Huge commercial projects, apartments drove construction to a record $1.9B in 2022

SIOUX FALLS — Huge commercial projects and apartment buildings drove the value of construction in Sioux Falls to a massive level in 2022.

The $1.9 billion in building permits issued wasn’t just a record, it topped last year's value by 75%, city officials announced during a news conference on Thursday, Jan. 12.

The commercial and residential construction will serve an ever-growing population. The number of people living in the city limits jumped by 6,284 to 208,884, according to estimates.

While that growth has generally been a steady upward trend, the expansion of the Cherapa complex, the first phases of the Steel District in addition to several large apartment complexes drove the increase in 2022.

The numbers are encouraging, but officials are quick to add that recent economic trends suggest a slowing economy that surely will temper growth in 2023.

Inflation and the companion increase in interest rates has already cooled the housing market. And the uncertainty over what is likely an economic slowdown in the country overall means companies are less likely to pull the trigger on major building projects in the near future.

“It was an exciting year. I often talk about the excitement of growth and it’s usually followed up with the challenges of growth,” Mayor Paul Tenhaken said. “I think 2023 is certainly going to ring true with that. There is going to be some economic uncertainty and challenges that growth will bring in the year ahead.”

The building activity in the city was spread across commercial, residential and remodeling in 2022.

Eighteen projects were more than $20 million in building permit valuation. That includes Cherapa and the Steel District downtown but also major apartment complexes.

PowderHaus Apartments & Townhomes along Veterans Parkway and north of 41st Street on the east edge of the city was the largest apartment development with 425 units valued at more than $51 million.

On the southwest corner of the city, Sage Meadow has 266 units of apartments and townhomes with a value of nearly $43 million.

In the housing market, the number of single-family homes and townhouses was down slightly from 2021 levels, but the number of apartment units under construction nearly doubled.

Patrick Lalley / Sioux Falls Live

Permits were issued for 3,343 multifamily units, which includes apartments, independent living centers, congregate living facilities and condominiums. That was an 83% increase from the 1,821 units permitted in 2021.

Demand for multi-family remains high, with occupancy rates in Sioux Falls at about 97%.

“That’s in response to the population growth we are seeing,” said Jeff Eckhoff, director of planning and development services for the city.

Population growth was driven by the influx of people moving to Sioux Falls, said Tenhaken. That includes “political refugees” drawn by covid policies and other factors.

Officials don’t know the details of the population bump in terms of how much of that is migration from out of state versus natural growth from birth and death rates. Tenhaken said it feels like the in-migration for political reasons may be lessening but as long as people keep coming there will be pressure on the housing market.

“Some people say to me, ‘Why are we building so many apartments? Why are we building so many townhomes?' Well, they are 98 percent occupied, so there’s a demand for those sorts of housing units, ” he said.

Over the past three years the city has expanded by more than 10,000 housing units including multi- and single-family homes, Eckhoff said.

Higher interest rates to stem inflation significantly cooled the single-family home market toward the end of 2022. The cost of building materials also has gone up, making projects more expensive.

Source: City of Sioux Falls

That said, the city is financially strong and sales tax receipts have been good, Tenhaken said.

“I don’t see this level of growth in 2023 again. I think this is a year when we are going to be alright, let’s stablize. Let’s be smart. Let’s be fiscally responsible. Let’s not overextend ourselves because I think we are headed into a period of uncertainty.”

Here are the 15 largest building permits issued in Sioux Falls in 2022:

1. City of Sioux Falls – Water Reclamation Facility: $170,511,331
2. Sanford Medical Center – Surgical Tower $90,065,350
3. Sioux Falls Regional Airport – Parking Ramp: $62,648,902
4. Augustana University – Midco Ice Arena: $60,000,000
5. Cherapa II: $49,521,680
6. Canopy By Hilton: $46,960,000
7. Cherapa IV: $45,316,000
8. Alloy 1 Storage Warehouse: $45,000,000
9. Powderhaus Apartment: $43,897,442
10. Sage Meadow Apartments & Townhomes: $42,967,988
11. Sanford Medical Center – Parking Ramp & Office: $41,000,000
12. Cherapa III: $37,699,855
13. Millstone Apartments: $32,892,314
14. Harrisburg 9th Grade Academy: $29,100,000
15. Steel District Office Tower: $28,884,000