The assumption behind the rent projection

An apartment acquisition can look conservative until you examine what has to happen for its projected rents to materialize.

One assumption deserves particular scrutiny: construction has slowed, so existing apartments will face less competition and rents will rise.

Sioux Falls’ permit data gives investors a reason to question that sequence.

Our market research database contains the following Census estimates for new housing units authorized in buildings with five or more units across the Sioux Falls metro:

A rebound within a longer slowdown

The 2026 total increased 42.3% from the same months of 2025. It remained 11.4% below 2024.

Both comparisons matter. Last year’s slowdown was substantial, but using that slowdown to justify several years of stronger rent growth would overlook the subsequent rebound.

The monthly figures also show how uneven authorizations can be. April 2026 recorded zero units in this category; June recorded 404. One quiet month provides weak evidence for a lasting change in competition.

These figures count units authorized for construction. They do not establish completion dates, rental availability or how many units will compete with a particular property. The five-or-more-unit category also does not distinguish rental apartments from condominiums. See the Census definitions.

The financial risk appears in effective rent

Consider a simplified, hypothetical 20-unit property. At $1,300 per month, with every unit paying for a full year, annual rental revenue is $312,000.

Raise every unit’s monthly rent by 3%, to $1,339, and the annual figure reaches $321,360 before concessions.

Now give one month free on ten leases. Rental revenue falls to $307,970—$4,030 below the original scenario.

Advertised rents increased 3%. Rental revenue decreased 1.3%.

This example holds occupancy and other factors constant to isolate the concession. Actual results also depend on renewal timing, downtime and collections. But it demonstrates how a modest leasing incentive can consume an apparently reasonable rent-growth assumption.

The useful research happens property by property

For an acquisition, the metro permit count should trigger a closer investigation.

Which competing projects have financing, active construction and a credible delivery schedule? How do their floor plans, locations and rents compare with the subject property?

What are their effective rents after free months and other incentives? How much vacant inventory remains, and how many units are actually leasing each month?

That evidence determines whether a nearby development is likely to affect achievable rents, tenant retention or leasing time.

A newer property offering concessions may compete with an older building at a lower effective price than its advertised rent suggests. An owner who compares only the advertised figures can overestimate the room available for rent increases.

The acquisition should therefore be tested with flat effective rents, continued concessions and slower leasing. If acceptable cash flow depends on competing supply disappearing, the purchase price needs to reflect that dependence.

A construction slowdown can improve an investment’s prospects. The rent roll still has to prove the benefit.

Source and method

Data: U.S. Census Bureau Building Permits Survey, monthly estimates with imputation for the Sioux Falls metro (CBSA 43620). Figures are summed for January–August in each year from our October 20, 2026 database snapshot. These are counts of housing units authorized, not counts of buildings, construction starts or completed units. The totals are not annualized and may be revised.

Percentage changes are calculated from the monthly sums and rounded to one decimal place. The revenue example is hypothetical and does not describe a Metastone property or investment result. This analysis is not endorsed or certified by the Census Bureau.