Regional Review: Twin Cities poised for growth with strong target industries despite headwinds
Writer: Pablo Marquez
Regional Review is a year-end series from Capital Analytics that looks at key developments throughout the year and sets the stage for what’s to come in the near term.
May 2024 — The Twin Cities seem to be at an economic impasse, showing satisfactory overall performance indicators yet with regional growth potential. While a strong economic hub for sectors such as manufacturing and medtech, the Greater Minneapolis-St. Paul region could benefit from improvements yet to be made across different industries. Wrapping up 2024 and heading into the new year, the Twin Cities still have potential in terms of growth to their economic diversity.
Minneapolis-St. Paul and the surrounding region offer a diverse business ecosystem specialized in advanced manufacturing, life sciences, renewable energy, food production, agriculture, retail, banking, financial services, technology, and innovation. Minnesota’s strength is its economic diversity, since there are more Fortune 500 Companies per capita in Greater Minneapolis-St. Paul than anywhere else in the world. The region is well renowned as a global leader in medical technology, advanced manufacturing and innovation. The metropolitan area concentrates a large amount of banking and financial talent and the main employers are the healthcare, manufacturing, and professional services sectors.
According to the 10th Annual 2025 Business Benchmarks Report released by the Minnesota Chamber of Commerce, the Twin Cities are showing several positive signs of growth, but the state of Minnesota is not reaching its full economic potential. Minnesota is behind other states in terms of economis, being the 40th state in annual GDP growth, falling at a 1.6% rate in comparison to the 2.9% national average in 2023. Meanwhile, as of 3Q24, the unemployment rate in the Twin Cities was slightly lower than the national average. In October 2024, the unemployment rate in Minneapolis-St. Paul stood at 2.7%, while the same rate in October 2023 was 2.3%.
A lack of affordable housing is also a challenge for the region’s renters, buyers, and the overall workforce. “The Twin Cities area is a hub of the state. It’s also a hub that showcases the disparities of what people can afford and how much housing costs,” said Anne Mavity, executive director of the Minnesota Housing Partnership, as cited by RE journals. “We track several data points to understand when people are paying too much for housing. Overpaying for housing is a big issue in the Twin Cities. It doesn’t just stress a family’s budget. It stresses our larger community, too. When people are spending too much on housing, they don’t have enough money for transportation and healthcare. That makes it hard for kids to thrive in schools. It makes it hard to develop a good workforce.”
Known to be a hub for the medtech industry, 16% of the nation’s medtech talent is working in the Twin Cities. In fact, the Minneapolis-St. Paul metro area in combination with Rochester is commonly referred to as ‘Medical Alley’, being home to over 1,000 health and sciences companies. According to the Minnesota Department of Employment and Economic Development, Minnesota had the second most employees and the seventh most companies in the medical device industry of any U.S. state as of 2022. According to the U.S. Bureau of Labor Statistics, Minneapolis-St. Paul has a larger concentration of scientific employment in comparison with other U.S. metropolitan cities. R&D also plays an integral role in the Twin Cities’ economy, while Minnesota ranks favorably in the top half of all states when it comes to R&D expenditure.
“While hiring in the life sciences market has noticeably slowed over the last two years, the industry remains resilient in Minneapolis-St. Paul and across the U.S. with its lower than average unemployment rate compared to other industries. The Minneapolis-St. Paul market also continues to be a powerhouse in the medtech subsector, outperforming several noticeably larger life science markets, including Boston-Cambridge, the San Francisco Bay Area, Chicago, Washington D.C., and Baltimore,” said Mike Bowen, senior vice president of CBRE in Minneapolis in a press release.
While the Twin Cities hotel industry has yet to fully recover to the annual occupancy levels of the pre-pandemic era, the hotel market in Minneapolis-St. Paul is showing signs of improvement in 2024. There are a number of hotels being listed for sale, limited new supply on the horizon, growing average daily hotel rates (ADR) and a gradual return to offices that is expected to present favorable opportunities for investors.
Manufacturing still remains as one of the main industries in the Greater Minneapolis-St. Paul region. According to the Minneapolis Saint Paul Regional Economic Development Partnership, the state of Minnesota has a long history in advanced manufacturing, having made multiple contributions to national defense and receiving nearly $2 billion in Department of Defense contracts. Minneapolis-St. Paul ranks No.19 in the top 25 markets for manufacturing in the United States. However, it is also worth noting that Minnesota’s manufacturers have recently expressed anxiety towards the economy due to inflationary pressures and other economic headwinds.
Looking towards 2025, Minneapolis-St. Paul and Central Minnesota are preparing to continue improving the region’s growth. The Twin Cities and surrounding areas still have plenty of room for improvement when it comes to employment rates, number of exports, manufacturing, affordable housing and real estate.
