April 7, 2022

The market for industrial space in Sioux Falls is so tight, a North Dakota company is planning a 200,000-square-foot building without knowing yet which business will fill it. And it could be the first of several.

Built on speculation, or without a committed tenant, the building is coming in response to historically low vacancy in the Sioux Falls market.

According to a market outlook presented by Bender Commercial Real Estate Services in March, the city added 4 million square feet of industrial space last year — the equivalent of 70 football fields and a 17 percent increase from 2020.

However, the report still estimated the market has a 1.4 percent vacancy rate, down from 4 percent last year, despite absorbing 4.5 million square feet. That’s because nearly all the new space already has a user — Amazon, FedEx or FurnitureMart USA, for example.

The building planned by Great Hall Properties of Fargo will be about a half-mile southwest of Foundation Park,on 52 acres near Interstate 90 and Marion Road.

“We’re geared toward distribution and logistics, but someone like manufacturing could also utilize it,” said Chris Tyre, the company’s development specialist.

“Sioux Falls has had virtually zero spec industrial built in even the last decade and certainly not any to this size and scale.”

The appeal likely will be to e-commerce-driven businesses looking to “nail down shipment times to one day or same-day shipping,” Tyre continued. “These last-mile delivery networks are becoming crucial, and Sioux Falls had zero space available.”

Large companies are looking throughout the region and typically locate where they can find existing space, he said.

“Talking to local people plugged into the market, local brokers, they had been approached by national tenants looking for space who liked Sioux Falls and liked the state of South Dakota, but they wanted to move rapidly, and there was nothing available,” Tyre said.

The project is working through city approvals and anticipating a late-spring groundbreaking, he said. Construction is estimated to take nine months.

Ideally, a single tenant would take the entire building, but it could be divided in two, Tyre said.

“These are typically well-paying jobs with good benefits,” he added.

The site ultimately can support three buildings at that scale.

“It largely depends on how the first one goes,” Tyre said. “If it is leased up and stabilized within 12 months, we’d likely start on a second building. With some activity in the area however, it’s not infeasible to think that someone would want a build-to-suit on the remaining land.”