End of Q3 Market Snapshot
Greetings from your Rapid City Commercial Team in the Black Hills! The second half of the year has kept us busy—Q3 transactions were up 35%, showing renewed activity across the market. While that momentum is encouraging, we’ll need to sustain it to close the year strong, as total volume remains behind 2024 levels.
Retail continues to lead all sectors, while others are still finding their footing. Inventory growth is helping drive more transactions, and recent rate declines have provided a boost. Still, we’re seeing hesitation from buyers, signaling that the market remains in transition from a seller’s to a buyer’s environment.
SALES MARKET UPDATE
Office Transaction count is on par with last year, though total volume is lower at $15.1M. Investors are starting to see value in this sector but remain cautious, waiting for stable opportunities. Larger space deals are virtually absent.
Retail The clear top performer with 32 transactions and $49.5M in volume, driven largely by off-market NNN sales. On-market listings remain scarce, both for sale and lease.
Industrial Still trailing 2024 with only 15 transactions—less than half of last year—but recent months have shown an encouraging uptick as inventory expands.
Multifamily The slowest sector with just 8 sales totaling $12M. Price reductions are common as sellers align with today’s investor expectations, yet many listings continue to sit due to unrealistic cap rates relative to current interest rates.
Hospitality Activity remains quiet with only 5 transactions and $6.4M in volume. However, both listing and buyer engagement have picked up since summer, suggesting stronger movement ahead.
Land A consistent performer with 32 transactions totaling nearly $17M and a solid 3Q trend. Expanding inventory will likely bring price adjustments and more opportunity for buyers in the coming months.
LEASING MARKET UPDATE
Office Leasing remains robust with 36 transactions year-to-date, though the average deal size is smaller at under 2,000 SF. Interest is rising for larger Class A spaces in key submarkets such as Downtown, Mt. Rushmore Road, and 5th Street.
Retail Softer leasing activity with only 14 transactions YTD, but this reflects lack of available product more than lack of demand. With Rushmore Crossing and other top centers at full occupancy, new construction completions next year should bring welcome options.
Industrial Supply continues to outpace demand as new product hits the market. Landlords are getting competitive with pricing to reduce vacancy times. Developers introducing new units will need to differentiate with in-demand features like yard space, floor drains, and 3-phase power.
TRENDS TO WATCH
Buyers Haven't Fully Returned
Buyer activity slowed sharply after rate peaks last year. We’re seeing slight improvement in Q3, but confidence remains tentative.
Sellers Will Either Bend or Break
As balloon payments mature and five-year loan rates reset, sellers holding firm on outdated pricing will face pressure, creating likely opportunities for investment buyers heading into 2026.
Need to Lease? Don’t Wait.
Rates across all sectors are stabilizing or softening thanks to higher inventory. If you’ve been waiting for the right time, conditions are the most favorable since 2022.
