While the Nation Normalizes, Sioux Falls Industrial Keeps Building

The national industrial market is cooling off. That is not a crisis. It is a correction. After the pandemic supercharged demand for warehouse and logistics space, the market overbuilt. Now it is working through the hangover. But Sioux Falls, even while cooling alongside the rest of the country, is doing so from a position most markets would envy.

The National Picture: Strong, but Settling

According to NAR's March 2026 Commercial Real Estate Insights Report, national industrial net absorption totaled 114.2 million square feet over the past 12 months. That sounds enormous. It is. But it is also down 27% year over year. The pace is slowing.

National vacancy sits at 7.6%. Rent growth has cooled to 1.3%. Cap rates are at 7.4%. Completions continue to outpace leasing, which means new buildings are coming online faster than tenants can fill them.

Where is the demand? Logistics assets drove the bulk of it at 87.8 million square feet. Specialized facilities (think cold storage, pharmaceutical, advanced manufacturing) posted 25.2 million square feet of gains. Flex space, on the other hand, saw 7.8 million square feet of net move-outs. That category is struggling everywhere.

Dallas-Fort Worth led the nation in absorption at 24.5 million square feet. On the vacancy side, the range is wide. Charleston, South Carolina, sits at 14.8%. Anchorage, Alaska, at just 1.1%. Context matters.

Sioux Falls: A "High" Vacancy That Most Cities Would Love

The local industrial vacancy rate hit 4.8%. For Sioux Falls, that is a 20-year high. Headlines might frame that as concerning. But let's be clear: 4.8% is still well below the national 7.6%. Most metros in the country would trade their numbers for ours in a heartbeat.

Absorption dropped about 20% to 680,000 square feet. That mirrors the national trend. New construction held steady at 1.1 million square feet, which means we are still building. And sales volume hit a record $168 million. People are not running from Sioux Falls industrial. They are investing in it.

The Projects That Tell the Story

Numbers only go so far. The real story is in what is actually getting built.

Amazon landed here. CJ Schwan's committed $170 million to expansion. Silencer Central is growing. These are not speculative projects. They are commitments from companies that see long-term value in this market.

Then there is the biggest one. Smithfield Foods announced a $1.3 billion pork processing plant. That is the largest private investment in Sioux Falls history. Full stop. A project of that scale does not just add square footage. It reshapes the labor market, the supply chain, and the surrounding infrastructure for years.

On the emerging side, data center demand is starting to show up. The Gemini site in east Sioux Falls has already secured rezoning and annexation. Data centers require enormous power capacity, fiber connectivity, and flat land. Sioux Falls checks those boxes. This could become a meaningful new demand driver in the years ahead.

Where the Land Is Going

One constraint worth watching: industrial land in Sioux Falls proper is getting scarce. Most industrial land sales in the past year have been in Tea and Harrisburg. That is not a problem exactly, but it does mean the metro is spreading. Developers and tenants who want to be close to the core of Sioux Falls need to plan earlier and move faster than they did five years ago.

What to Expect in 2026

The outlook for this year is straightforward. Construction should stabilize. Vacancy should start declining as the market absorbs what has been built. Lease rates should hold steady. And after a record-setting sales year, there is reason to expect renewed momentum on the investment side.

The national market is normalizing. So is Sioux Falls. The difference is where each started from. When your "high" vacancy is still 2.8 percentage points below the national average, and when a $1.3 billion plant and data center interest are on the horizon, normalizing looks a lot like opportunity.