Apartment rebound? Vacancies show big year-over-year drop
March 2, 2020
The number of available apartments in Sioux Falls is shrinking.
The semi-annual vacancy report released by the South Dakota Multi Housing Association shows a 7.49 percent vacancy in market-rate apartments, down from 7.73 percent in July and well below the 9.83 percent reported in January 2019.
“This is a great downward trend for the industry, especially for this time of year. This should also bring an end to the rent concessions that are being offered,” the report said.
“2020 should be a strong market for multifamily.”
It’s starting out that way, according to multiple apartment developers and property managers.
“Overall, our portfolio is outperforming the market study, so we’re pleased with that,” said Norm Drake, CEO of Legacy Developments.
“We still see strong interest all across the board, whether it’s class C or class A, so we’re excited. We’ve got several more multifamily projects on the board for this year, a couple here in Sioux Falls and a couple in Rapid City, so we’re looking forward to it.”
His Third Avenue Lofts project, which is scheduled to move in residents in April, just started leasing and showings. It will add 87 units west of Third Avenue between 12th and 13th streets.
“We have strong interest,” Drake said. “The prices range from $995 up to $1,640 for a two-bedroom, two-bath unit, so we feel really good about the pricing. It should be very competitive, and we’re really pleased with the way the finishes are looking and the appearance of the entire building. I’m excited to see the dog park start this spring, which will be a nice amenity for people in that area.”
On the north end of downtown, Lloyd Cos. is on pace for its strongest apartment lease-up ever thanks to The Cascade, which will open its second building for residents this month.
“We’re 81 percent leased, and that would be by far our best lease-up ever,” said Christie Ernst, senior vice president of property management.
“It’s an amazing product. There’s a high demand for wanting to live downtown and be part of the action, and we have a fantastic team, which is No. 1.”
There are 15,000 units that reported as part of the survey, and about one-third of those are managed by Lloyd Cos., so the numbers closely reflect the portfolio, she said.
“2019 was a good year of occupancy, probably the best occupancy we’ve seen since going back to 2016,” she said.
Lloyd also has projects in development on multiple sides of town that likely will start construction this year, she said.
The vacancy report found tax credit properties were about even with July at an 8 percent vacancy and below the 8.52 percent vacancy reported a year ago.
“Historically, tax credit has a higher vacancy due to the lengthy qualification process required — meaning those units are vacant longer, though they may have an application holding them,” the report said.
HUD properties increased in vacancy to 6.62 percent from 4.58 percent in July and 4.63 percent one year ago.
Lloyd Cos. will be leasing up several new tax credit projects this year, Ernst said.
The vacancy report also reflects what Jill Madsen, president of Bender Midwest Properties, is experiencing in the company’s portfolio, she said.
“We’ve had a lot of activity,” she said. “I think a lot of it is that building permits are down, and we haven’t seen many grand, brand-new ones come online, so we’re just absorbing what’s there. It’s nice to be on this side for a while.”
Her company is still considering whether to bring any new product into the market, she said.
“The east side is where the most construction has been, so that area is still absorbing, and we’re seeing the west side start to tighten up a bit, which is nice to see vacancies go down,” Madsen said. “We’re pleased with where we’re at and just hoping things continue.”
