Nov. 29, 2021

A number of Sioux Falls developers are heading west.

“Rapid City’s economy is roaring,” said Luke Jessen, senior director of development at Lloyd Cos.

“There have been several significant announcements of new businesses moving into the area. On top of that, we’ve seen a huge influx in rental activity – we are filling buildings on the day they open.”

Lloyd’s latest project will transform a block of Rapid City’s downtown along St. Joseph Street between Fifth and Sixth streets.

Called Block 5, it will be anchored by a Hyatt Place hotel and will include 130 loft apartments, 5,000 square feet of commercial space and 330 parking spaces. The plan is to break ground in the spring and open two years later.

“The combination of business activity, housing demand and visitor industry resurgence makes us very excited to deliver this project,” Jessen said.

Like Sioux Falls, Rapid City is on pace for a record building year. Its October economic indicators report showed more than $280 million in building permit valuation through August.

The city proper, which includes Rapid Valley, has a population of more than 100,000, and the metro area counts about 145,000. The projection is 7 percent annual growth for the next five years.

And that doesn’t factor in Ellsworth Air Force Base bringing in the B-21 Raider mission, which is estimated to result in 1,600 support personnel and create 3,500 direct and indirect jobs. At Elevate Rapid City, the community’s combined chamber of commerce and economic development corporation, leaders predict growing by up to 50,000 people in the metro area in the next decade.

It’s “through the roof,” said Matt Brunner, Elevate’s economic development director.

“From talking with other people who have lived here for decades, it’s like nothing they’ve ever seen.”

Brunner, who came from Colorado and worked for the Governor’s Office of Economic Development in Rapid City before taking on his current role 15 months ago, said he  is providing information constantly to site selectors and companies considering the area, which includes Rapid City, Rapid Valley and Box Elder.

It generally has been rare for Sioux Falls developers to do projects in the community, he said. But that definitely has changed.

“We did our own things. It’s a very libertarian community, which is a huge advantage, but I think the proof is in the pudding,” Brunner said. “They’re investing a lot of time, people and dollars in Rapid City, and that’s something that has not occurred ever.”

Early success

Sioux Falls-based Legacy Development has invested in the Rapid City area for more than five years, including commercial, industrial and residential projects.

“There is tremendous growth in the area, and we enjoy the vibrant energy that is palpable in Rapid City and the entire Black Hills region,” CEO Norm Drake said. “New companies are envisioning the new services and new activities in the area. We like the demographics, and we like the Rapid City business environment. We’re also going to see a great influx of people moving there.”

Legacy plans to open a development consulting office in downtown Rapid City “in the near future,” he added.

“The community is incredibly welcoming and supportive,” Drake said. “They are excited about all of the growth coming to this area of our state and appreciate companies investing in their community.”

Legacy’s most recent projects include Creekside Heights, a 15-building, 659-unit complex on 25 acres new Elk Vale Road and South Dakota Highway 44. That’s more units than any single apartment complex in Sioux Falls.

The first buildings and a community center are expected to open in the fall of 2022 and include studios and one- and two-bedroom apartments with “stylish 9-foot ceilings,” Drake said.

Legacy also has a downtown project underway. The Elements is a four-story, mixed-use building under construction at 100 St. Joseph St., with 99 loft-style apartments and 21,000 square feet of commercial space on the first level. It’s expected to open in mid-2022.

“Without a doubt, we will continue to develop in Rapid City and the Black Hills area,” Drake said.

Lloyd, which also has staffed based in Rapid City, found early success with its first apartment project there.

The Vue at Catron, which ultimately will be a 168-unit apartment community, has fully leased its existing apartments after opening them earlier this year, and work has started on a 96-unit second phase.

Lloyd also is breaking ground on additional multifamily communities this fall, one in Rapid City and one in Box Elder, and has started construction on Heartland Heights, an affordable Rapid City housing project in conjunction with The Club for Boys, an organization that serves as a positive influence in boys’ lives.

“Some of this is pent-up demand, but a good share of the activity is being driven by individuals moving into Rapid City,” Jessen said. “We see exponential growth on the horizon and are excited about all of the potential in Rapid City.”

Factors behind growth

As for what’s driving the growth, it’s multifaceted.

Rapid City has experienced the same pandemic and political-related bump in residency as Sioux Falls, driven by Gov. Kristi Noem’s growing national profile.

“We see a lot of people from Idaho. … We’re seeing a lot of in-migration from California, from Minnesota believe it or not,” Brunner said. “I know Sioux Falls gets way more of that, but we’re getting a lot of that. Illinois, the Chicago area specifically, even the East Coast. New York has been a big attraction.”

Climate and the setting help, he added.

Visit Rapid City

“Our uniqueness that no one can match is the quality of life in the Black Hills,” Brunner said. “It’s hard to leave a place like Colorado with all that natural beauty and sunshine unless you can find somewhere similar, and Rapid City offers that.”

At Elevate, the approach to economic development is highly strategic and concentrated, Brunner said, using proprietary data to pinpoint decision-makers at companies who have ties to the Black Hills area.

“Either they went to school here or grew up here or they lived part of their life or vacationed here or have friends or family,” he said. “They’re able to say, ‘Rapid City is awesome,’ and it harkens back from positive memories. It gives us a shot. It starts the conversation.”

An economy that traditionally has been driven by the tourism industry is expanding into manufacturing, including the recent announcement of a new 600,000-square-foot gigafactory for battery manufacturing, which is estimated to ultimately bring 1,500 jobs.

“It’s huge,” Brunner said. “We’ve traditionally been light on manufacturing. That battery company will be a great opportunity to continue to move that narrative of advanced manufacturing, and the hope is upstream and downstream companies will fall in line.”

South Dakota School of Mines & Technology also is playing a key role in attracting companies in search of workers with those technical skills, and it’s driving entrepreneurship among students and alumni who are inclined to start businesses. Recently, a South Dakota Mines graduate and serial entrepreneur reached out to Elevate and said: “The Black Hills of South Dakota is still in my blood. What can I do? I want to create a company there or move a company there,” Brunner said. “That doesn’t happen without that place identity.”

And then there’s the B-21 mission, which will be based at Ellsworth and drive construction of significant infrastructure to support the projected population growth, from new schools to a recreation center.

The B-21 is a nuclear-capable aircraft, and the plan is to deliver the first bombers to Ellsworth in the middle part of this decade.

The B-21 even figures into the design of another Sioux Falls developer’s new project. Cresten Capital Holdings, led by Kevin Tupy, is developing The Altitude, an approximately 300-unit apartment complex on Highway 16 three miles from Reptile Gardens.

The project is designed in two phase of town home-style apartments with a full amenity package.

“Pool, fitness, community room with a theater room, and it’s going to have an airplane theme to it,” Tupy said. “We’re going to do an airplane-themed playground to complement all the aviation-related activity.”

The hope is to open the first apartments later next year.

“The main thing is they need the housing,” said Kelly Greer, director of real estate operations for Cresten Properties.

“When I was there in early summer, it was 4,000 units. And then it jumped to 5,000 units.”

Actually, it could be closer to 6,000 units, Brunner said.

“And what are being built are not keeping up with even the minimum demand,” he said. “We’re on pace to hit maybe 700, 1,000 new units this year, which is great. But when demand is 1,200 to 1,500, you’re falling further and further behind.”

Not surprisingly, vacancy in the current apartment market is essentially nonexistent, Tupy said.

“We looked at different sites, but we really liked the attractiveness of this location. The views are going to be amazing,” he said, adding the community consistent ranks highly as one of the nation’s best places to live.

“And I think there’s a lot of nostalgia for East River people because they always vacationed out there. Growing up, that’s where we went, and I think it holds a special place in many people’s hearts because it’s so vastly different than the east side of the state. We still go out there to experience all the ‘Great Faces and Great Places’ it has to offer.”

Others with development and investment ties to Sioux Falls also are pursuing potential projects in the market.

“These developers in Sioux Falls are sharp,” Brunner said. “They know how to do it, so it’s exciting to see them in the marketplace. I don’t want to diminish the developers we have here because they’re fantastic, and they’ve done and continue to do a great job, but talking with our local developers, I don’t think they see it as a bad thing. They realize a rising tide raises all boats.”