ROCHESTER – Downtown private businesses spent almost $186 million on improvements last year, though all but $9 million or so came from Mayo Clinic investments.

Destination Medical Center (DMC) officials say that's good news, despite the fact that non-Mayo investments are at the lowest they've been since the initiative to turn Rochester into an international medical hub officially started in 2015.

"We feel a lot of energy out in the marketplace knowing, of course, that we still face … headwinds with interest rates, labor costs, construction costs and supply costs‚" said Patrick Seeb, DMC's executive director.

DMC has garnered more than $1.8 billion in private investments over its life cycle, according to the organization's latest annual report to the Minnesota Department of Employment and Economic Development. The Legislature in 2013 approved $585 million in state, city and county funding to help with marketing and cover utilities and other public infrastructure via DMC, which has a goal to raise more than $5.6 billion in public and private investments by 2035.

DMC's executive board met Wednesday to finalize the report.

The group has garnered more than $548 million in non-Mayo investments over the past decade, though its annual output has significantly dropped in recent years. DMC went from highs of more than $130 million in 2018 and 2019 to less than $45 million in 2021, and only $12.6 million in 2023.

Seeb told DMC officials the drop-off was expected, calling it part of a typical development cycle where a community has to absorb larger investments before going on another run. Yet he pointed out that COVID hit Rochester hard, putting its economic development out of whack as companies paused investments for a few years.

"We have every reason to believe that when markets stabilize, when interest rates stabilize, there is a lot of pent-up demand and eyes around Rochester," Seeb said.

Seeb and DMC officials have retooled their pitch to outside businesses after a 2022 study of more than 300 life-science businesses found most of them didn't know much about Rochester or its connection to Mayo.

Companies that paused investing in buildings or other real estate during the pandemic typically look for opportunities in top-20 markets around the U.S., making a community of more than 120,000 residents a tough sell.

But Seeb said Mayo's shift in recent years toward sharing research data and resources with outside companies is creating demand among biobusinesses and related industries to move to the area.

Rochester officials say that demand is already showing in other parts of the city. Cindy Steinhauser, a deputy city administrator, noted Rochester had record commercial investment in 2023 and 2024.

"It's been … a healthy year despite some of the private-sector challenges that are out there," she said.

DMC's private investment lull is expected to break this year as Mayo Clinic kicks off construction for its $5 billion downtown expansion.

Doug Holtan, chair of Mayo Clinic's facilities department, said Mayo's community investments are up 30% compared with 2023.

That ranges from ongoing work to install proton-beam equipment in the upcoming Anderson building to the groundwork needed for Mayo's expansion west of its current downtown campus, which will create five new buildings and several parking ramps.

DMC officials say they're in talks with 14 developers at various stages of housing, hotel and biobusiness projects. Some of that work could show up as soon as next year's investment report, according to Seeb.

That includes the upcoming CityWalk Apartments on 2nd Street SW.

Wayzata-based developer DM Cos. started work on the project in 2022, but has more than doubled its initial $50 million vision to plan a 12-story, 319-unit complex set to begin construction within the next year or so.

Representatives for DM Cos. have said they enlarged the project in response to Mayo Clinic's upcoming expansion work. They won't be the only developers looking to expand in Rochester once construction starts in earnest, according to DMC Board Chair Pam Wheelock.

"Our best recruiting tool is the success of the businesses that are here in Rochester right now," she said.