Dec. 27, 2021

Building permits are far from the only metric to measure a community’s economic success.

But still, it’s hard to talk about 2021 without starting with the fact that it was the year that brought Sioux Falls past the billion-dollar mark in terms of new building activity.

And based on the projects already known for 2022, the record year might be in jeopardy.

“We’re looking for another really strong year,” said Jeff Eckhoff, the city’s director of planning and development services. “Obviously, there was a lot of momentum at the end of last year, but did we think it would get to this level? No.”

Now, Sioux Falls looks to 2022 with major developments on the horizon.

“I’m hearing this last year has been a banner year for pretty much everybody I talk to,” said Bob Mundt, president and CEO of the Sioux Falls Development Foundation. “They’re really bouncing back from where they were, they’re expanding, they’re growing.”

In the northwest, Amazon will begin distribution operations in the coming months, as construction begins on a massive CJ Foods processing facility.

In the northeast, a development park is slated to triple in size, and Wholestone Foods plans a year of permitting before hoping to begin its $500 million pork processing plant.

Downtown, a massive multiyear construction boom will be underway as the skyline is transformed by a destination hotel, office towers, hundreds of new apartments and riverfront amenities.

And all around the city, plus into the metro communities, new neighborhoods are continuing to take shape.

“As with everybody, I think there’s pent-up demand,” said Jack Hopkins, CEO of CorTrust Bank, who said business-lending activity has “gotten really active in the last quarter, which is exciting. Everything that’s going on around town makes for a pretty active time.”

But the city also enters 2022 faced with the challenges of growth. It’s likely that when the city releases its population estimate early in the year it will show a record increase. That has brought with it a historically tight housing market and continued pressure on staffing as businesses attempt to expand and serve the population.

In estimating the population growth, which likely will exceed 5,000 new residents and could be as much as 7,000, “we look at housing units and where we are with vacancies and where we’re at today versus last year,” Eckhoff said.

That story is a relatively easy one to preview: The single-family real estate market last reported about a two-month supply of homes in Sioux Falls, despite permits for nearly 700 new houses this year through November. The multifamily market continues to show nearly 100 percent occupancy, despite new permits being issued for more than 1,700 apartments through November.

“In November, our occupancy was in the high 97 percents, and we’ve never been close to that in November,” said Jake Quasney, executive vice president of Lloyd Cos.

“That’s just indicative of actual occupancy and not what is actually available because we have units that turn over and things that are leased for the next month. So it’s incredible to see those reports just continue.”

When the pandemic began, Lloyd shifted its construction and development strategy to focus on apartments. It quickly proved smart. New apartments have been renting as soon as they’re made available, often opening entire phases full.

“The projects keep getting bigger, and there are more of them, but we need it. I don’t have a fear of looking up in 2023 and saying we’re overbuilt,” Quasney said.

“Just in the spring, I think we have over 500 units slated to start in Sioux Falls.”

On the single-family home side, “it’s been really, really active,” said Steve Van Buskirk, president of land development for Van Buskirk Cos.

“We sold twice as many lots this year as we did last year on the single-family side, and it’s not just us. Everybody, all the companies are busy. It doesn’t look like we’re going to be slowing down any time soon.”

By next year, lots in the east-side Copper Creek neighborhood “will be gone,” he said.

Cherry Lake Reserve on the west side already sold out. Willow Ridge and Canterbury Heights on the east side “are all busy,” he continued. “Same thing in Harrisburg. One neighborhood we sold out and the other we took a big leap forward on lot inventory and sold it all out, so it was pretty amazing. Even in Crooks, where we just got the street paved, I think we’re going to have all eight lots under contract. So it’s just across the board. It’s been pretty wild. It’s hard to fathom all this actually happened.”

Downtown momentum

The coming year will be a year of continual construction and leasing updates for the pair of signature projects underway on the north and east sides of downtown.

Both the expanded Cherapa Place and new Steel District have started construction, with their first openings planned for 2023.

Another new mixed-use project from Lloyd Cos. will redevelop a city parking lot on the south end of downtown.

And they might not be the only ones. The city still has property it could sell near the Downtown Library and on parts of the former rail yard land, including behind 8th & Railroad Center.

“We continue to get calls,” Eckhoff said. “We’re definitely not done.”

The coming year also will bring a total redo of the city’s downtown master plan, Eckhoff said. While it’s still being planned, “one of the things we know is we have to look at the boundaries of downtown,” he said.

“As downtown has grown, we need to be very thoughtful about our next phase of growth out. There’s concern about gentrification. You’ve got the downtown affluence in the core neighborhoods and making sure we take advantage of the opportunities that are there. So a big part of the next downtown plan is to look at boundaries and transitions.”

Addressing challenges

The challenges of business and community clearly overlap against this backdrop of unprecedented growth.

A shortage of housing accessible for many budgets is “plaguing this community,” Lloyd’s Quasney said. “We have a few affordable housing projects we were awarded to build in the spring, and those are important to us as an organization. It’s the only way we can really build housing with low income rents.”

In the so-called workforce housing market, which involves people who are working jobs requiring average to below-average housing costs, the market is experiencing “really probably unsustainable inflation of cost and rents, and at some point we have to get ahead of it where supply and demand get a little more in line with one another,” he continued. “I’m excited the state is looking to invest funds across the state in workforce housing, the middle of the market, to make sure our community can sustain its long-term growth.”

And essentially no one in business neglects to mention staffing shortages and wage pressures when assessing prospects for continued growth.

“A lot of them are saying, ‘I could do more if I could find more people. I’m at a max of what I can do because I can’t find people.’ But all in all, I think people are very upbeat about what happened this year and upbeat about next year,” Mundt said.

The foundation will continue “really pushing hard” to attract, retain and upskill talent, he added. That includes expanding career-related opportunities for high school and college students, partnering to offer skills-based education in areas seeing particular demand and continuing to market in other areas “that we have job available in Sioux Falls,” he said. “Trying to get more people into our pipeline and pushing hard to get people to know Sioux Falls and hopefully move here.”

Still, the foundation for additional growth continues to be laid. In the development parks of northwest and northeast Sioux Falls, additional land is being prepped for building, and the Sioux Falls Development Foundation already is looking at options for more land.

“When you start carving off 60- and 80-acre pieces, it goes pretty quick,” Mundt said. “So we’re evaluating where we might want to be.”