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Brokers see interest in office space

February 04, 2016

Jered Johnson’s search for new office space eventually landed him in one of the more iconic spots in downtown Sioux Falls.

The president and CEO of Pepper Entertainment & Marketing is moving into the office formerly occupied by the late developer Don Dunham Jr.

“It’s cool,” said Johnson, who is moving from The District to the space on the second floor of Shriver Square at 11th Street and Phillips Avenue. “I had no knowledge of that (the former tenant) at the time. We looked at several locations, and that one was a prime location.”

Johnson is leasing about 2,000 square feet for his five-person company, with an option to add 2,700 square feet.

His search for space revealed a somewhat tightening office market that has seen a growing amount of leasing activity in recent months.

“The trick for us is we’re by our own definition a marketing firm, and we’ve got to have the space to support the brand image. We didn’t just want to be in four walls,” Johnson said. “And downtown gives you that entrepreneurial spirit with everything going on down there.”

Johnson verbally committed to the office the first time he saw it.

“The space was perfect,” he said. “We’ve got window front, good opportunities to host friends and clients for Parade of Lights parties. We were very lucky.”

While annual data is still being finalized, the sense is office vacancy is going down, said Reggie Kuipers, a partner in Bender Commercial Real Estate Services, who represented the Shriver space.

“The fundamentals seem strong,” he said. “There’s a lot of interest, and it does seem like people either want to be south or downtown. There are still adequate options because there will always be turnover, but it seems to be a lot of tenant interest in a couple months.”

Another of his clients, the new Estate Planning Solutions Law Firm, focused on the south side of town and leased 2,360 square feet near 49th Street and Louise Avenue.

“We’ve moved in and are open for business,” founder Evan Anema said. “We’re really happy with it. It was a CPA office before, and now as a law office the setup is going to work out really well.”

Estate Planning Solutions is a two-person firm for now, “but I don’t plan on it being that for long,” Anema said.

He found many office options at less than 1,500 square feet and more in excess of 3,000 square feet “but really not much in between.”

Two accounting firms found their solution to needed space through an office domino deal of sorts. Woltman Group PC outgrew its office at 4500 S. Technology Circle and opted to build a two-story office near 77th Street and Minnesota Avenue.

It allowed the firm to double its space to 12,500 square feet and left it with the same amount to lease to another business in the building.

“It was hard to find an existing facility or one that could even be remodeled. That’s why we went with new construction,” senior partner Tim Stotz said. “We might have it half-leased. We have some good leads.”

The firm’s former building was the right fit for another accounting firm, Anderson Group CPA Inc., which also had outgrown its office and bought the site on Technology.

“This ultimately ended up being a perfect fit, everything from the number of offices – a little larger than they needed initially – but right down to the cabling of the place, so they just moved in and took off to go,” said Ryan Ammann of NAI Sioux Falls, who put the deal together.

The greatest success in leasing has been class A space such as the downtown CNA Surety Building and The Plaza, said Raquel Blount of Lloyd Cos. She recently leased space to KSFY-TV for a new office and television studio in Courthouse Square and space to new architecture firm JLG Architects in the Best Building on Main Avenue.

“Office was, I would say, hit the hardest, and it’s taken time to recover, but we’re finally seeing some growth and activity in the market,” Blount said.

There also has been interest in the last remaining office space in The Foundry on Phillips Avenue above Duluth Trading Co.

“It’s an opportunity to design your own space and choose your own finishes.

This year likely will bring new construction in office space, particularly downtown and in southern Sioux Falls, those in the industry say.

Lloyd Cos. is hoping to start work on its featured office space at The Edges – a three-story, 45,000-square-foot building at interstates 29 and 229.

“We’re looking for that big-name anchor tenant that wants prominent exposure,” Blount said.

Other new office space that becomes available in that part of town generally gets filled within the year, Kuipers added.

“The demographics in south Sioux Falls are very attractive to a lot of office users, plus it’s where a lot of them live and there are amenities.”

Courtesy of Jodi Schwan, Sioux Falls Business Journal