Dec. 30, 2024

Try to take the pulse of the Sioux Falls business community and the reading feels a bit irregular heading into 2025.

“What stands out to me is that it’s very sporadic,” Mayor Paul TenHaken said. “I talked to one small retailer who’s having their best year ever — October was their best month ever. And I talked to another small retailer who said October was their worst in seven years. So it’s just a little schizophrenic.”

Larger businesses, especially those that are capital-intensive, largely have kept major investments at bay in the past year, he added.

“There are a few projects bubbling up … but not a lot of big economic development projects I’ve had conversations on the last half of the year.”

Still, 2025’s building total is positioned to be a big one, based solely on what already has been announced.

Schwan’s Co. broke ground in November on a 142-acre parcel at Foundation Park where the company is building a 700,000-square-foot facility.

The full building permit hasn’t been issued yet for the Avera McKennan women and children’s tower — the largest building project in the system’s history. And Sanford Health’s Good Samaritan Society – Founder’s Crossing senior community will be getting a permit for the first phase of its new campus at Veterans Parkway and 57th Street.

An additional large project could bring a $250 million permit, “and there’s a couple smaller ones out there that will end up being $50 (million) or $60 million, so just our projects we’re working on could get to $1.3 (billion) or $1.4 billion, and that’s not including housing or apartments,” said Bob Mundt, president and CEO of the Sioux Falls Development Foundation.

“You feel good about it, but something could come up where they decide not to pull the trigger. I think people are still feeling cautious because nobody knows how Trump’s policies are going to affect anything. Is he going to do the tariff thing or isn’t he? Is he going to cut all kinds of stuff or isn’t he? So a lot of people are thinking they’ll wait until the first quarter of 2025.”

At City Hall, the pipeline of projects is “definitely slower,” said Jeff Eckhoff, director of planning and development services. He predicts that the city will end 2024 with its fourth-highest building year.

Major projects have includes the state of South Dakota’s One Stop office campus at Dawley Farm Village, the new campus for LifeScape and “a lot of projects that were $10 million are below that made up the diversity to get to where we are over $1 billion.”

The city’s population growth also has slowed somewhat from the boom of a few years ago, Eckhoff estimates.

“It feels that way, but I also was talking to a Realtor and a lot of multifamily units were still going to people from out of state,” he said. “A lot of what we’ll see next year (in the multifamily market) will be second and third phases (of projects) finishing up, but there has to be absorption based on what we’ve permitted the last few years.”

Looking to next year, “it’s interesting who you talk to — some of the design people are really busy, and others are looking for work,” Eckhoff said. “We’re seeing it in our contractors. There’s a lot of them out there looking for work, and it’s filtered down. Some of the subcontractors are still busy, but even that is starting to open up a bit.”

At Journey Group, “our backlog is strong,” CEO Randy Knecht said, adding that the company’s diversification into different market segments helps. Journey is projecting an increase in business activity next year, but “we’re not the norm,” Knecht said.

“A lot of contractors were pretty busy in 2024 and finished work because the weather was really good, and they’re a little concerned because they don’t have as much activity and projects in 2025 as they’ve seen before. And there are some concerning things: sales tax revenue and a few concerning economic indicators. I’m still cautiously optimistic, but we’re blessed with some good projects that will be going through winter.”

Spots to watch

After record-breaking development years downtown, the city’s center is in somewhat of an absorption mode, with hundreds of new apartments and significant additional office space coming into the market at Cherapa Place and The Steel District.

“It’s just like a huge weight lifted to get to the finish line,” said Chris Thorkelson, CEO of Steel District developer Lloyd Cos.

“It’s big for our team. Everyone stuck with it even though there was a ton of pressure to meet deadlines and dates and see the final product come together.”

Office users continue to move into both properties. Pomegranate Market is scheduled to open at Cherapa Place in the coming year, while The Steel District will add a restaurant for Jack Rose Social Club in addition to the four full-service restaurants already operating at the development.

Elsewhere throughout downtown, The One2 seven-story apartment project from Lloyd Cos. is scheduled to begin moving in residents early in the year on the south end of downtown.

The city of Sioux Falls is continuing to work with Iowa-based Christensen Development on a mixed-use project on rail yard land along East Eighth Street, though there are no updated timelines.

The city’s parking ramp on Mall Avenue also remains a prospective redevelopment site.

“It’s not costing the taxpayers a dime to have it sit there, so we’re not in a huge rush to have something,” TenHaken said. “The time will come and the market will change, and it’s still a valuable piece of land. We still get interest and inquiries.”

At Lloyd, 2024 was the company’s biggest year by volume, Thorkelson said. The company’s stabilized multifamily portfolio saw an overall uptick in occupancy, “and that’s a good sign,” he said. “Where we can identify good pieces of ground, we’re still going ahead with new product.”

Still, the company is diversifying its presence into other markets, he said.

“The foot had to come off the gas a little bit because of the challenges with the interest rate environment and the construction costs,” he said. “It’s forcing us to identify other opportunities we’re taking advantage of and building relationships.”

The transformation of the former Mercato block is a highlight looking ahead to next year, Thorkelson said.

Financing is coming together for the project, which already has included demolition of the buildings on the 600 block of West 11th Street. The plan is to replace it with a building that will house Southeastern Behavioral Health on the first floor and 55 apartments designated for low-income residents on the floors above.

“It’s such a win-win,” he said.

For Van Buskirk Cos., it has been a “very busy” year for construction and brokerage, but “housing was definitely our slow spot,” said Steve Van Buskirk, co-CEO.

“Residential home construction and land development is definitely moving slower. As soon as interest rates dropped, you get a burst of activity, and then it peters out, and that’s pretty consistent talking with other developers and builders in town. A lot of it is interest rate-driven, and people are just waiting it out for rates to come down.”

Demand is there, though, he added. His company is working on multiple subdivisions, including three in Brandon, a neighborhood in Crooks, one in Harrisburg and others in northwest and northeast Sioux Falls.

In Sioux Falls, “the north end of town is really going to blossom,” Van Buskirk said, pointing to Mapleton Golf Club, which is scheduled to open in 2025, and the new industrial park that includes Maguire’s headquarters.

“There’s a lot of excitement up there.”

Commercially, the Lake Lorraine development is finishing up construction on Big Lost Meadery, scheduling to bring a new food and beverage option to the area in the first half of the year. Other prospects include a larger retailer and a quick-service restaurant.

“We should have good activity in ’25. We always like to see something going up, and it keeps momentum going,” Van Buskirk said. “It’s gotten busier and busier as things continue to fill in.”

In economic development, much of the talk recently has centered around prospective data center deals — large projects requiring hundreds of acres along with supporting infrastructure, including fiber capacity.

“We’re looking at it with a fine-toothed comb,” Mundt said. “How do we vet these projects to make sure we’re getting the best ones we can, taking … into account best use of land, best use of power, best use of people.”

National brokers are interested in buying 300 acres, for instance, he said, and then securing a user for a data center from there.

“We’re not going to tie up 300 acres for two years,” Mundt said. “We’re turning them away right now.”

While the need to grow a workforce is continual, “I don’t hear a lot about workforce anymore,” he continued. “People are always looking, but they’re operating with what they have. What I hear is more of a skills match, with some of our companies moving to advanced technology and robotics. I’m hearing more about ‘I need to train my workers from the old way to the new way.'”