2024