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MIDDLE MARKET HIGHLIGHT, DECEMBER 2005
ROCHESTER, MINNESOTA
Karen Stone, CCIM
After a rather direct hit from the technology downturn, Rochester, the economic engine for southeast Minnesota, is carving a new niche for itself and exceeding state and national averages in all areas of growth.
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Alvin E. Benike Construction recently built Rochester Market Square, a 60,000-square-foot retail development completed in October. The project is geared towards the building remodeling industry, with tenants such as Haley Comfort Systems, Carpet One, Bright Ideas, Showcase Cabinets and Echo Water Systems.
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The Mayo Clinic, the University of Minnesota (UM) and IBM are the area's largest employers. According to Sandy Keith, director of the Rochester Downtown Alliance, “Every day, more than 28,000 people come to Rochester's downtown to work in the Mayo international headquarters and medical facilities. Every year, more than 1.8 million people come to Mayo for medical care and training.” Primarily because of Mayo-related conferences, Rochester has more hotel rooms than Minneapolis, a city four times its size. The Mayo Clinic's presence in downtown is spurring development.
An existing three-story building currently occupied by UM is being renovated and expanded by three floors at a cost of $25 million. The university will occupy the new space, which will be utilized for joint research projects with The Mayo Clinic. Completion is set for the middle of 2006. Also in mid-2006, construction of a bioscience collaboration center will start on an adjacent site. Preliminary plans are for a 100,000- to 150,000-square-foot building housing biotech companies that will benefit from being close to UM and Mayo. Known as the Minnesota Partnership for Biotechnology and Medical Genomics, the center should be ready for occupancy by mid-2008.
More developments are being delivered in the city's downtown. Earlier this year, the Rochester Downtown Alliance was organized and the city set up a tax-abatement district to catalyze downtown development. The Alliance has hired The Project for Public Spaces, a non-profit organization out of New York, to develop a vision for its downtown area. “We have a 5-year mission that includes creating a vibrant, unique downtown environment; serving and retaining our major downtown employers; establishing and building a downtown ‘urban village;' and attracting new and unique retailers that will contribute to the new image we are creating,” Keith says.
Rochester's industrial/office park market is strengthening as the excess vacancy left by the technology downturn is being absorbed. In Valley High Business Park on the northwest side of the city, Maxtor, a computer hard disk drive storage development lab, has moved into 5,000 square feet of existing space. According to Gary Smith, executive vice president of the Rochester Area Economic Development Initiative, another 30,000 square feet was absorbed by the end of October. “Technology Park, on the south side of Rochester, is also seeing some activity,” Smith says. “Pace Electronics is expanding and is completing a new 50,000-square-foot building that cost $4 million to $5 million. Pace will use the building for light electronics manufacturing.”
Development on the south side of town is getting a boost as a result of the expansion of U.S. Highway 52 (I-90), the main highway through Rochester that connects it to the Twin Cities. “The highway improvements have opened up development in this area by putting downtown within a 5- to 10-minute drive and creating new intersections,” Smith explains.
A new retail development, Rochester Market Square, is going up in this corridor. Located on Highway 63 South near its intersection with the improved Highway 52, the 60,000-square-foot center opened in October. According to Bob Vogt, the marketing manager for the center, the L-shaped building, designed by Chris Peterson of Lake City, Minnesota, features stores that are interconnected by an indoor walkway. Geared toward the building remodeling industry, the tenant lineup includes Haley Comfort Systems (fireplaces, stoves, HVAC), Carpet One, Bright Ideas (lighting) Showcase Cabinets (kitchen cabinets), AFM (countertops) and Echo Water Systems. A group of local furniture retailers out of Rochester developed the project and Alvin E. Benike Construction, also of Rochester, served as the contractor.
With a skilled, technically oriented labor force, a great quality of life, reasonable costs of living and doing business, and its Mayo/IBM/UM trio of economic drivers, the outlook for continued growth for Rochester is, “very good,” according to Smith.
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