Downtown Rochester businesses struggle amid pandemic, construction

ROCHESTER — The state's third-largest city is having a bit of an identity crisis. The workers who once filled downtown streets during breaks to grab a bite or run a quick errand are few and far between since the pandemic.

More businesses closed than opened this year, and remaining businesses still feel headwinds.

"It's a lot more challenging than it was before," said Steve Williams, who runs the Eagle Store — downtown's oldest business, started in 1866 — with his brothers and father. "You look up and down the sidewalks and used to see … 25 to 50 people, just within a block, going from building to building. Right now, it's maybe five."

Rochester is far from alone as cities across Minnesota and the U.S. face similar obstacles recovering from the pandemic. But this community has Destination Medical Center, a state-backed initiative to bring in billions of dollars in investments to transform downtown and cement its status as an international medical hub by 2035.

That has spurred continuous construction projects during the past several years, a factor many businesses cite for their problems.

"The continued construction pretty much taught people to not come downtown, and they've developed a new habit of doing things elsewhere," said Heather Wright, owner of Tulips & Truffles, which shared a space with Scrub Your Butt Soap Co. before both businesses moved out of downtown in October. Wright moved just north of downtown, inside the Kismet building at 611 N. Broadway Ave..

At least 15 businesses have opened downtown since the start of 2022, from restaurants, cafes and cocktail lounges to boutiques, bakeries and event spaces, according to data from the Rochester Downtown Alliance (RDA). Yet, 12 businesses closed this year and another 11 moved to a site outside of downtown.

That's a downturn from 2021, when 21 businesses opened, seven closed and nine relocated, according to the RDA.

John Kruesel, who owns an antique store, said he expects to see more downtown businesses close within the next few months, taking away much of the area's unique character.

"We are demolishing the spirit and the esprit de corps of the downtown for the greater good of supposedly having (tax-increment financing) projects with higher real estate taxes," he said. "However it makes that independent small business, which is the personality of the community, disappear."

Besides construction, business owners say too few office workers are behind the struggle to keep afloat. And, of course, property values and tax increases make setting up shop downtown an expensive proposition.

Restaurateurs David and Mark Currie closed Hefe Rojo and the original Newt's location in October, publicly citing the lack of foot traffic since employers instituted work-from-home policies during the pandemic.

Mayo Clinic alone shifted about 2,900 office workers to work from home.

Mayo Clinic spokesperson Kristyn Jacobson said in an email that the medical system doesn't plan to require workers who primarily work from to come back to the office, but it is looking to expand into existing office spaces.

Downtown boosters might be rethinking whether daytime workers are as important as they once were.

The RDA held focus groups with residents who live in or near downtown in 2021 who said they're looking for more things to do downtown rather than businesses to cater to them.

"They are all seeking downtown as a whole experience and as a neighborhood," said Holly Masek, the RDA's executive director. "And that is a big shift from, 'Downtown is where I come to work and where I spend money during the day, and then I go home.' "

A growing number of entrepreneurs say they see opportunity in Rochester's shifting business climate.

Jeff and Sarah Schwenker hope to bring old-style class to the French cuisine restaurant they have planned inside the 164-year-old Kelley Building at S. Broadway Avenue and 3rd Street.

The Schwenkers started Marrow as a pop-up before the COVID-19 pandemic but paused their plans to find a permanent location until earlier this year.

They found their perfect spot in a slim part of the building, where they'll install a bar, about 45 seats and an open kitchen near large windows to add to the cozy atmosphere they're looking for. If all goes well, they'll join other eateries in the area this spring.

"There are really amazing things going on downtown, and we just wanted to be a part of that," Sarah Schwenker said.

Thai Pop restaurant owner Ryan Balow said he believes the downtown area is shifting back to a fun place to come together. Balow and his wife, Annie,opened Thai Pop last year after several years as a pop-up restaurant at various places downtown. Since then, they've expanded with a speakeasy in the basement, the same spot where they hosted a pop-up.

A Rochester native, Balow remembers eating at downtown restaurants whenever he got good grades in school, as well as the boom in bars and restaurants from about 2015 to 2019 which made the downtown area near 3rd Street SW. an attraction at night and on weekends.

"The people that live here, I think we want it back," he said. "We saw the potential of it. … We had a lot happening."