Sioux Falls added more than 3,000 apartments last year. Did it help availability?
Feb. 9, 2023
Despite more than 3,000 apartments being added last year to Sioux Falls, the overall market vacancy hasn’t budged much.
The semiannual look at apartment occupancy from the South Dakota Multi-Housing Association shows a 4.2 percent overall vacancy, compared with 3.7 percent in July and 3.1 percent a year ago.
The survey represents 18,548 units reporting.
There is some seasonality to the occupancy.
“Historically, we see an increase in vacancy in January. So no surprise with this increase,” said Jody Bjornebo, chair of the South Dakota Multi-Housing Association.
“We continue to be in an extremely tight real estate market with limited choices to rent or purchase, which contributes to the downward shift of rents in some of the areas.”
Sioux Falls added 3,343 multifamily housing units in 2022, up from 1,821 in 2021 and 1,571 in 2020.
Still, the vacancy rate for conventional market-rate properties only went from 3.41 percent in July 2022 to 3.96 percent in January. Of 15,874 units reported, there were 629 vacant.
For comparison, last January the vacancy rate was 2.88 percent, but in January 2021, it was 6.39 percent.
“With many new units either open or slated to open in Q1 2023, the market is about to change,” the report said. “More units available means more options for residents.”
At Lloyd Cos., which has its entire Sioux Falls portfolio reflected in the report, “these numbers are very comparable to our overall portfolio,” said Ashley Lipp, vice president of residential property management.
“Occupancy continued to hold strong through the fourth quarter, although we did see the typical increase in seasonal vacancy. Our average occupancy for 2022 was well over 95 percent for the year, and I anticipate a strong 2023, although maybe not quite as strong as 2022, which is positive for renters as they may have more options.”
Out-of-state relocations “are definitely playing a factor in the strong occupancy,” she said. “Recently, we’ve seen an increase of people relocating to work at some of the larger facilities that have started hiring such as Amazon.”
Market rates for apartments have increased steadily in the past two years but actually stay flat or trended down a bit in the past six months.
HUD properties saw a small decrease in vacancy from 1.9 percent in July 2022 to 1.4 percent in January. Of the 214 units reporting, only three were vacant.
“The application process continues to be a lengthy process for the residents as well as the managers/owners,” the report said. “No new HUD units are being constructed at this time.”
Tax credit properties saw a slight increase in vacancy from 5.9 percent in July 2022 to 6.06 percent in January. There were 2,460 total units reporting with 149 vacant.
“Tax credit properties, with the application requirements and qualifying process, continue to carry a higher vacancy rate than HUD and market property,” the report said.
As new apartments come into the market, “pre-leasing is going great,” Lipp said. “People are attracted to our new projects in all areas of the city, and we’re happy to offer such a wide variety of floor plans and amenities at a variety of price points.”
Projects currently leasing up include The Boundary in northwest Sioux Falls, opening in March and including a two-story clubhouse, and The Carlton at Dawley, which includes underground parking, multiple community gathering areas and an indoor pool.
The Multi-Housing Association is hopeful that as the state of South Dakota begins to administer $200 million in housing infrastructure funds, “our smaller communities around South Dakota will reap the benefits and see workforce housing construction underway soon, bringing more housing to much-needed areas,” Bjornebo said.
