Feb. 7, 2022

In retail, January tends to bring a season of closures.

And this year was no exception, particularly at The Empire Mall, which saw longtime retailers, including PacSun, Yankee Candle and Bohme Boutique, announce departures.

A few miles south, it was a similar story at Cody’s Smokehouse BBQ.

But otherwise, the city’s retail market largely appears to be entering 2022 not just relatively unscathed but positioned to capitalize on a retail market that industry analysts say is expanding in virtually every direction.

“What’s happened in retail is kind of blowing my mind,” said Garrick Brown, who is considered among the nation’s leading retail analysts. He’s the chief operating officer at California-based Lockehouse Retail Group.

“Everyone is in growth mode, especially the categories that did well (since the pandemic started).”

Fewer retailers are at risk of bankruptcy today than before the pandemic began, Brown contends.

“Obviously, some did go bankrupt; some of them basically were able to get better loans and redo their financing because lenders were afraid the damage would be so massive they renegotiated debts, so suddenly you’ve got where almost everyone’s credit ratings are going up, with a few exceptions.”

In Sioux Falls, “there’s a lot of momentum in the national retail market right now,” said Ryan Tysdal, a commercial broker with Van Buskirk Cos. “They’re expanding; they’re adding locations in existing markets that they’re doing well in.”

That often includes Sioux Falls, where sales tax revenue was up 17 percent year over year in the most recent report at the end of November.

“Retail sales are doing great,” Tysdal said. “The economy has been just roaring, and retailers perform exceedingly well in those environments, and that’s where you see the adding locations.”

Tysdal said he is working with multiple national retailers already in Sioux Falls “and they’re all watching their Sioux Falls revenues and justifying additional locations in our market,” he said. “The fact that the city is literally growing in every direction provides opportunities.”

Interest from national retailers extends to every corner of the city, brokers said.

On the east side, Dawley Farm Village opened T-Mobile last week and will add Freddy’s Frozen Custard & Steakburgers in the coming weeks.

On the west side, Dave & Buster’s plans to open in early March at Lake Lorraine, and growing neighborhood centers at intersections along the Ellis Road corridor have attracted retailers from Dunn Brothers Coffee to Dollar Tree.

Infill sites such as The Crossroads at 12th Street and Interstate 29 have attracted Starbucks, Silverstar Car Wash and Northern Tool + Equipment.

And Empire Place, which landed long-awaited retailers Chipotle and Chick-fil-A, is gaining traction on its next two retail centers in front of The Empire Mall.

“We are seeing really, really good growth,” said Raquel Blount, vice president of commercial real estate at Lloyd Cos.

“Sometimes, it’s focused on the quick-service restaurant drive-thru market because it’s performed so well they can expand. And we’re seeing for the first time in two years a little resurgence in apparel. … People had stopped shopping for clothes and now realize their wardrobes are outdated, so people are coming back to shopping, and new concepts are being created.”

And to the south, the area around 85th Street and Minnesota Avenue continues to come into its own as a center of retail, with new announcements, including McDonald’s, Starbucks and Little Caesars Pizza.

“I think the 85th and Minnesota area has clearly shown to be the natural third location for many retailers,” Tysdal said.

“You go west and east, and now you go south, and northwest I think will quickly follow that up. What retailers are really waiting for in the northwest is for housing to catch up. They like the momentum in that direction, but they don’t want to see as many cornfields when they look at Google Maps.”

Who’s growing

Categories that fared especially well during the pandemic are in solid growth mode, Brown said.

“I haven’t seen this much growth scheduled for the coming year in seven years,” he said.

Dollar General, which had planned 900 new stores, just increased that to 1,100, he said. That includes one that just opened in east Sioux Falls.

“Suddenly, you’ve got Starbucks, which closed 400 stores and is going to 300 new ones this year,” Brown said. “Chipotle is on fire and wants to do 200 stores.”

That includes one on the east side of Sioux Falls that likely will open later this year.

“Basically every fast-food restaurant wants to do aggressive growth,” Brown continued. “The challenge is there aren’t enough drive-thrus to accommodate them, but we’re seeing a ton of capital go into rebuilding the restaurant industry, so restaurants are super active.”

Off-price apparel such as The TJX Cos., which includes T.J. Maxx, Marshalls and HomeGoods, have accelerated.

“TJ Maxx and Ross were always good for 40 new stores a year, Burlington too, and now they’re saying 80 stores. Anything home-related or hardware is in super-growth mode. Tractor Supply was averaging 50 to 60, and now they’re saying 80.”

Pet-related businesses are benefiting from the increase in ownership during the pandemic, he added.

“And Hobby Lobby is ramping up,” he said. “It’s pretty fascinating. I haven’t seen anything quite like this.”

Department stores also have largely escaped the predicted “retail apocalypse” narrative, he added.

“Retail ripped a very ugly bandage off all at once,” Brown said, adding big players such as Macy’s still will “right size” their store count. In Sioux Falls, where Dillard’s announced a new store at The Empire Mall years ago, there has been no sign that plans have changed despite the lengthy delay.

“One thing that has helped Dillard’s is they own 90 percent of their real estate, and because they own it, sales per square foot on average for Dillard’s can be lower than a Nordstrom that’s leasing,” Brown said.

The one sector of retail that remains deeply challenged is the theater industry, he said.

“And I don’t think that’s going to change because … the impact of streaming was already hurting them, and that just got vastly accelerated, but almost everyone else is improving.”

Available space

While newly built retail centers and redevelopments are out there for retailers looking to grow in Sioux Falls, existing space also offers some opportunities.

There is some vacancy along 41st and 57th streets, for instance.

“But even when you see vacant space, it’s common there’s a deal being worked on for that space,” Tysdal said.

“It’s just some of these deals take forever. Some of these retailers don’t move fast. A lot of them are trying to approve more sites this year than they ever have before. There’s a lot of hurry up and wait to put these retail deals together.”