By Liz Wolf
After years of planning, a massive $5.6 billion Destination Medical Center (DMC) is now driving a building boom that will forever change downtown Rochester’s skyline.
The DMC initiative is the biggest public-private partnership in Minnesota’s history. It’s expected to generate more than $5 billion in private investment, add 30,000 new jobs and thousands of new residents, and transform the downtown over the next 20 years – all while ensuring that Rochester remains a global medical destination. The project is one of the largest economic development initiatives in the country.
In 2013, the Minnesota Legislature approved $585 million in incentives for the DMC, which will help Mayo Clinic continue to expand and remain competitive with other world-class medical centers.
According to city documents, the city has approved $2.62 billion worth of construction permits since 2013. The permits are for a mix of housing, hotel, retail, office and research space.
“The state took a leap of faith, and now five years later, there’s a tremendous amount of evidence that they took a risk with this community and it’s really paying off,” says Patrick Seeb, director of economic development and placemaking for the Destination Medical Center’s Economic Development Agency.
“When this initiative got launched, it really took on a life of its own in terms of making the marketplace aware of the growth opportunities that Rochester represents,” Seeb continues. “For many years, Rochester has been a very successful city. Mayo continues to grow and it has done well, but it has largely relied on local investments for its growth. What the DMC initiative has done is led to a confidence in the market here that has attracted capital certainly from the Twin Cities and also from outside the Minnesota market. It has attracted capital from Chicago, from Boston, California, Florida. It’s new money flowing into this state, investing in this state and supporting the growth. It’s doing so because it believes there’s demand that’s being fueled mostly by Mayo’s growth, but also by the willingness of the state and the city to invest in public infrastructure.”
Many projects are underway
With the DMC designed as the global center for medical care, Rochester needs additional infrastructure, transportation, hotels, retail, restaurants and entertainment.
To date, 21 projects have recently been completed, are underway or proposed in the approximately 550-acre DMC development district. “All of those are in response to real market demand,” Seeb says.
The DMC’s master plan calls for 2,200 to 3,100 units of new for-rent and for-sale housing, 200,000 square feet to 348,000 square feet of retail/entertainment space, 1,300 new hotel rooms and commercial research and technology space.
The DMC development district is centered around six sub-districts. A variety of development projects are underway, leading to an endlessly changing Rochester skyline. Many of the projects are being led by Twin Cities developers.
“It’s been very impressive to see the larger development firms that have started to be active in our community,” says Bucky Beeman, licensed agent and partner at Rochester-based Realty Growth Inc.
Beeman points to the city’s booming apartment development market as well as new retail and restaurants.
“We’ve seen more retailers and restaurants come to downtown and I think we will continue to see more,” Beeman says. “We’re getting interest from people around the state and out of state looking at different opportunities, but I’m also happy to see some of the downtown growth of small business owners.”
Here’s an update of some of the biggest projects in three of the DMC’s sub-districts:
Discovery Square sub-district
Discovery Square (phase one)
Golden Valley-based M.A. Mortenson broke ground in October 2017 on a four-story, 90,000-square-foot life sciences building that will anchor the 16-block “Discovery Square” sub-district, which will be a life sciences and bio-tech hub. The new building, which will house laboratory space, offices and research space, is being constructed at the corner of Fourth Street Southwest and Second Avenue Southwest. Mortenson was selected in September 2016 to lead development of Discovery Square.
Over the next 20 years, DMC plans to add 2 million square feet of space in Discovery Square for research, education and product development. DMC officials say Discovery Square will be the keystone to the DMC economic development strategy. They’re hoping this new $35 million building will attract other national research companies that want to be near Mayo Clinic.
The building will be anchored by Mayo Clinic, which will take approximately one-third of the rentable space.
Jeremy Jacobs, director of real estate development at Mortenson, says additional tenants will likely be named soon.
“We think we’re very close in terms of being able to make formal announcements and really begin to show the hard work we’re doing to bring new companies, new professionals and new tax base to the market,” Jacobs says.
He says the opportunity for tenants to locate alongside the world-renown Mayo Clinic is “clearly unlike any experience you could get anywhere else in the world.”
The building was designed by RSP Architects and HOK, and Colliers is the leasing agent. The building is scheduled to open in April 2019.
Jacobs says Mortenson saw this development as a big opportunity.
“With the advent of the Destination Medical Center back in 2013, the entire market saw an opportunity and rightfully so,” he says. “Mayo’s strategy of a destination healthcare practice completely aligned not only with what the state and region needed, but what the country needs right now in terms of its expertise and specialty research… Now construction permits are exploding in the area, and I think we’re going to continue to see a great deal of interest in that market, particularly… as new companies come to the market to partner with and alongside Mayo Clinic.”
Urban on First project
Rochester-based Titan Development & Investments and Minnetonka-based Opus Group broke ground in March on a 154-unit apartment development in downtown Rochester in the Discovery Square sub-district.
“Located just steps away from Mayo Clinic’s main campus in downtown Rochester, this development marries convenience with unique/high-quality amenities for local residents,” said Matt Rauenhorst in a released statement. He’s vice president and general manager at Opus Development Co. LLC. “Our combined Opus and Titan team will bring urban living to a new level in Rochester, and we’re thrilled to be a part of the city’s and DMC’s vision for the area.”
The $38 million, six-story building will include 9,000 square feet of ground-level retail space. First-level amenities will include bike storage, a dog wash and resident parking. The second level will include a swimming pool, green roof space with seating, a club room and fitness center. Units will feature high-end finishes. The project is scheduled to open in summer 2019.
St. Mary’s Place sub-district
Alatus project
Minneapolis-based Alatus LLC recently broke ground on a $125 million, 13-story apartment tower adjacent to Mayo Clinic’s St. Mary’s hospital campus where The Brentwood hotel (formerly known as The Blondell) and Ray-Mar Motel once stood. The development site – at 406 Second St. SW — is 2.83 acres and includes 14 taxable parcels that were assembled, says Chris Osmundson, director of development at Alatus.
The yet-to-be-named tower will have 350 units including apartments and rental townhomes. The ground floor will include restaurants and retail with office space and additional retail planned for the second floor.
“Right now, we’re trying to wrap up bringing on board sort of a co-working tenant [for the second floor]. That would be really cool to get in there with the adjacency to St. Mary’s,” Osmundson says.
Amenities will include a third-story rooftop pool and indoor sauna, outdoor grilling stations, fire pits, a fitness center and on-site pet park. Osmundson describes it as an “urban, integrated-living concept.”
The building is scheduled for completion in March 2020.
Downtown Waterfront sub-district
Bloom Riverfront Towers
Developer Bloom International Realty of United Arab Emirates is working its way through the approval process for an approximately $250 million, approximately 900,000-square-foot, mixed-use waterfront development composed of two high-rise towers. The towers will include 130 condos, a 180-room four-star hotel and 215 units of senior housing. The towers will be built atop of ground-level retail, restaurants and a parking garage. The site runs along the Zumbro River from Second Street SE down to Fourth Street SE.
The project is the biggest private development proposed since the implementation of the DMC initiative.
Hilton Hotel
A $125 million, 264-unit, upscale Hilton Hotel is under construction at South Broadway and East Center Street. Developers are Titan Development & Investments and Chicago-based Harbor Bay Real Estate Advisors. The 19-story hotel includes ballrooms, conference rooms and 15,000 square feet of retail space. The hotel, which will connect to the downtown skyway system, is slated to open in spring 2019.
