July 25, 2022

Sioux Falls set a record by surpassing $1 billion in building activity last year, setting the mark in late November. This year, the city hit $1 billion in less than seven months.

“It’s almost unimaginable to think that … we’re already breaking the record and the stuff that’s coming,” said Jeff Eckhoff, the city’s director of planning and development services.

For instance, there is $100 million worth of permits that have been approved but aren’t counting yet because they haven’t been paid for and picked up. There is an additional $200 million being reviewed.

A $1.5 billion year is within reach, “and we could exceed that,” Eckhoff said.

Unlike in 2020 when the Amazon fulfillment center vaulted the city into record territory, this year’s projects are a mix.

“We’ve got some medical in there, commercial projects and a bunch of homes too,” he said. “With apartments, we’re at 2,300 apartment units by now, and I think we have another 400 of those in the queue.”

Projects still to be permitted include a similar mix, from the new parking ramp at the Sioux Falls Regional Airport to expansion on the Sanford USD Medical Center campus and the city’s wastewater treatment plan.

“That’s the first really big public project in there from the city,” Eckhoff said.

For longtime developer Craig Lloyd, who marks 50 years in business at Lloyd Cos. this year, hitting $1 billion so early in the year is unbelievable, he said.

“It’s amazing. It’s huge. I remember when Steve Metli was talking about doing $100 million, when he was still planning director (in the early 2000s). And $1 billion is only Sioux Falls. I’d hate to guess what it is if you put Brandon and Harrisburg and that area in.”

Notably, the record numbers also come with increased construction costs. The more a project costs to build, the larger the permit valuation. And those are up 20 percent to 30 percent, Eckhoff said.

“Absolutely … inflation plays a role in valuation and permits.”

Lloyd agreed.

“Inflation has a lot to do with it, and it’s also the size of the projects people are doing today,” he said. “On our apartments, we thought a big deal was 48 units, and most of our projects are 300 to 400 units, and it’s just pretty amazing.”

Lloyd Cos. is the contractor behind The Steel District, which has three buildings among the highest valued of the year and some permits yet to come.

The downtown redevelopment includes a Canopy by Hilton hotel, office and restaurant building, and a parking ramp wrapped by apartments, retail and condominiums.

Additionally, Cherapa Place is adding a multiuse office and condominium building, two mixed-use apartment buildings and a parking ramp. The two downtown projects combine for nearly a half-billion just between the two of them.

Lloyd looks at the progress daily — even via digital camera on a recent fishing trip.

“I’m excited about it,” he said. “It’s fun to see two big projects coming out of the ground and starting to take shape.”

Cherapa is on track to place the 10th story on its largest building in the next two weeks, said Jeff Scherschligt, co-owner of development group Pendar Properties.

“They’ve got half the parking ramp already completed and four stories high, and they’re starting to frame the other half, so it’s really coming along quite nicely,” he said. “I have three cameras, so I see it every day.”

For Sioux Falls overall, “the momentum is continuing, and it’s impressive especially when you look against our peer communities in the region,” Scherschligt said. “These good decisions made by our community over really the last decade and two to get ourselves prepared for this kind of growth is really what’s doing it.”

It has been a blend of creating quality of life and a diverse economy where people want to move, he added.

“It used to be you build the plants and the businesses, and the people went to the jobs, and the whole concept now is you build out the community for where people want to live, and the businesses follow because they can get workers, and that’s literally what Sioux Falls has done. We are really showing up all of a sudden creating an urban environment but without the crowd. I really think that’s the key.”

And while projects like the downtown developments are the sort to come along once in a generation, 10-figure building years aren’t out of the question going forward, Eckhoff said.

“What I keep hearing is everybody is feeling pretty strong about next year, and it’s the year after that where nobody knows,” he said. “But whether it will be this pace, you just have to wonder. Is this the new normal or is this an anomaly? I think $1 billion, certainly. But a billion and a half? It’s just kind of hard to imagine we can keep going with that.”

Rising interest rates might dampen some developers’ appetites for taking on new projects, but “there’s a lot of stuff from private industry that will do things,” Lloyd said. “For our company, we’re way over our projections for this year, and we’re right on our five-year plan for next year, and who knows what 2024 is going to be like.”

Here’s a look at the top 10 projects by valuation  so far this year:

• Canopy by Hilton at The Steel District: $46.9 million.
• Cherapa Place building B, the Bancorp building, $46.6 million.
• Millstone Commons apartments, 26th Street and Veterans Parkway, $32.8 million.
• The Steel District office building, $28.8 million.
• Stadium Crossing Apartments, 69th Street and Cliff Avenue, $28.1 million.
• Harrisburg Middle School, 3001 E. Bison Trail, $26 million.
• PowderHaus Apartments, 2700 S. Burnfield Ave., $24.8 million.
• The Steel District parking ramp, $21 million.
• The Boundary apartments, 5350 W. Vision Drive, $19.2 million.
• The Parkwood apartments, 85th Street and Western Avenue., $17.5 million.

For a look at building activity through June by location, browse our interactive map below: