Gustafson Talks Multi-Family In Sioux Falls

Thursday, July 23 2015

Gustafson Talks Multi-Family In Sioux Falls

On Thursday, July 23rd Nick Gustafson talked about the Multi-Family Housing Market in Sioux Falls via Periscope. 

At mid year 2015 in Sioux Falls $21,800,900 in sales have occurred vs. roughly $15,000,000 for calendar year 2014. So Sioux Falls is up 45% over all of last year. Nick predicted in the Bender Commercial Market Outlook at the beginning of the year there would be a strong "pop" in sales. There have seen roughly half the number of transactions at mid year in 2015 vs 2014. Nick predicts increasing momentum as the year continues. .

The biggest change this year so far over last year is Sioux Falls is seeing larger, newer properties start to change hands. A few months ago, Nick sold a 15 year old 32 unit property as well as a 36 and 48 unit built 20 and 18 years ago trade in May and June. Nick says brand new properties are not selling but definitely newer than the 30 & 40 year assets we have primarily seen in the last several years. Sioux Falls has also seen some larger older properties trade hands as well. Cleveland Heights – 147 Units , East Park & Sycamore Village Apartments sold together for 130 units. 

In Sioux Falls, the last city wide survey completed earlier this year put city wide market vacancy just under 4% that’s a very healthy number. There will be a lot of attention given to the number that will be released soon. The general consensus is that it will bump up a little bit, but not much. Nick constantly reminds his clients that Sioux Falls is still a smaller market and big chunks of supply truly have the ability to outpace demand.

Sioux Falls still remains at historically low interest rates. A good number of these larger acquisitions are locking in long term, low interest rate money. If Sioux Falls doesn't completely overbuild the market it’s a remarkably good time to acquire a quality property. Nick wonders if the fed truly will bump rates in fall.

Investors often quote real estate cap rates or yields in terms of spreads above Treasuries and sometime refer to this spread as a risk premium. Since 2009 Sioux Falls has had a wide spread between cap rates and the cost of borrowing. Cap rates have experience some downward pressure over the last two years, but have remained quite stable compared to larger markets, especially on the coasts.

In Sioux Falls, there was a record year in 2014 for Multi-Family units. There were just over 1,000 or 1,200 depending on whether you count townhouse units which are often leased. To put this into perspective, this is 5 times the level of Multi-Family construction in 2010. Just recently a 500 unit project was announced on the corner of Cliff Avenue & 77th Street. Through June 2015 the city report just under 400 units pulling permits. This could be a sign of restraint.

Sioux Falls continues to experience healthy population and job grown. Last year the city grew 4,000 people to 170,000. That’s fantastic growth for a vibrant yet smaller community like Sioux Falls.

If you would like any additional information on the Multi-Family market in Sioux Falls, SD please feel free to contact Nick Gustafson

To check out the YouTube Video CLICK HERE! 

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