When two Hayfield investors closed on Stewartville’s Professional Building for $775,000 this May, they weren’t just buying real estate—they were betting on a quiet shift: small-town commercial properties near major medical hubs are becoming serious wealth-builders. The 7,600-square-foot property includes eight units and signals growing confidence in secondary market commercial real estate as Rochester, M, N economic expansion extends to surrounding communities.
Why would seasoned investors pay $775,000 for a downtown commercial building in a town of 6,100 people? The answer reveals a shifting trend in commercial real estate. While major cities grab headlines, smaller markets like Stewartville are attracting serious capital from investors who see opportunity where others see risk.
Nick Matti, a former Mayo Clinic nurse, and Trevor Anderson led an investment group that closed on the Professional Building at 100 Second St. SE on May 1, 2025. Both men grew up in Hayfield and understand the local market. This purchase marks their entry into commercial real estate, but it likely won’t be their last.
Why Hayfield Investors Chose Stewartville
In commercial real estate, location isn’t just a factor—it’s the deciding variable that separates winning deals from missed opportunities. This Rochester-adjacent community sits just 10 miles south of Rochester, Minnesota, home to the world-famous Mayo Clinic. Rochester’s Destination Medical Center initiative is expected to create 35,000 to 45,000 jobs over 20 years and draw $6 billion in private investment.
Matti explained their strategy: “We like Stewartville as sort of a secondary location for people that might want something a little bit more inexpensive than having their business inside of Rochester. We like the growth that is coming to Rochester, and we’re seeing that bleeding into the surrounding areas, like Stewartville”.
And the data backs up their conviction: Amazon and United Therapeutics aren’t just exploring Stewartville—they’re building permanent facilities in the Schumann Business Park. This industrial growth creates demand for supporting services, exactly the type that fills downtown commercial buildings.
The Professional Building: A Smart Investment
The 46-year-old building offers 7,600 square feet across eight tenant units. Six units were already leased at purchase, including Charlie Brown PC Applications Consultants, 507 Family Chiropractic, and Overby Orthodontics.
The property’s financial structure reveals careful planning:
- Purchase price: $775,000
- Previous sale: $675,000 in April 2024
- Olmsted County market value estimate: $661,800 for 2025-2026
Based on current lease rates for professional office space in Olmsted County, the property likely generates a 7-9% cap rate—aligning with secondary market benchmarks for stabilized commercial assets and appealing to investors prioritizing immediate cash flow over value-add speculation. The investors paid above market value, but they bought immediate cash flow. Six occupied units generate income from day one. The remaining two units offer upside potential through new leases or renovations.
Small-Town Commercial Real Estate Gains Traction
Victor Calanog, Global Head of Research and Strategy at Manulife Investment Management—which oversees over $100B in real estate assets globally—noted in 2025 that the commercial real estate industry “appears that the landing will be relatively soft, so that should mean continued positive momentum for economic activity, benefiting leasing and income drivers, including rents and occupancies”. This institutional perspective validates the Hayfield group’s thesis: stabilized secondary assets can deliver reliable income even amid broader market uncertainty.
Through the beginning of 2025, new loan volume increased by 13% from the end of 2024 and over 90% from the same time last year, marking a recovery in lending activity to levels not seen since early 2023. According to CoStar’s Q2 2025 secondary market report, stabilized properties in Rochester-adjacent communities are leasing 22% faster than the state average—validating the timing of this acquisition. This improved access to capital makes deals like the Stewartville purchase possible.
Retail trade sales were up 3.3% from May 2024 to May 2025, according to the U.S. Census Bureau. Strong consumer spending supports retail tenants, a key component of mixed-use commercial buildings.
Investment Strategy Behind the Purchase
Matti outlined their long-term vision: “We have been looking around at things for about a year. Our eventual goal is to do bigger deals and help people to invest their money into something that could earn them a better return than in the stock market”. This structure also creates flexibility for future 1031 exchange strategies, allowing the group to defer capital gains taxes while recycling equity into larger secondary-market properties.
Their playbook reflects a wider shift: savvy investors with local roots are outmaneuvering institutional buyers in secondary markets by moving faster and knowing their communities intimately. Investors with local knowledge target secondary markets that larger funds overlook. They can move quickly, understand tenant needs, and build relationships that institutional buyers can’t replicate.
The Hayfield group’s strategy includes:
- Starting with cash-flowing properties
- Building track records through successful management
- Scaling to larger deals as capital grows
- Offering investment opportunities to local investors seeking alternatives to traditional markets
Rochester’s Growth Drives Demand
Stewartville’s appeal stems directly from Rochester’s expansion. Rochester’s Loam Commercial Real Estate—with a CCIM-designated broker leading the transaction—represented both buyers and sellers in the transaction. The brokerage specializes in connecting regional buyers with properties positioned to benefit from Rochester’s medical and technology sectors. Olmsted County Economic Development data shows Stewartville’s commercial permit applications increased 40% year-over-year, confirming the infrastructure growth supporting new business tenants.
Commercial property in downtown Rochester commands premium prices. Businesses serving Rochester’s workforce but requiring lower overhead find Stewartville attractive. The 15-minute drive offers significant cost savings without sacrificing access to Rochester’s market.
Professional services, healthcare support businesses, and technology consultants are natural tenants for the Professional Building’s location. These businesses need professional office space but don’t require downtown Rochester addresses.
What This Deal Signals for Small-Town Markets
The Stewartville purchase illustrates several emerging trends in commercial real estate:
Secondary Market Appeal: Smaller metros showed rising absorption in 2025 as offices migrate to cheaper secondary markets. This Olmsted County suburb fits this pattern perfectly.
Local Investor Advantage: The Hayfield investors’ familiarity with the area gave them confidence to act. They understand traffic patterns, know the tenant base, and grasp growth trajectories that data alone doesn’t reveal.
Stabilized Properties Win: In uncertain markets, investors prefer properties with existing tenants and proven cash flow. The Professional Building offered both, reducing risk despite the above-market purchase price.
Challenges and Opportunities Ahead
Investing in small-town commercial property isn’t without trade-offs: tenant pools are smaller, and economic shocks can hit harder than in diversified metros—but the upsides often outweigh the risks for informed buyers. Limited tenant pools mean vacancy can last longer than in larger markets. Economic downturns affect smaller communities more severely than diversified metros.
However, opportunities balance these risks:
- Lower competition for quality properties
- Stronger tenant relationships in tight-knit communities
- Potential for significant value creation through property improvements
- Less institutional capital creates pricing inefficiencies
The demand for affordable housing continues to outweigh supply, creating opportunities in 2025. Commercial property owners in growing small towns can potentially convert or redevelop spaces to meet this demand.
Looking Forward: More Deals Coming?
Matti, who also owns an online health coaching firm called F1TxMIND Fitness, positioned this purchase as the first of many. The investment group’s model of pooling capital for commercial real estate acquisitions suggests they’ll continue seeking similar opportunities.
The Olmsted County suburb’s industrial park expansion should drive additional commercial demand. Workers need places to eat, shop, and access services. The downtown core benefits directly from industrial growth on the town’s periphery.
The Professional Building purchase may encourage other investors to examine secondary markets near major medical and technology hubs. For investors evaluating similar opportunities: prioritize properties within 15 minutes of major employment hubs, verify existing tenant quality before purchase, and partner with local commercial brokerage expertise who understand micro-market dynamics. The Stewartville deal proves that in 2025, smart capital follows growth—not just headlines. Similar patterns exist across the country, wherever tier-one cities’ growth spreads to surrounding communities.
FAQs
Why did the investors pay above the county’s market value estimate?
Investors paid above Olmsted County’s $661,800 valuation because the $775,000 price secured immediate rental income from six occupied units. In commercial real estate, the income approach appraisal methodology means income-producing potential often outweighs assessed value—especially when tenants include established businesses like 507 Family Chiropractic and Overby Orthodontics.
What makes Stewartville attractive for commercial investment?
Proximity to Rochester’s Mayo Clinic, lower costs than downtown Rochester, recent industrial development, and highway access make Stewartville appealing for businesses and investors.
How does this deal compare to typical commercial real estate transactions in 2025?
The purchase aligns with trends favoring stabilized, cash-flowing properties in secondary markets. Investors increasingly seek properties with existing tenants rather than development projects or troubled assets.
What types of businesses work well in downtown Stewartville’s commercial space?
Professional services, healthcare-related businesses, technology consultants, and companies serving Rochester’s workforce without needing premium downtown addresses perform well in Stewartville.
Could this investment model work in other small towns?
Yes, but success requires similar conditions: proximity to a major employment center, active economic development, reasonable property prices, and investors with local market knowledge.
