Good morning from Sioux Falls, South Dakota!

When: A beautiful Tuesday morning walk in downtown Sioux Falls, South Dakota.

(Weather: 42 degrees sunny skies but blustery winds. Autumn is showing in this region with changing golds and red leaves in the trees and on the ground.)

Why Sioux Falls:
Jim and Staci, Wealth Builders’ investors, invited me to join them in their hometown. In actuality, they have been inviting me for some time and I have been kicking tires in the Sioux Falls market for almost two years. So, I decided to drop in on them for a couple of days to visit their great state and get a better understanding of what's going down in Sioux Falls.

Where I stayed:
Close to the downtown area, I stayed at the new property owned by Stacy and Jim. My morning walk took me past Sanford Medical’s beautiful campus, including the Children's Hospital. It’s designed to look like a castle in order to appear less intimidating to the children visiting. Closer to walking into Disneyland than a medical facility. Also in the surrounding area are the VA Hospital, University of Sioux Falls, and the falls that bear the name of the city.

Marketplace:
My interest in Sioux Falls and the surrounding area really began with multifamily investing. After my visit, I have expanded my interest to include self-storage. On Tuesday I was shown around with a tour of the area by local real estate professional, Nick Eichacker. Jim and I jumped in his truck and provided a full survey of Sioux Falls, sharing valuable insight into the entire market as he drove. From what I could gather, there are a couple of large developers in the area - the Lloyd Company and Bender Company - as the signs depicted at most sites.

Development:
Nick provided us with several articles referencing new MultiDevelopment in the heart of Sioux Falls. All of them highlighting tremendous growth in Sioux Falls:

• South Downtown
• Railyard Flats
• East Side

Digging deeper, I learned the number of multifamily permits increased 144% in 2020 compared to 2019. From the look of things, there is not a set place where these new units are being built. It appeared from our drive that they are going up everywhere, though from my perspective of touring through the town, a majority appear to be on the east side.

Construction of new single family homes is taking place all over the outer parts of the city. It felt like a construction bomb was dropped in the middle of the city and spread in all directions. In Sioux Falls, it truly is booming all over.

With all of the new residential construction, I expected to see a ton of self-storage popping up, but this was not the case. With a little digging, I learned there were only four new storage facilities permitted in 2021 and zero in 2020. This struck a chord and didn’t make sense to me. At the time of this writing, I still don’t know why...but have not given up the search.

Why the Boom?
What is driving the population and development taking place in middle America? Asking around, I got the obvious answer; Californians. Ha, no surprise there. Seems like every city is pointing their finger West. Other states I heard people were relocating from that I heard about included Washington, New York and Minnesota. The City of Sioux Falls lays claim to being the “Top Spot for Young Professionals” due to no state income tax, low property costs, and size of the city.

Downtown:
The city has done an excellent job in terms of architecture and green space and feels really welcoming as I toured through it. The highlight of downtown are the Falls themselves, appropriately named for the waterfalls of the Sioux River. They are in the heart of downtown, and the city has done a great job in highlighting their beauty.

The Monday night I was in town was chilly (high 30’s and windy). This didn’t stop folks from heading out for the night. With no apparent large events to draw people, downtown was still bustling and the bars and restaurants were full. Jim, Staci and I enjoyed a nice meal at one of the fine restaurants, Minervas, and I had my first taste of a walleye cake - a lot like a crab cake - and Beef Chislic (chard beef bits). Chislic is part of the local cuisine, and saw it being sold all around… and you certainly can’t get away from the walleye.

Granite seems to be the building material of choice in downtown Sioux Falls, and I really enjoyed the feel it gives. I also observed a large number of renovated buildings, so obviously investment is being made downtown.

Economy:
From what I gathered, healthcare and construction are the primary economic drivers in Sioux Falls. Banking is also at the core of the Sioux Falls economy and it is sometimes referred to as "the banking center of the midwest." Other factors include the Amazon distribution warehouse, agriculture and higher education. Something to keep an eye on in terms of market growth is the role that AgTech may play in the Sioux Falls area.

What I learned:
Originally, I headed to Sioux Falls specifically interested in looking at multifamily. I left there still high on multifamily but also very interested in the self-storage market. Overall concerns include price of land and amount of new construction already taking place. There seems to be only a handful of developers who control the market, which is both good and bad. The city is truly wonderful, clean and active. Sioux Falls already has a Home Depot and Costco, so the overall data indicates growth.

Fun fact:
South Dakota used to be called the Sunshine State as it averages 213 sunny days a year. According to the state website: “In 1992, a measure sponsored by State Rep. Gordon Pederson of Pennington County, South Dakota, changed the wording on the flag to read ‘The Mount Rushmore State’.