Private investment in downtown Rochester will decline in 2023

ROCHESTER — Downtown development has increased its reliance on Mayo Clinic over the past year, with just $12.5 million in investment from outside Mayo. This is the lowest amount since the effort to make Rochester an international medical hub began tracking investments in 2015.

Downtown attracted a total of just under $150 million in private investment, a significant decrease from a strong 2022, according to Destination Medical Center (DMC) officials.

Rochester City Governor Allison Zelms downplayed the lack of interest outside of Mayo. “It’s a little less than we’ve had in the past, but still given that we’re still recovering from the COVID-19 pandemic,” Zelms said Thursday at a DMC meeting to review the group’s annual report to the Minnesota Department of State. It’s a really great investment.” employment and economic development.

Investments outside of Mayo included new restaurants and more space at existing spots downtown. This includes renovating the former DoubleTree by Hilton to accommodate more student housing at the University of Minnesota, Rochester.

Mayo’s $133 million investment in 2023 primarily included the completion of the Anna Maria and Stephen Kellen Building, the health system’s state-of-the-art cancer research center. This was the first major Mayo Clinic building project completed in Rochester since Mayo Clinic opened his Gonda Building in 2001.

Downtown Rochester saw similar investments in 2020 and 2021 during the height of the pandemic as last year, but nearly $200 million in economic development in 2022.

DMC invests an average of approximately $173 million annually in downtown development.

DMC Executive Committee Chair Pamela Wheelock acknowledged that high interest rates and the economic recovery from COVID-19 have made private investment difficult.

“I hope we can continue to think about what we need to think differently or act differently to overcome hurdles,” she said.

In 2013, the Minnesota Legislature approved $585 million in city, county and state funding for DMC through 2033. Most of DMC’s annual budget, which is used to pay for public infrastructure to support development, comes from state funds, but its operating budget comes primarily from city revenues. . To date, DMC has spent or allocated approximately $220 million in public funds.

That funding is contingent on continued private investment, but DMC has already met the requirement to receive the largest amount of annual funding each year, with more than $1.6 billion invested to date.

Thanks to Mayo Clinic’s multibillion-dollar expansion, this effort is on track to exceed its overall investment goals in the coming years. Construction on some of these projects is expected to begin this summer.

Zelms said investments in downtown Rochester reflect only a small portion of the city’s 55 square miles of ongoing growth. He estimated it was more than double the amount of non-Mayo private investment made across the city last year. More private development is expected in the coming years as Mayo’s expansion increases staff and secondary operations.

“It’s much easier to maintain momentum and keep the flywheel moving than to start the flywheel,” Zelms said. “We’re ahead of the curve, especially in the sense that we continue to invest in downtown. Downtown is a more challenging space based on price, footprint and building costs.”