The first newsletter of each year is always a favorite, as it gives us the opportunity to analyze a full year’s worth of data, reflect on market trends, and set the stage for what’s ahead.
Development Trends: Growth Continues, with Some Signs of Slowing
Rapid City and the surrounding Black Hills continued to experience economic growth in 2024, with new developments shaping the landscape. The land sales market was a key driver, with sales volume up 46% from 2023. This increase was largely fueled by two factors: a slight easing in material and construction costs and a wave of pent-up demand from developers who had been waiting on the sidelines. However, we will be watching this trend closely, as activity began to slow in the final three months of the year.
Industrial properties also saw a strong year, with total transactions up over 70% and nearly double the sales volume. This was largely driven by owner occupied business owners who were ready to buy and finally found the inventory they needed.
Multifamily and retail assets experienced a slight dip, as interest rates continued to put downward pressure on values for income-producing properties. However, hospitality had a solid bounce-back year, with financials showing multiple years of stability post-pandemic. Within our team, we facilitated several large campground sales in the Black Hills and have noticed an uptick in lead activity for this sector. Early indicators suggest a strong 2025 tourist season, with reservations already looking solid.
Leasing Market: Stable, with Continued Demand for Smaller Spaces
The commercial leasing market remained steady throughout 2024, both overall and within our team, as we completed 59 lease transactions for the year.
- Industrial rents have stabilized with an increased supply of smaller shop spaces, but the market remains in critical need of warehouse/distribution buildings with loading docks. We regularly receive inquiries from distributors interested in Rapid City who ultimately decide against moving forward due to the lack of available inventory.
- Turn-key office and retail spaces under 3,000 SF remain highly sought after, while demand for larger spaces over 5,000 SF has been notably soft. This trend may shift as in-office work policies become more standardized.
- Landlords are adapting to market conditions by offering larger tenant improvement allowances for long-term leases on vanilla shell retail and office spaces, as construction costs remain elevated.
If you're considering leasing space or have available properties, our leasing specialist, Gina Plooster, is ready to help.
As always, we appreciate the opportunity to serve as your trusted commercial real estate partner. If you have any questions or want to explore opportunities in the market, don’t hesitate to reach out.
