COMMERCIAL ACTIVITY OFF TO A SLOW START IN 2025 AS UNCERTAINTY TAKES HOLD
Through April 2025, only 37 commercial property sales have closed across Pennington County, totaling just over $41 million in sales volume, a decrease of 33% compared to 2024. While overall transaction count and volume is down compared to this time in 2024, the average deal size remains strong at $1.1M, as we are not seeing price declines even with the decreased sales activity.

By Sector: Who's Buying What
    - Office is only one of two sectors with year over year growth with 6 transactions, nearly 3 times what we saw in 2024. This is a bit misleading as many of those transactions came together in late 2024 and are closing in 2025.           We have seen office demand decline in the last 3 months. Owner-occupied users continue to dominate this space.
    - Retail recorded 11 transactions for $18.3M, nearly double the sales volume year-over-year as investment deals start to pencil.
    - Industrial saw only 4 transactions, totaling $7.1M—a drastic 79% decline in volume, while inventory continues to increase to levels not seen since 2019.
    - Multifamily only saw 2 sales totaling $1.6M, down sharply (-88%) from last year. Inventory has continued to increase and DOM are returning to normal levels.
    - Land sales continue to lead all sectors in transactions, with 12 transactions totaling $7.6M—while this is a drop from the first 4 months of 2024, we are still seeing steady demand for improved land in the city limits.

LEASING MARKET UPDATE
Small Suites Perform, Larger Spaces Need Incentives
     - Office leasing is outperforming other sectors in 2025, with consistent interest in turn-key suites under 3,000 SF.
     - Retail leasing has softened, with multiple months of limited lease activity but most of this has been driven by a decline in available inventory.
     - Industrial has seen a significant new supply of small shops delivered, serving a much needed segment of the market, but users of 10,000–20,000 SF distribution-ready space with loading docks are still waiting on the              sidelines until new inventory is delivered.

Quality Matters
Renovated, ADA-accessible spaces are now expected. Properties with deferred maintenance or dated interiors are losing out to modern, ready-to-occupy spaces. Owners who reinvest in improvements are achieving stronger rents and faster lease-ups, while older inventory is struggling to lease and adding to the additional supply.

TRENDS TO WATCH
1. Office Momentum Accelerates
Office transactions and leasing are both on the rise, driven by increased owner-occupied demand and move-in ready leasing spaces.
2. High Deal Size Masks Slower Volume
While the number of sales is down by 33%, average deal size is up 7%—a signal that the market is still active, but more selective.  Once uncertainty in the macro economy subsides we see the market growing at a steady pace again.
3. Leasing Volume vs. Leasing Value
Much of the leasing activity is happening in smaller spaces, which is allowing for strong rent growth but larger spaces are requiring creativity and incentives to attract tenants which is holding back the total rent growth seen in the market as a whole.

For regular market updates and a full list of available properties, please visit our website at www.RapidCityCommercial.com.