After dismal 2022, Destination Medical Center retooling its Rochester pitch

ROCHESTER — A decade into the $5.6 billion initiative that was to make Rochester a world-class medical destination, area marketers are finding that many of the types of companies they hoped to attract weren't even aware of the city and its connection to Mayo Clinic.

"From a strategic sort of programming standpoint, we know we need to do things to get out and really raise the level of awareness in this community," said Michael Flynn, director of economic development for Destination Medical Center (DMC), the initiative working to turn Rochester into an international medical hub.

Now, DMC officials are retooling their pitch to outsiders to persuade them to come to Minnesota's third-largest city. Wednesday, they brought in more than 200 developers, bankers and consultants from the Twin Cities, Des Moines and elsewhere to sell them on Rochester's growing opportunities.

The move comes as Mayo renewed interest in Rochester after threatening to pull $4 billion in investments in Minnesota out of the state as part of negotiations with lawmakers over a pair of health care workforce-related bills.

When DMC was formed in 2013, Mayo promised to invest $3.5 billion in Rochester over the next two decades, with another $2.1 billion coming from public and private investments.

So far, some $1.4 billion in economic development has been spent in Rochester since 2013, most of that from Mayo. And outside dollars have slowed considerably in recent years, in part due to economic conditions compounded by the COVID-19 pandemic, such as higher construction costs and interest rates on projects, construction labor shortages and other issues.

DMC officials recorded nearly $200 million in investments last year, including a record $173 million from Mayo. Yet private, non-Mayo investments only totaled $26 million — the lowest annual investment of private funds since 2015.

In a survey of 321 life science companies and site selection consultants DMC conducted in 2022, officials found most didn't know much about Rochester — just 30% were aware of the city and its status as Mayo Clinic's home.

Only 10% of the 168 life sciences companies surveyed were considering Rochester as a place to open office and lab space, even though most companies were actively looking for places throughout the U.S. to invest in.

"People are looking for [cities] where you have a lot of confidence in the future of the community," said DMC Executive Director Patrick Seeb. "And Rochester checks a lot of those boxes."

Seeb said he wasn't surprised by DMC's survey results. DMC officials usually pitch in one or two other markets each month, as well as host ongoing delegations from other cities — but that doesn't mean everyone knows about Rochester.

He said the results helped DMC staff members sharpen their pitch and home in on what attracts companies, such as Rochester's workforce, the city's quality of life and opportunities to work with Mayo on research and future inventions.

"We have to tell them about the relationship to Mayo Clinic," Seeb said. "We have to tell that story because otherwise, they simply don't know about it and they're hearing about a lot of other cities."

DMC and city officials hoped to use Wednesday's summit to pitch would-be developers on a variety of projects, from planned mixed-use housing west of downtown as part of a bus rapid transit line to be built within the next few years to a $300 million waterfront district along the Zumbro River that could bring in more than 500 housing units to the city.

Other community groups pitched ideas directly to developers. A coalition of minority organizations and businesses want to build an intercultural center that would also act as a food hub and business incubator. A nonprofit serving East Africa women wants to build a women's shelter in the downtown area. And the Masjed Abubakr Al-Seddiq mosque wants to redevelop its downtown location into a mixed-use building for offices, condos and the mosque, as well as build housing and an Islamic center on 75 acres of land just north of Rochester that would serve a growing Muslim youth population.

"Our city has to provide for each family member," Rashed Ferdous of the Islamic Resource Group said. "If it's not fulfilling the need of one child, the family decides to relocate. So we lose talent."

Developers and bankers in attendance said Rochester appears to be a growing, thriving city, which DMC emphasized with data compiled by the state Department of Employment and Economic Development that shows Rochester residents are on average younger, more educated, more diverse and with a higher labor force participation compared with Minnesota residents overall.

Developers also appreciate DMC's $585 million in state funding to help cover public infrastructure costs that are often upfront barriers to projects.

Yet some attendees questioned city officials' insistence on mixed-use buildings in future downtown plans, which historically haven't paid off as well as strictly commercial or residential projects. Others questioned the city's riverfront plans as they've heard from residents concerned about the Zumbro's water quality.

Still, most developers in attendance said they were positive about Rochester's future — as state officials project the city of more than 120,000 residents will gain another 35,000 people by 2045.

"I love the city's vision," said Joanne Kuria of Brooklyn Park-based Amani Construction. "The idea to revolutionize downtown and how much change has already happened really allows you to see the city is serious about development."