Rochester’s Destination Medical Center plan moved ahead despite challenges

As a bulldozer digs into dirt in downtown Rochester, all Chris Schad sees is a pedestrian-friendly walkway.

“It’ll be benches, and trees, and greenery and spaces for people to gather,” he said. “We tend to think of these public spaces as pearls on a thread. And this is part of the thread that connects to the core downtown campus.”

Schad is director of business development for the Destination Medical Center, a 20-year $5.6 billion facelift for Rochester’s downtown.

Standing on the fifth floor of the nearly-completed Two Discovery Square biulding, Chris Schad, DMC’s director of business development, sees a lot of potential in Rochester’s downtown business and retail capacity. Ken Klotzbach for MPR News

Ken Klotzbach

Construction on what is dubbed Discovery Walk just began. It will connect Mayo Clinic’s campus a few blocks away, restaurants and a new cluster of med-tech offices nearby called Discovery Square.

DMC’s master plan aims to refashion Rochester into more of a destination for people seeking healthcare at Mayo Clinic and for people seeking to work at the intersection of health and technology.

Success hinges, in part, on creating a vibrant downtown that’s attractive to people who might otherwise move to a bigger city. That requires the right mix of amenities, businesses and places to gather, said urbanist and University of Toronto professor Richard Florida.

“Not only does it need to be an attractive place for doctors, research scientists and biologists, it needs to be an exciting place for talent because if it’s not those people won’t come,” he said of the project.

But while construction of new condos hotels and pedestrian areas has moved quickly during the pandemic, filling storefront spaces has been slow, the pandemic a major headwind.

At the heart of the slow down is uncertainty about consumer habits, Schad said.

“All of that uncertainty puts a decision making on pause,” he said.

$700 million in private investment

The Destination Medical Center’s goals include creating 30,000 new jobs, generating up to $8 billion in tax revenue, and expanding the city’s industry beyond Mayo Clinic’s walls.

The plan leans heavily on private investment to unlock up to $585 million in taxpayer dollars to pay for improved public infrastructure, such as sidewalks and sewers. Since 2013, nearly $700 million in private dollars have been put into new development, the majority coming from Mayo Clinic.

A glass pane of a building

Sitting on the southern edge of downtown Rochester, the recently completed Maven building, right, features a large vacant street-level retail space. Ken Klotzbach for MPR News

Ken Klotzbach

Roughly half of that private investment so far has gone into hotel and apartment space downtown, making the area the fastest growing residential area in the city.

In recent years, downtown Rochester has become the fastest growing residential area of ​​the city. Young people without kids and empty nesters tend to fill the newly built condos here – and Schad says they want a host of amenities.

In May, DMC plans to roll out a $3 million award from the state to help businesses launch capital projects in the area.

“We’ve heard we need a place to work out. We heard: a bookstore, a place where I can take my dog. We’re hearing a need for another grocery store,” Schad said.

Twenty-five new businesses have opened or reopened downtown, but some storefront space has been available for years. Schad said the people are coming, but the amenities are lagging.

“It’s sort of the chicken egg – which one comes first? And I think the answer is they both come first,” he said.

‘A bit of authenticity’

Suburban areas have been quicker to bounce back from pandemic-related shut downs and in-store sales are up, said Charlie Hexum, a senior associate with commercial real estate and investment specialists CBRE.

“In general, urban areas have just been much slower to recover,” he said.

Pre-pandemic, retailers would have seen downtowns as a top choice to open a shop.

Now, “it’s probably another year, year-and-a-half out before they look at it because they just want to see what the new normal is going to look like a little bit more as we get out of the pandemic,” he said.

Meanwhile, what Florida calls “third places” – coffee shops, bars, beauty salons – that are essential to bustling downtowns have done well during the pandemic because people want to connect.

“Casual spots for people to get together have thrived even during the course of the pandemic, and that’s telling us something,” he said.

But successful neighborhoods can’t just be manufactured, said Brandon Isner, CBRE’s head of retail research for the Americas.

“There’s got to be a bit of authenticity to it,” he said – a quality that can breed additional investment and attract new businesses naturally.

“It’s nothing you can make up. People have tried and it never seems to work,” he said.

‘There’s no one walking downtown’

Just down the block from where Discovery Walk is under construction visitors can find Pasquale’s Neighborhood Pizzeria.

Owner Pasquale Presa said that pre-pandemic, his eatery busled with people gathering for lunch, happy hour and dinner.

“It was hot, things were going phenomenal,” he said.

A man stands next to brickwork

Pasquale Presa, owner of Pasquale’s Neighborhood Pizzeria, has seen his lunchtime crowd evaporate since the pandemic forced many downtown workers to work from home. Ken Klotzbach for MPR News

Ken Klotzbach

Now, even though workers are back at Mayo, Presa said the institution’s decision to keep some employees working remotely – potentially for good – has forced him to focus on expanding his food business to grocery stores. It’s going well, and he’s questioned whether his rent downtown is worth it.

Presa said the decline in foot traffic has created a vicious cycle that’s in direct conflict with DMC’s efforts to bring new businesses downtown.

“Various businesses came here and talked to me and asked ‘What do you think of downtown?’” he said pointing to an empty storefront across the street.

“I said, ‘Well, why don’t you hang out at lunchtime and see what it’s like? And then you think if it’s good to place the rent.’ Well, they did their numbers. There’s no one walking downtown. No wonder they’re empty,” he said.

People’s Food Co-op is a natural foods grocery store in the area. When it opened a decade ago, CEO Lizzy Haywood says they knew the area would be growing.

“We did expect it would be much quicker than it has been. It is happening, it’s just slower,” she said.

The pandemic shifted the Co-op’s business too. Consumers are less likely to come in for lunch, she says. But an increase in local residents grocery shopping there – and shopping for more – has helped offset that downward trend.

New businesses opening in Discovery Square and construction of Discovery Walk just outside the co-op’s front door is a promising sign for the store’s future, she said. The construction hassle will be worth it.

“It’s really going to be a driver of people being comfortable walking in and feeling like there’s a good path and they’re not going to get stuck halfway to their lunch,” she said.

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