As large office buildings fill, even former call center space starts to see demand

April 21, 2025

It took two days from when a satellite office for Target Corp. went on the market for a deal to come together.

The sale is scheduled to close in May, officially taking the 92,000-square-foot space at 3901 W. 53rd St. off the market.

“Within the first couple days, we had three people that called wanting to tour, and two of the three toured. The third one was out of town and didn’t get back in time before it went out under contract,” said Kristen Zueger of Lloyd Cos., who brokered the deal.

The “spotless” building will continue to include some office space but also will be used for warehousing, she said, and while she expected that the building’s condition meant it would sell quickly, “all of a sudden it was just boom, boom, boom.”

That increasingly has been the case with larger vacant office spaces citywide. In February, the annual market outlook report from Bender Commercial Real Estate Services found that the overall office space vacancy rate at the end of 2024 was at 11.6 percent, below the national rate of 20.9 percent, which is a record high.

Take away class “B” and C” office space over 10,000 square feet and vacancy is more like 3 percent in Sioux Falls, said Nick Gustafson, a partner at Bender Commercial.

“There’s not a ton of options. The spaces that are on the market get leased in a relatively healthy fashion,” he said.

At the time of the report, there was an estimated 1.1 million square feet available. Of that, more than 800,000 square feet was in buildings 10,000 square feet and larger, representing more than 75 percent of vacant square footage.

But that storyline is changing too.

Large former call center space that in some cases has sat vacant for years suddenly is drawing “a big uptick in interest,” said Andi Anderson, a partner at Bender Commercial.

“We’ve had a significant amount of showings, and the interest has certainly gone up. I think this is the kind of year where people are embracing the fact that this is what renovation and repurposing expenses are going to cost, and if we can buy the building at a rate that makes sense, you can offset some of those expenses versus building brand-new.”

Interest rates have eased enough that office users see a path to making a deal work.

“I think businesses and nonprofits are realizing you can still buy a large building at an attractive price point,” said Nick Gustafson, a partner at Bender Commercial.

“None of these buildings you can just move in and are ready to go. You have to spend some money, but there’s only a handful of these buildings giving Sioux Falls all its vacancy, and once that’s gone, no one is going to build a 60,000-square-foot office building on spec. That’s never going to happen. It’s going to look like Cherapa or Steel District with a nice mixed use and a lot of amenities. You’re never going to build a big rectangular box again.”

Nonprofits fill space

Split among three locations with one of its leased buildings for sale, Call to Freedom knew a move was needed to bring its approximately 30 employees together.

After looking for a new office for about two years, a fit emerged in the form of one of the former Fiserv buildings at 4501 S. Technology Drive.

“It’s a blessing,” CEO Becky Rasmussen said. “We’ve been updating and getting ready for a move.”

The organization is moving this week and plans to be operational by May 1 in the new location.

The building was purchased for Call to Freedom by supporters and investors with the understanding the nonprofit would buy it back from them and enter a multiphase fundraising campaign to further remodel.

The nonprofit serves victims and survivors of human trafficking while proactively helping educate the community. Its almost 14,000-square-foot new building will allow the team to work under one roof while providing space for the voluminous donations of goods that supporters send their way.

“We have so many clients walking through the doors, and at the same time, our meeting rooms are really limited,” Rasmussen said. “This will allow us to do more training on-site with a larger conference room for community training and expand our services under occupational therapy and case management.”

The broader vision is to remodel to add sensory rooms and space for play therapy where clients can work on deescalation.

A national nonprofit called Eight Days of Hope came in to help with initial renovations to get the building ready to reuse.

It’s one of three buildings vacated by Fiserv. Avera Heath leased one for its dialysis services, and recently the nonprofit Collision Ministries learned that it would be able to move into the final building.

Like Call to Freedom, a supportive donor bought the building to lease to the nonprofit.

“I never expected that,” president John Glasser said. “We weren’t really looking, but this anonymous donor was aware we were growing.”

The nonprofit has evolved its focus to training local churches nationwide to build student-led teams who then share the Gospel in their schools and communities.

The organization works with 90 churches currently, including 12 in Sioux Falls, and the hope is to work with up to 30 churches in the Sioux Falls area. There are 43 employees nationwide, with 18 based in Sioux Falls.

“We’re helping churches get connected to schools, build relationships with the principals and kids,” Glasser said. “Our goal over the next five years is to partner deeply with 21,000 churches. Our team is growing, and this donor knew that and said ‘You guys need a bigger spot.’”

Collision has been in two separate locations, with one for its national efforts, and will combine in the 7,500-square-foot former Fiserv building.

“When Fiserv left, they left us all their stuff. So we have all their chairs, cubicles, cabeling,” Glasser said. “We’re going to work with Habitat for Humanity if they want to dismantle the cubicles because we’re not a call center that large.”

The deal represented “an ideal location at a competitive price point for the buyer and Collision,” said Bradyn Neises of Bender Commercial, who represented Collision.

“The location is further enhanced by the presence of other nonprofit organizations moving into the adjacent building, creating a strong sense of synergy and helping to revitalize the office complex with renewed purpose and mission.”

The new space allows for some private offices in contrast to the current location, along with space to meet with pastors and to hold training sessions as churches connect with Collision. The hope is to move in within the next month, and Glasser said he’s excited to look into ways to collaborate with his new neighbor at Call to Freedom.

“It’s such a blessing,” he said. “Maybe we can share resources. Becky’s daughter was involved in Collision, so there’s a lot of good communication already happening. I think when we don’t duplicate resources, it provides an opportunity to link arms.”

Other large buildings draw interest

Bender Commercial has two large former call centers still on the market, totaling about 111,000 square feet in one and 60,000 square feet in the other.

“I’ve shown both twice in the last month,” Zueger said, noting a couple of other options downtown between 13,000 and 15,000 square feet, but “the issues there are you can’t be as cost-effective with an office user because you’re paying for parking,” she said, adding that “I still think it (inventory) is going to become very limited.”

Interest in the buildings is coming from “everyone from investors, nonprofits, flex users,” Gustafson said. “We’ve had some people that want to use portions for office, one for lab, so we’ve had a variety of interest.”

The former Citibank campus has been submitted as a potential relocation site for the South Dakota men’s prison, though there has been additional interest in the three call center buildings, former child care center and remaining land, said Gregg Brown of NAI Sioux Falls.

“We’ve had interest on various parcels and buildings, but not the entire property. It’s such a behemoth,” he said of the almost 70-acre campus.

He has had inquiries from private schools and child care centers in the child center building and has had had interest in the empty parcels because the site is zoned for industrial use.

Call centers broadly can be tough to fill because their low ceilings make it hard to be flexible in reuse, Gustafson said.

“These are made for a church,” he added. “Data centers is another one we’ve seen, and opportunistic nonprofits that have space needs.”

Other large spaces that have filled include a former Great Western Bank operations center that is becoming the new home of Direct at 3401 N. Louise Ave.

I think people are waking up to a big opportunity. I’m going to go out and say a high percentage of these buildings will not be on the open market at the end of the year,” Gustafson said.

The Bender Commercial report found that downtown space is tight despite adding multiple new office towers, with 5.9 percent vacancy, compared with 13.9 percent vacancy in suburban areas.

While some downtown businesses also are paying extra for security, Zueger said the comparably safe environment in Sioux Falls likely is what has helped it avoid some of the national office vacancies, combined with less of a shift to remote work.

“Downtown Minneapolis still feels so different, especially once it gets dark,” she said. “It’s not a comfortable place to be. Sioux Falls obviously has our issues, but it’s not as scary as some of these big cities. That’s a big difference, and a lot of these cities aren’t going back ever.”

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