While it's not recession-proof, Minneapolis/St. Paul's economy never hits unsustainable highs or dramatic lows as other regions of the United States do. Food processing and medical high-tech business tend to insulate the Minneapolis/St. Paul market from the ups and downs in the U.S. economy.

“Other markets seem to have steeper ups and downs than Minnesota,” says Kevin Powell, president of Werner Electric Supply of Minnesota, Minneapolis. “If you consider the diversity of business in Minneapolis, Minnesota's biggest market, you gain an understanding of why.”

Adds Greg Hames, president, Viking Electric Supply/Sonepar USA, Minneapolis, “We have a very stable overall economy that rarely sees large gains or decreases in the level of business activity.”

The Twin Cities of Minneapolis/St. Paul make up the 14th largest market in the United States, according to Hames. Built on the banks of the Mississippi, Minnesota and St. Croix rivers, the metropolitan area is nicknamed “Twin Cities” for its two largest cities, Minneapolis and St. Paul, the state capital.

Food processing companies are major employers in the area and Gary Brusacoram of Andrews-Johnson-Brusacoram, a manufacturers' rep in Minneapolis, says Minnesota has 10 companies among the top 100 food processors in the United States. “This is a very substantial part of our Upper Midwest economy, about 22 percent of our manufacturing shipments,” he says. “This list would include General Mills, Land O'Lakes, Cargill, Hormell (Jennie O & Spam), Michael Food, American Crystal Sugar, Malt-O-Meal, Schwan's and another 10 to 15 companies that have expanded their operations in the past few years.”

Hames of Viking/Sonepar USA says food processing also drives a robust OEM packaging industry in the area and that med-tech businesses such as Medtronic, St. Jude Medical and Boston Scientific are expanding their Twin Cities-based operations and office facilities. Other companies expanding operations include UnitedHealth Group, which is building a new hospital and new administration building; Cargill, which has a new office campus in Excelsior Crossings, Minn.; Dakota County's huge new administration campus; IBM's expansion in Rochester, Minn.; Mayo Clinic's Gonda building expansion; Medtronic's new campus completion; and the Region Hospital expansion.

Data center expansion has also been big. “Data center expansions for Target Corp., Thomson West Publishing and United Health Care combine with a robust hospital construction business at locations like Regions Hospital, St. Joseph's Hospital and Park-Nicollet Hospital to create a positive outlook for the large construction segment in the near future,” says Hames.

3M is a big employer in the Minneapolis area, but most of 3M's expansion has been outside of Minnesota. “3M has only built one new plant in the last 25 years and it was built in the Carolinas,” says Ken Rowland, Border States' Northeast region manager in Coon Rapids, Minn. “They continue to invest in capital equipment and building expansion to support the production of new product.”

Ethanol is also driving the Minnesota economy. Ethanol is big in the Midwest because of the amount of available raw material, specifically corn, says Rowland. Fagan Inc., Granite Falls, Minn., a design-builder, has built approximately 50 percent of all the ethanol plants in the United States. The company is very busy and has projects extending beyond 2010, he says.

But at least one industry observer questions ethanol's future. Werner Electric's Powell says it's difficult to tell if ethanol is a sustainable market. “Those with a disagreement with government subsidies will cite statistics on energy and water requirements to produce the end product,” he says. “Those with a stake in ethanol growth say most of the information in the media is old and outdated science or not factual, and that ethanol is a viable energy alternative with current technology.”

While the medical and food processing segments of the Minneapolis economy are enjoying steady growth, the area's housing market has not escaped the impact of the national housing crisis. Minneapolis has seen year-to-date total building permits drop by 34 percent through September.

“The housing market is very depressed, and from what we are hearing and seeing around here, nobody is looking for a recovery before the fourth quarter of 2009,” says Border States' Rowland. “They have basically stopped building new homes, which is increasing the inventory of existing homes for sale in the marketplace.” New home construction is down 50 percent from the height of construction three years ago, he says.

Electrical distributors and manufacturers' reps agree that the Twin Cities' fastest-growing areas are in the southern and western regions of the metropolitan area, including suburbs such Shakopee, Savage, Eden Prairie, Chaska and Victoria. Retail and school construction has followed the development of housing in these areas, says Hames of Viking Electric Supply/Sonepar. Denis Lawless of manufacturers' rep firm LESCO Inc. says the northwestern suburbs had been growing, but are now in a holding pattern. “There is just too much housing on the market at this time,” he says.

Want to use this article? Click here for options!
© 2007 Penton Media, Inc.