Rochester hopes for another $1 billion in construction this year, on par with Minneapolis

ROCHESTER – Officials here hope to match or exceed last year’s more than $1 billion in construction as Mayo Clinic continues its expansion in this booming city.

This is the third consecutive year the city has had record construction based on permit valuation, meaning the cost of projects that have gone through the city’s permitting process. For comparison, construction in Minneapolis routinely surpasses $1 billion per year.

Officials with Destination Medical Center, which steers public infrastructure financing downtown, say growth in Rochester will look like a century’s worth of construction for comparable cities.

“We’re still seeing commercial renovations. We’re seeing a lot of alterations and updates to buildings,” said Irene Woodward, Rochester’s community development director. “And then obviously those new projects coming through.”

The area is arguably the economic driver of southeast Minnesota. Housing data compiled by Minnesota Realtors shows the 2,512 closed home sales in Olmsted County last year dwarfed any other county in the region. Mower County, home of Hormel Foods, had the next highest number at 454.

Rochester appears poised for another record-breaking year as Mayo Clinic’s $5 billion expansion continues. Last year, crews demolished the former Lourdes High School site and the Ozmun buildings, and demolition continues on the Damon parking ramp to make way for another clinical building near the health system’s main campus.

Construction continues this year on all five Mayo building sites, as well as four parking ramps to be completed by the end of this year.

City officials are also looking at pushing water and sewer utilities farther into northwest and northeast Rochester, where they’ve annexed hundreds of acres of land in recent years to prepare for growth.

“It’s always been easier to develop a cornfield than a mountain, and northwest Rochester is cornfields and flat as a pancake,” said Eric Brownlow, chief executive officer of the Southeast Minnesota Association of Realtors.

Brownlow noted that national builders have descended on Rochester over the past few years after Mayo announced its expansion. That’s fueling optimism that more construction will happen this year as housing demand far outstrips the area’s supply.

“I think we’re going to go from 200 single-family homes being built every year ... to [having] 1,000 homes being built,” said Pat Sexton, head of the Coalition of Rochester Area Builders.

A report by Maxfield Research found the county still needs about 18,000 new housing units, about 14,000 in Rochester alone.

JoMarie Morris, head of the Coalition for Rochester Area Housing, said the group is redefining its priorities after supporting affordable single-family housing projects in 2024 and more multifamily apartments last year.

She said a majority of people moving to Rochester will be one- to two-person households, which could affect construction priorities.

Yet if enough homes are built, it could provide a better chance for hopeful homeowners to enter the market, potentially freeing up workforce housing stock, according to Sexton.

“I’m as excited about a $2 million house being built,” he said. “If you buy a $2 million house, I can buy your $500,000 house and someone can buy my $220,000. It’s all part of the cycle.”

Southeast Minnesota still faces a shortage of construction workers, and Mayo has hired more than 2,000 people as part of its expansion.