As Destination Medical Center marches forward, the Rochester downtown languishes
Downtown businesses remain in shock. While some closed or departed, others are moving in.
ROCHESTER — Pizza slices are an odd way to gauge the strength of an economic development initiative.
But Pasquale Presa swears by them as a unit of measure.
Presa opened Pasquale’s Pizzeria in 2016 when the Destination Medical Center was just getting launched. He chose a downtown corner of southwest Rochester for his pizzeria because it put his shop at the heart of the DMC action — and within arm’s reach of a biomedical entrepreneurial sector called Discovery Square.
For the first four years, his entrepreneurial instincts were richly rewarded. Business boomed. Slices flew off pizza pans. So hot was business — “DMC was coming hard” — that Presa built an adjacent 2,500-square-foot back dining area to host clubs and physician meetings.
Then it all came to a crashing halt. The world was changed by a virus, triggering changes that people, businesses and downtowns are still grappling with. Demand for pizza slices shrank, as wariness grew over dining-in options. And so Presa, forced to changed with the times, converted Pasquale’s into a little Italian grocery store-cum-pizza shop.
In several ways, Presa’s tale is the story of downtown Rochester writ large. Businesses needed survival instincts to emerge intact — whatever that might look like.
Some didn’t survive. Others have.
Presa said downtown Rochester desperately needs new ideas to revitalize it, to help it get unstuck.
“The downtown right now is actually in a state of shock,” Presa said. “What happened is we all bought into this amazing opportunity. Before the pandemic, we were on such an amazing trajectory. So the pandemic came and guess what? People got stuck. The innovators, the creators, the visionaries are stuck.
“No one can somehow picture how we come out of this," he said. "How do we reinvent, re-energize, rethink doing things the way that we were on that track?”
Creating a 'Destination'
DMC is moving forward, but the downtown, the revitalization of which was viewed as a key part of DMC, is in a lackluster state, business leaders say.
"There's definitely a concern," said Hal Henderson, a Rochester business owner. Henderson is one of a number of downtown leaders, a group that includes Mayo Clinic and DMC officials, who regularly meet to brainstorm ways to revive the downtown. "The world changed on us as result of the pandemic"
It was 10 years ago to the month that Destination Medical Center was first unveiled at a St. Paul press conference attended by the state’s medical and political leaders, including then Mayo Clinic CEO John Noseworthy, then-Gov. Mark Dayton and other state and Rochester area leaders.
Hailed as the largest economic development initiative in Minnesota’s history, it was hard for some to wrap their heads around the monumental nature of the investment. Some saw it as creating the medical equivalent of Silicon Valley.
The 20-year plan would make Mayo Clinic and Minnesota a global center for medical care and wellness. It would lead to spin-off companies and tens of thousands of new jobs, catalyzed by Mayo Clinic’s investment of $3.5 billion and additional private investment of $2.1 billion. The state would also pitch in $585 million for large-scale infrastructure costs to handle such rapid growth.
The side effects
Seen as critical to the DMC plan was a vibrant and energetic downtown. At the time of its unveiling, the Rochester downtown was viewed as lacking in different types of entertainment. A vibrant downtown was seen as key in attracting top talent to work for Mayo and in keeping patients coming to the state.
But the world today is a far different place than when DMC was first introduced at the Legislature in 2013, and when the DMC framework plan was officially adopted by the Rochester City Council in 2015.
The pandemic changed patterns of personal, consumer and work behavior that adversely impacted the downtown. Remote work meant that area workers, including scores of Mayo employees, were no longer frequenting downtown businesses and restaurants. Telemedicine loomed larger, allowing patients to receive medical counseling at home rather than forcing them to travel to the destination of Rochester.
The last couple of years has seen a stream of businesses, law firms and restaurants either decamp the downtown or close their doors. They include the closing of Dooley’s, Legends and the Loop. The once-famous Michaels restaurant, which closed its doors on Jan. 31, 2014, remains an empty shell eight years later. The Rochester skyway is littered with closed shops, and empty retail and office space abounds in the downtown.
“It just got torpedoed, in my view, by COVID,” said Dave Senjem, a former state senator who carried DMC legislation in 2013 and is now a Olmsted County Commissioner.
DMC officials note that the true launch of DMC was not in 2013 when the legislation passed but in 2015 when a framework plan was adopted by the city council. And at least a third of the way through the 20-year initiative, figures show DMC is on a trajectory to meet many of its numerical benchmarks.
Mayo Clinic pledged to invest $3.5 billion to expand its Rochester campus. Through 2021, the clinic has made more than $762 million in state-certified DMC investment.
Officials describe this as a conservative figure, because it does not include recently announced Mayo Clinic projects. That includes a $200 million expansion of the clinic’s Proton Beam Therapy Center and the planned 11-story Anna-Maria and Stephen Kellen Building for research.
DMC envisioned $2 billion in non-Mayo private investment. Through 2021, that investment had reached $499 million in the DMC district. Those investments included 865 new or renovated hotel rooms, more than 1,100 units of multifamily housing and an additional 500 under construction, and the building of life science buildings Discover Square One and Two.
Anticipated job growth under DMC was projected to reach 25,000 to 30,000 net new employees. That figure has reached 7,700 so far, officials say.
Boom still to come?
Yet it is the condition of the downtown where the reality and vision of DMC remains far apart.
“You can’t overstate the impact the pandemic has had on street-level businesses in particular,” said Patrick Seeb, DMC executive director. “We lost a whole year or more of entertainment and people gathering. So it’s had a dramatic effect.”
Lisa Clark, founding DMC director, said there wasn’t a single city in the U.S. that wasn’t disrupted by the pandemic. Rochester was no exception. Yet, none of these other cities had the benefit of a DMC initiative. So despite the economic upheaval the pandemic created, DMC moved forward with infrastructure projects and private investment and creating new jobs.
“The second building of Discovery Square actually was built during the pandemic,” Clark said. “And that’s an amazing feat and confidence in the developer to build a project of that size.”
And because DMC is hitting its benchmarks in investment, state dollars are flowing into Rochester at a tune of $30 million annually from a $585 million DMC fund created by the Legislature, she said.
New attitudes downtown
ThaiPop restaurant, owned by Ryan and Annie Balow, opened in Rochester’s historic downtown district in 2019.
Balow has seen Rochester downtown go through its up-and-down cycles. Ryan grew up in Rochester at a time when the downtown wasn’t viewed as a “hip and cool place to go.” After a stint in the Peace Corps in Thailand, where he met his wife, the couple returned to Rochester and found that it had shed its drab demeanor and “things were coming to light.”
He became part of the grassroots arts community that opened a downtown location called C4. There were other signs of downtown liveliness. Thursdays on First launched in 2007. The Loop bar and restaurant opened a year later. Kathy’s Pub featured an open-air patio.
“I was like, ‘Wow, this is really something.' I can see that it’s going to be a downtown-centric place to go,” he said.
Balow said that sense of optimism and the promise of growth and development dissipated when the pandemic struck, and businesses started shutting down.
“It’s looking scary,” Balow said. “It’s not looking as promising as I was thinking how it would look like in 2023.”
Balow said an out-of-town customer who comes to his restaurant on a regular basis inquires about the state of DMC and is dismayed at the lack of promise as it relates to the downtown in terms of entertainment. The guest, Balow said, gets regular check-ups at Mayo.
“He’s like, ‘Every time I come back, I’m expecting something. And every year, it’s less and less enthusiastic for me to be here, because I’m not seeing the entertainment value. I’m not seeing the things to do,’” Balow said, explaining the customer's observations.
One Rochester business owner who is banking on a revival of the downtown is Joe Powers. His company plans to open a new restaurant called The Well in the space formerly occupied by Dooley’s Pub in the downtown.
He said he and other downtown property owners have been meeting in an attempt to re-energize the downtown. And they have seen some success with new shops opening up.
“I’m hopeful we can re-energize downtown and get life back to the way it was,” Powers said.
But there was no doubt COVID “heavily affected” the downtown and DMC. COVID changed life in ways that will be permanent. Remote work will remain a feature of work life. Powers said he never imagined that employees of his company would be working from home, but some do. And businesses will need to adjust to that reality.
“I’m the guy investing millions into the downtown,” he said. “The idea that people are going to come back downtown — we’re banking on that. Do I think Mayo is going to bring these people back to work downtown? No, I don’t. They’ve already said they’re leaving a bunch of their buildings downtown. That isn’t why I bought the business. It’s one of the premier corners downtown, and I think it’ll do very well.”
Powers said he remains optimistic about DMC’s overall prospects, because Mayo is, frankly, doing very well. The hospitality industry’s interactions with Mayo give it a glimpse into how Mayo is doing.
“They’re doing fantastic. Thank God for that,” Powers said. “Because if Mayo doesn’t do well, DMC’s done. It’s over. You could fold it up and put it away. And I think Mayo has been highly successful at what they’re doing.”
The clinic provided care to a record-breaking 1.4 million patients in 2021, Mayo officials say.
While the pandemic and its effects had a deleterious impact on the downtown, DMC officials note that more than 40 new businesses have opened within the last several years in the DMC district or will open in the future. They include eateries like Chez Bojji, CRAVE American & Kitchen Sushi Bar and Olde Brick House to beverage and snack options such as MOKA and SpyHouse Coffee cafes to Popus Gourmet Popcorn
Rochester Mayor Kim Norton has a rare vantage point on DMC. The one-time DFL legislator carried the bill in the House when it passed in 2013 and now is watching how DMC unfolds as the city’s top elected leader.
Asked for her assessment of the downtown’s condition, Norton said it is on an “uptick” and in the midst of a face lift. She noted that roads, sewers and sidewalks have been improved. Restaurants appear to be doing well, because waiting lines for seats can be as long as 45 minutes. But she doesn’t dispute that there are fewer people downtown. And if a business relied on employees working downtown for its trade, “there is a serious impact.”
“Do I think the community is using the downtown in the same way they did pre-pandemic? I would say, no. It looks a little different now. And I don’t know the reason, and I think this is something that we still need to look at.”
Norton said the impact of the pandemic has brought permanent change.
“I think we need to look at it with a different eye based on the changes that happened,” she said.
Downtown spaces and buildings will likely need to be used in different ways. One possibility is creating more downtown housing to offset the loss of downtown workers.
"We can build the number of people downtown by adding more housing downtown," Norton said. "A lot of people like living in the downtown area. Or we also have to look at retail differently. The need for retail has morphed."
Norton said it would be premature to judge DMC when it hasn’t yet reached the 10-year mark. And it would be wrong to blame DMC for the problems created by the pandemic.
“We still have a lot of years left of investment that’s coming either from Mayo or the private sector,” Norton said. “We still have years to go, and those things are yet to come.”