Annual Bender Market Outlook finds ‘remarkable strength, resilience’ in Sioux Falls market

Feb. 19, 2026

Even without this week’s announcement of the largest private investment in Sioux Falls history, the commercial real estate market was on track for a strong year, according to the annual Bender Market Outlook from Bender Commercial Real Estate Services.

“With strong fundamentals across all sectors and a thriving local economy, our region is well positioned for another year of strategic growth and opportunity,” Bender partner and president Reggie Kuipers said.

“As we enter 2026, the Sioux Falls market continues to demonstrate remarkable strength and resilience.”

Sioux Falls outperformed every other regional metro in total value of building activity other than the Des Moines metro, which Sioux Falls surpassed, however, in activity per capita.

The uncertainty of a year ago has been replaced by new federal legislation and trade policy that provides a bit more clarity, he said.

“The underlying economy remains strong, and we seem to be entering a period of confidence and potential white-hot economic activity,” Kuipers said, predicting interest rate cuts, steady inflation at less than 3 percent and a potential GDP gain of more than 3 percent.

The addition of a $1.3 billion new pork processing plant from Smithfield Foods won’t have short-term impact in the market but long term would be “transformative,” he said.

“We predict 2026 to be a very strong economic year in the U.S. and Sioux Falls,” Kuipers added.

“Buckle up — it’s going to be a fun year with new announcements and growth in Sioux Falls.”

Here’s a look at the market by sector and the Bender team’s projections.

Land market

The Sioux Falls market recorded its second-strongest year for unimproved land sales last year at 1,120 acres. That was driven by larger raw land acquisitions for the future South Dakota State Penitentiary and a potential large-scale data center.

“Sioux Falls metro’s land market continued demonstrating resilience and investor confidence in 2025,” Bender partner Bradyn Neises said.

“Overall, the metro land market remains strong. While certain sectors are adjusting, the growth trajectory remains positive, with neighboring communities playing an increasing role in development.”

Momentum continues to shift toward neighboring communities, he added.

In 2025, Harrisburg led with 388 acres sold, driven by sewer investments from the city in 2019 and 2020.

“This underscores the influence of forward-thinking municipal planning on private-sector growth and land absorption,” Neises said.

“Improved land sales also posted a solid year, with volume and transactions increasing. Office land was steady, while retail and industrial land increased. Conversely, multifamily land declined, and pricing softened, signaling a slowdown in multifamily development.”

Here’s a look at where major sales occurred:

One year ago, AI data centers were just emerging as a factor in the land market and were starting to gain national attention but were not yet a significant issue locally.

“What a difference a year makes,” Bender partner Rob Kurtenbach said.

“Today, data centers dominate local and national headlines. The Gemini site in east Sioux Falls has secured rezoning and annexation, but state sales tax legislation remains the key hurdle.”

The broader issue centers on how equipment purchases are taxed, especially given how frequently technology must be replaced, he said.

“With gigawatt-scale requests becoming increasingly common, data center power demand is also accelerating, and power generation companies are coming alongside to ease pressure on local utilities,” Kurtenbach said. “If legislative incentives and power partnerships align, expect several more data center announcements across eastern South Dakota.”

Retail market

The retail market in Sioux Falls has shown a slight drop in vacancy to 8 percent from 9 percent in 2024.

Bender commercial broker Bobbie Tibbetts called it a “Goldilocks” market — “balanced, stable and growth-supported,” she said.

Over the past five years, the city added nearly 1 million square feet of retail, while vacancy dropped from 13.3 percent to 8 percent, “demonstrating strong absorption rather than oversupply. In key retail corridors, new developments continue to open with committed tenants,” she said.

“When vacancies occur, there is strong activity in backfilling the spaces, keeping local vacancy rates competitive with national benchmarks. Offsetting closures, we see expansions and rising rents as signals of healthy demand and strong property values.”

Metro-area communities, including Tea, Harrisburg and Brandon, are providing additional opportunities for retail growth as demand expands regionally, she added.

 

“Looking ahead, we expect continued population growth, strategic development and new national tenants to keep the Sioux Falls retail market resilient,” Tibbetts said.

Office market

After years of disruption, “the office market is moving from confusion to confidence,” Bender partner Andi Anderson said.

“Our local market is still adjusting to hybrid work and large blocks of available space, but vacancy rates are improving, and there is buyer interest in repurposing large former call centers.”

Sioux Falls has 1.2 million square feet of available office space, with a 12.1 percent vacancy rate, up slightly from 11.6 percent in 2024. Most of that — 78 percent — is in blocks that are 10,000 square feet or greater, meaning spaces smaller than that have a slim vacancy rate of 2.7 percent.

Downtown space is especially limited, with just a 4.1 percent vacancy rate and a total of about 110,000 square feet available. One major deal for the market in the past year will transition the U.S. Bank building at 141 N. Main Ave. to an AC by Marriott hotel and bank branch.

The more suburban market outside of downtown has a larger 15.2 percent vacancy.

“The fundamentals in the office market are improving, and we expect an exciting year for expansion of new office space and absorption of those large spaces that have been vacant for years,” Bender broker associate Isaac Jorgensen said.

Industrial market

The Sioux Falls industrial market vacancy climbed to its highest level in more than 20 years last year — though that put it at 4.8 percent versus 3.7 percent in 2024.

Nationwide vacancy was at a 10-year high, with absorption at its lowest since 2010, rents declining and construction at its lowest level since 2017.

Absorption in Sioux Falls dropped 20 percent to 680,000 square feet, while new construction held steady at 1.1 million square feet. Sales volume hit a record $168 million, “driven by larger transactions and elevated pricing,” Bender partner Rob Fagnan said.

“For 2026, expectations in the industrial sector include stabilizing construction, declining vacancy, steady lease rates and renewed sales momentum.”

Key transactions included new construction for Amazon, CJ Schwan’s and Silencer Central.

Multifamily market

The Sioux Falls multifamily market is entering 2026 “with improving fundamentals and growing momentum,” Bender partner Alex Soundy said.

“New construction has slowed significantly due to higher interest rates and rising construction costs.”

The city issued permits for 1,168 multifamily units in 2025.

“This reduced pipeline is helping vacancy recover after briefly reaching double digits, while rent concessions continue to ease,” Soundy said.

“Likewise, rent growth is expected to return to a healthier pace. At the same time, homeownership affordability challenges are pushing more households toward renting, supporting long-term demand for apartments.”

Here’s a look at how the city compares regionally in terms of multifamily occupancy and rents:

Sioux Falls recorded more than $150 million in multifamily sales in 2025, and the improving occupancy and financing conditions point toward the potential for a record year of multifamily sales in 2026, Soundy added.

“Lenders who previously worked with struggling multifamily owners are beginning to require action, which is expected to increase listing activity and transaction volume,” he said.

Capital markets

In Sioux Falls, year-over-year real estate investment sales volume in dollars increased across the board: multifamily by 63 percent, office by 24 percent, industrial by 44 percent and retail by 76 percent. All compare favorably to the national real estate sales volume increase of 22 percent.

“Global and national real estate investment markets are clearly on the rebound after a sharp drop in 2023,” Bender partner Nick Gustafson said.

“Sioux Falls is outpacing this recovery with all asset classes showing strong recovery. The big theme real estate investors are considering now is sell-side certainty that will exist for the next three years. Federal tax structures will remain constant, 1031 exchange continuance will remain the same, and the interest rate environment will be neutral or slightly improving.”

For capital and investors, political uncertainty will reemerge in 2029, he added.

“These considerations paired with an upcoming historic demographic wealth transfer will set the pace for very strong transaction volume in 2026, 2027 and 2028.”

To view past Bender Market Outlook reports, visit here.

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