The booming real estate market in downtown Rochester, fueled by the Mayo Clinic's expansion, is pricing some businesses out of the market and displacing others.
Among them is CJ's Midtown Lounge, where dropping in for happy hour is like taking a trip back in time, Minnesota Public Radio reported Monday. Beers cost $2, the jukebox plays oldies all day and everybody knows each other by first name.
But the watering hole won't be two blocks from Mayo much longer. A developer plans to demolish it to make way for a high rise with a hotel, apartments and upscale restaurants.
The Mayo Clinic launched its 20-year, $5 billion Destination Medical Center plan last year. It includes $327 million in state aid, largely to fund improvements to public facilities in Rochester, which is expected to grow by 32,000 residents. While some developers and investors look toward that growth with anticipation, soaring real estate prices have forced other businesses to consider leaving downtown or paying a lot more to stay.
CJ's owners, Gary Kruse and Bob Sund, are rushing to relocate by April 1. They pay about $2.50 per square foot now. Prices in a new downtown space could be as high as $30 a square foot.
"Right now, there just isn't anything downtown, so we're going to have to move out away from the downtown area," Kruse said. "Eventually, there's going to be commercial rentals available downtown, once they get this stuff done. But that's probably two years down the road."
Only about 15 percent of existing commercial retail and office properties in downtown Rochester are vacant, estimates Barb Phelps, an agent with Paramark Real Estate Services. Commercial downtown space goes for $18 to $25 dollars a square foot, which she expects to rise to more than $30 in just a few years.
Some companies are opting to pay premium prices to stay downtown.
Exhibitor Media, a trade show and corporate event company, has to relocate soon because the building it's in was sold last year to foreign investors. President Randy Acker said moving to a new building one block away will cost more than $400,000, and operating there will increase his annual expenses by 30 to 40 percent.