A record building year in Sioux Falls and similarly strong activity regionwide is driving significant interest in real estate investing. Whether you’re currently invested in local real estate or considering it, knowing market conditions and potential challenges is key to understanding your opportunity. We sat down with Chris Daugaard, a partner in Ernst Capital Group, for insight on the market today and looking ahead.
How would you describe the state of the real estate investment market today? What are some of the themes through the first three quarters of the year? The real estate investment market is strong, very competitive and growing. Through the first three quarters, we continue to see interest in investment real estate and growing interest from firms that are located outside of the region. You see competition and higher prices for any property that hits the market.
You’ve consistently invested in Sioux Falls and regional markets like it. How are you perceiving the strength of those markets currently relative to the rest of the country? Around the country, the last two years have seemingly increased growth in certain areas and slowed growth in others. Markets in the Upper Midwest seem to have fared relatively well compared to much of the country. Sioux Falls is as strong as we’ve ever seen it and I think still flies a bit under the national radar. That is changing.
You have invested primarily in multifamily but also in some retail and office properties. Multifamily is in a historically tight market. What does that mean for Ernst Capital and future investment prospects? It means that we continue to focus on multifamily investments, as the demand is there. Labor and material availability is what is limiting more multifamily development at this point, not opportunity. Sioux Falls has strong office and retail markets, as well, counter to the narrative that the pandemic has created in other places. Some coastal cities have significant downtown vacancy, retail vacancies and slowing trends. Sioux Falls is seeing the opposite. We have a robust downtown office market and new retailers starting and building in Sioux Falls, and the market seems to be just getting better, not worse.
Sometimes intense markets can lead to some bad decision-making. Are there any cautions you might share for real estate investors? It goes back to the popular quote, “Trust, but verify.” Excitement and good marketing don’t take the place of investors doing their own homework. It’s important to seek good information from people you trust. If you hear about how good a potential investment is, it’s OK to ask the person offering that investment for some documentation. What makes it a good investment? Would this investment work well in a slower, more “normal” market? Additionally, because a hot market can require quick decisions, it’s important to do your homework ahead of time. What exactly are you looking for as an investor? What type of property, what characteristics are important? Knowing that all ahead of time can help you make quick decisions about an investment property when there’s competition. We provide investors a more passive, measured approach to investment real estate. That way, they don’t have to be in the heat of competition to buy properties themselves.
What are some of the most common questions you’re receiving from current or potential investors? We are hearing a lot of questions about Congress, the state of the economy and what’s happening with the two main bills under consideration. A lot of investors are also looking at the stock market and wondering how much room there is left to run.
Looking ahead, what are your expectations for the remainder of the year and into 2022? We’re expecting the multifamily market to remain strong, with more announcements for new construction and new businesses planning to open in Sioux Falls and the region. We’re blessed to live in an area that is a great place to live, work and invest.