Mayo Clinic expansion project unleashes Rochester housing boom

ROCHESTER, Minn. – A $5.6 billion Mayo Clinic expansion project has unleashed a housing boom in this southeast Minnesota city, with the number of downtown apartments, condos and flats expected to double in the next five years, according to a new report.

That's an acceleration of strong housing and hotel growth already underway since the day in 2013 when the Legislature approved taxpayer support for Mayo and Rochester's expansion, known as Destination Medical Center. The project blends private, public and Mayo investments to help the renowned clinic expand its campus, grow its workforce and remake Rochester into a destination in its own right.

The Mayo officials betting on the 20-year project want to renew the clinic's global reputation for medical research, innovation and cutting-edge health care, and they have invested $325.2 million of Mayo funds — with more to come — on everything from hospital renovations to new equipment and lab space in the project's first five years.

The hotel and housing projects come from private developers who see an opportunity in the city's growth.

Downtown Rochester counted 789 housing units, not including single-family homes, in 2014. That's since grown to 1,096 units, with another 1,282 in the pipeline by 2024, far outpacing earlier projections, according to the report from San Diego-based AECOM. The report, paid for by the DMC's Economic Development Agency, is required once every five years by the Legislature as an update on DMC progress.

The report concludes that enough housing construction is underway to meet all but the highest estimates of future demand for the next five years.

The number of hotel rooms fell from 2,830 in 2014 to 2,703 this year, mostly due to consolidation of existing rooms to create suites as well as some planned closings. There are 943 hotel rooms either under construction or in the planning stages, and those new rooms should help the city meet all demand until at least the mid-2020s.

The report also examined retail and professional office space needs, concluding that existing projects and renovations should meet demand for the next five years.

The $585 million in taxpayer funds authorized for the DMC goes to the city of Rochester to pay for needed infrastructure improvements to accommodate Mayo's and Rochester's growth. That money, DMC proponents have said, will be paid back via increased tax revenue. City of Rochester tax revenue has climbed from $64.9 million in 2013 to $89.3 million last year. Olmsted County reported tax revenue of $197.2 million in 2013, rising to $250.7 million last year.

Matt McKinney • 612-217-1747