The Sioux Falls Commercial Real Estate Market

Jan 22, 2024

Sioux Falls is the largest city in South Dakota, located in the state’s southeastern corner on the Big Sioux River and bisected by Interstate 90. The city is a thriving metropolis with a population of over 280,000 people. Home to a diverse economy with many different industries represented, Sioux Falls consistently ranks as one of the best places to live in the United States and, thus, is also a great place to invest in commercial real estate.

Crexi proudly serves Sioux Falls as the fastest-growing online commercial real estate platform. Across the CRE transaction lifecycle, brokers, tenants, buyers, investors, and principals enjoy unparalleled industry transparency and ease of use. Crexi’s tech tools have helped Sioux Falls brokers facilitate more than $650 billion in commercial property transactions and represented over $5.5 trillion in listings.

The Sioux Falls MSA encompasses areas in Lincoln, Minnehaha, McCook, and Turner counties in the southeastern corner of the state bordering Minnesota and Iowa. The MSA earns its name from its nearby waterfall landmark, known for its national parks and the active lifestyle of its residents. Nicknamed the “Best Little City in America,” Sioux Falls serves as Minnehaha County’s seat and the largest, most populous city in South Dakota.

The State of Commercial Real Estate in Sioux Falls

Sioux Falls, South Dakota, perched on the banks of the Big Sioux River, is the largest city in the state and an economic powerhouse. It’s a city that has seen consistent growth in population and economy, making it a significant player in the region.

The city’s economy is diverse and robust, with key sectors including healthcare, finance, and retail trade. The presence of major corporations such as Sanford Health, Avera Health, and Wells Fargo adds to its economic vitality.

This business-friendly environment has resulted in a strong job market, which has fueled population growth. With a metro area population nearing 300,000, Sioux Falls has seen a steady influx of new residents, drawn by the promise of opportunities and the city’s high quality of life.

Sioux Falls has seen significant real estate development in response to this growth. The city’s skyline is dotted with new construction, from residential housing to commercial properties. This ongoing development illustrates the city’s dynamic nature and potential for future growth.

It’s a place where businesses thrive, people prosper, and the future looks promising.

Sioux Falls Regional Breakdown

The Sioux Falls metro area, encompassing Minnehaha and Lincoln Counties, has seen a notable population growth trend over the past years.

The city of Sioux Falls, the heart of this metro area, has experienced an impressive population increase. The city’s strategic positioning, robust economy, and diverse opportunities have all contributed to this upward trajectory. It continues to attract a wide range of residents – from young professionals to families and retirees.

Similarly, Minnehaha and Lincoln Counties have also seen their populations grow. This trend shows the broader appeal of Sioux Falls beyond the city limits. The counties’ blend of suburban comforts, rural charm, and proximity to the amenities of Sioux Falls makes them attractive places to live.

Sioux Falls is home to over 202,000 people and nearly 300,000 in the metropolitan area.
Minnehaha County has a population of almost 204,000, while Lincoln County is home to almost 71,000.
Population growth has averaged over 30% since 2010, according to the U.S. Census Bureau.
The median age in the metro area is 36.7, a little less than the figure in the US.
Per capita income is $41,241, and median household income is $77,605.

Sioux Falls Job Market

Sioux Falls’ economic growth is impressive. Once primarily agriculture-based, the city has successfully transitioned into a hub for healthcare and financial services. The metro area has also seen considerable development in other areas.

For instance, the construction sector has been bustling. Significant real estate projects include the Van Buskirk housing development expansion on the city’s east side, developments by the Orthopedic Institute, and the downtown mixed-use Cascade at Falls Park.

According to Policom’s annual analysis, Sioux Falls ranks third in national economic strength thanks to its strategic planning, industry diversification, and a business-friendly environment that fosters innovation and growth.

GDP has soared by about 27% over the past ten years, currently at nearly $28 billion.
The unemployment rate is 1.5% as of November 2023.
Sioux Falls ranks 5th among the metropolitan areas with the lowest unemployment rates.
Major employers include Sanford Health, Avera Health, Sioux Falls School District, Smithfield Foods, Wells Fargo, Amazon, and the Department of Veterans Affairs Medical & Regional Office.
Distribution and logistics, advanced manufacturing, and health and life sciences are among the key industries in Sioux Falls.
The Tax Foundation ranks South Dakota as having the 2nd best state business tax climate.
Metro Sioux Falls is home to Augustana University, the University of Sioux Falls, and Southeast Technical College.
Nearly 94% of the population are high school graduates, and over 37% hold a bachelor’s degree or postgraduate degree, both figures higher than the rate in the US.
The Sioux Falls metro area boasts a well-connected transportation infrastructure, featuring Interstate 29 and Interstate 90, access to Class 1 rail, Sioux Falls Regional Airport (FSD), and a public transit system.

Sioux Falls Industrial Market

The industrial market in Sioux Falls is exhibiting a strong demand that surpasses national trends, with a quicker absorption rate for industrial spaces. Even though rent price increases have been slower than the national average, the vacancy rate remains lower. Most of the available space in the market is primarily for lease, resulting in many owner-users expanding their existing buildings or seeking land for new construction.

Market overview (NAR Commercial Metro Market Reports Q3 2023)

Inventory: 16,212,376 SF
Vacancy rate: 1.8%
Net absorption (12 month): 960,633 SF
Deliveries (12 months): 966,458 SF

Crexi Insights

These are the most recent industrial lease and sales trends from Crexi Insights (as of January 2024):

For Lease (active)

Asking rate/SqFt (median): $8 per year
Median SqFt/listing: 7,150
Days on market: 275
Total listings on Crexi: 48 spaces

For Sale (active)

Median asking price: $1.55 million
Price/SqFt: $123
Asking cap rate: 8.5%
Days on market: 109
Total listings on Crexi: 13

Sales Comps (past 12 months)

Median sold price: $381,000
Sold price/SqFt: $117
Total sales volume: $4.14 million
Sold cap rate: 6.7%
Median SqFt sold/transaction: 4,160
Total SqFt sold: 53,200
Days on market (median): 202

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Sioux Falls Office Market

Sioux Falls’ office market is outperforming national trends. With a faster absorption rate of office space, the city has seen increased rent prices, reflecting strong demand. Despite a slight uptick in office vacancy rates, the market continues to add substantial tenant-occupied inventory. The downtown area remains a hotspot for businesses, even as the city anticipates a rise in call center vacancies.

Market overview (NAR Commercial Metro Market Reports Q3 2023)

Inventory: 11,260,014 SF
Vacancy rate: 5.2%
Net absorption (12 month): 269,310 SF
Deliveries (12 months): 336,869 SF

Crexi Insights

For a detailed overview of the Sioux Falls office market as of January 2024, rely on Crexi Insights. Access the latest transactions, leasing trends, and growth statistics in the commercial real estate sector.

For Lease (active)

Asking rate/SqFt (median): $17 per year
Median SqFt/listing: 2,370 SF
Days on market: 269
Total listings on Crexi: 279 spaces

For Sale (active)

Median asking price: $1.74 million
Price/SqFt: $150
Asking cap rate: 6.4%
Days on market: 127
Total listings on Crexi: 30

Sales Comps (past 12 months)

Median sold price: $652,000
Sold price/SqFt: $149
Total sales volume: $5.25 million
Sold cap rate: 6.7%
Median SqFt sold/transaction: 4,996 SF
Days on market (median): 125

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Sioux Falls Retail Market

The retail market in Sioux Falls is surpassing national levels in demand and absorption of retail space. Despite slower rent price increases compared to the nationwide trend, the vacancy rate in the city remains notably lower.

The city continues with strategic efforts to attract events to downtown, supporting local businesses. Despite potential future challenges, the resilience displayed by retailers during the pandemic suggests they will continue to adapt and thrive in this vibrant retail landscape.

Market overview (NAR Commercial Metro Market Reports Q3 2023)

Inventory: 15,965,967 SF
Vacancy rate: 2.1%
Net absorption (12 month): 89,401 SF

Crexi Insights

Retail lease and sales trends from Crexi Insights (as of January 2024):

For Lease (active)

Asking rate/SqFt (median): $19 per year
Median SqFt/listing: 2,025 SF
Days on market: 310
Total listings on Crexi: 185 spaces

For Sale (active)

Median asking price: $1.17 million
Price/SqFt: $224
Asking cap rate: 6.6%
Days on market: 262
Total listings on Crexi: 25

Sales Comps (past 12 months)

Median sold price: $374,000
Sold price/SqFt: $94
Total sales volume: $11.6 million
Sold cap rate: 5.8%
Median SqFt sold/transaction: 4,000 SF
Days on market (median): 148

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Sioux Falls Multifamily Market

Sioux Falls’ multifamily market is experiencing robust demand, outpacing national trends with a faster absorption rate. Despite the healthy market conditions, rent price increases have been slower than the national average, and the vacancy rate is slightly higher. The influx of newly constructed units entering lease-up mode suggests that the vacancy rate will continue to rise, albeit minimally, due to a still-tight rental market.

Market overview (NAR Commercial Metro Market Reports Q3 2023)

Total housing units: 123,811
Multi-unit inventory: 26,653 units
Effective rent: $1,071
Vacancy rate: 11.0%
Net absorption (12 month): 1,350 units
Deliveries (12 months): 2,634 units

Crexi Insights

Here are the most recent multifamily Insights from Crexi (as of January 2024):

For Sale (active)

Median asking price: $995,000
Price/SqFt: $121
Price/Unit: $124,000
Asking cap rate: 6.3%
Days on market: 154
Total listings on Crexi: 13

Sales Comps (past 12 months)

Median sold price: $307,000
Sold price/SqFt: $237
Sold price/unit: $203,000
Total sales volume: $30.2 million
Sold cap rate: 6.7%
Total SqFt sold: 138,000
Days on market (median): 12

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Learn more about the Sioux Falls commercial real estate market with Crexi Intelligence.