Berlin’s office market is on the rise
Millions of square feet of new office space completed year by year.
Of all European cities, Berlin stands out as the one where the office landscape has changed most significantly in recent years. Every 20 hours a new business is established in Berlin and the office market in Berlin is growing rapidly. Being one of the most dynamic cities in Europe, Berlin also has one of the world’s hottest office markets with exploding demand, especially within the startup sector. Berlin has the highest floor space turnover and lowest vacancy rates in Germany. Just as well that nearly 10 mio. sqft of new office space is due to be completed annually for the next couple of years.
Responding to the increased demand
Entrepreneurs from all over the world are moving to the German capital for its large talent pool, easy access to financing, spirit of innovation, and inimitable way of life. The universities ensure a steady supply of professionals, but it is the capital's abundance of cultural attractions, rich heritage, and thriving club scene that lures in a young, tech-savvy crowd. In turn, this has been a major driver behind international companies’ decisions to locate here.
This growth has resulted in tens of thousands of new startup jobs, many of which are opportunities for non-German speakers as companies look to expand across the European market. The Berlin startup ecosystem is considered one of Europe’s most dynamic, and the city has a population of 3.7 million that is forecasted to grow to 4 million by 2035, according to the Cologne Institute for Economic Research (IW).
Given this steady influx of businesses and people, the demand for offices has grown rapidly in recent years. In terms of the rental situation, after extended periods of home office, JLL sees that at the end of 2021 “the market has benefited from rising optimism and the return to the office”. With a vacancy rate at less than 1,9%, the office rental market may be tense, but real estate providers have responded. A total of around 19 million sqft of new office space was completed between 2018 and 2021, and millions sqft more are currently under construction. No other city in Germany can compete with this kind of area increase.
Berlin is increasingly attractive from the point of view of investment, and the recent report „Cities That Work 2021“ by Allianz Real Estate puts the German capital third place in a ranking of 26 European cities. “Berlin is globally interconnected with a rich history and world-class cultural offerings, has leveraged its open values and accessibility to attract international talent and cultivate a growing tech sector,” according to the report.
The report „Emerging Trends in Real Estate, Europe 2022 – Road to Recovery“ by powerhouse PwC with the Urban Land Institute (ULI) puts Berlin at second place. In that ranking, when it comes to forecasts for investment and development Berlin is even ahead of London. According to PwC, Berlin is particularly attractive for foreign investors, not least due to Germany’s robust economy. More specific benefits include short commuting times to the city center (compared for example to sprawling metropoli such as London or Paris), “an aspect that became particularly important during the pandemic and from which commercial real estate will also benefit”.
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The growth of Berlin’s sub-markets
Competition for space has led to the development of new and existing sub-markets, as companies are forced further afield to find the right space at the right price for their employees. The rapid transformation seen in areas within and along the S-Bahn city rail ring illustrates the extent of the evolution underway.
The Mediaspree sub-market to the east of the city centre, a former industrial area, is now popular with communication and media companies which occupy both modern new-builds in addition to refurbished warehouse space. Mediaspree benefits from a picturesque riverside location, charming architecture, and good accessibility, with easy connections by U-Bahn and S-Bahn. It has also become one of Berlin’s most sought-after residential and socialising destinations for young professionals. The area is now almost at full capacity having cemented itself as an established sub-market for companies and investors alike.
The Spreeturm completed in November 2020, is a 20-storey office high-rise in the Ostbahnhof railway station area. The tower by architect Eicke Becker has a gross lettable area of about 145,000 sqft. The property provides highly presentable office accommodation next to the old post station, very close to the Mercedes Benz Arena and trendy Oberbaumbrücke.
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The Mercedes Platz district surrounding Mercedes Benz Arena in Friedrichshain is situated across from the largest remaining section of the Berlin Wall and hosts business and office space on the riverbank. The Stream Tower, a new office high-rise with a “vertical folding” look, brings a floor area of 430,000 sqft, mostly occupied by Zalando. Even more prestigious, the revolutionary sustainable architecture of the Edge East Side Tower building is set to become a new landmark on the Berlin skyline. Amazon is due to move into most of the 866,500 sqft on 36 storeys in 2023.
The City-West area has officially made a come-back. Overlooked by investors and renters until relatively recently, there are now a number of projects underway, particularly around the Zoologischer Garten station. One of the most prominent buildings here is the Zoofenster, a tower complex that is home to the glamorous Waldorf-Astoria hotel as well as high-end office and retail companies. On the famous Ku’damm shopping boulevard, Fuerst will occupy an entire city block of nearly 2 m sqft with offices, a theater, kindergarten, shopping, and more. The project is due for completion in 2023.
The area around the shopping strip Friedrichstrasse has drawn major attention from investors and renters, the most obvious sign of which is the prominent GWS Rocket-Tower development which serves as headquarters to Rocket Internet. Not far away, the new OMA-designed Axel Springer campus highlights the burgeoning of this sub-market.
A stone’s throw from the iconic TV tower at Alexander Platz is the new Alexander Tower, “Berlin’s first residential skyscraper” at almost 500 ft for 35 storeys. At the bottom will be three floors of luxury retail while at the top there’ll be three floors of luxury penthouses, with 377 apartments in between. You can move in in 2023, but hurry, the apartments are being snapped up fast.
Spandau completely sets itself apart from the other districts of Berlin. The bright and buzzing, up-and-coming district is a contrast to typical big city life. The borough is embedded in Berlin’s green belt, conveniently connected to the western inner city, and right on the Havel riverbank. Near the Spandau railway station, the three buildings of the Spandauer Ufer are 130, 200 and 260 ft high respectively and due to be completed by 2022.
Van Caem Projects is developing 1,184,000 sqft of commercial space in eastern Berlin’s Lichtenberg district. Six new buildings, each with 59,000 to 400,000 sqft, are planned for the former site of the Post Office at Buchberger Strasse. In close proximity, 527,000 sqft of sustainable and innovative architecture of the new DSTRCT building is already almost fully leased.
The area around the central station, Hauptbahnhof, has also witnessed a huge change. The city’s most important transport hub has seen a number of new commercial developments spring up, with its proximity to parliament drawing renters from the federal government. Europacity, Berlin's new investment hotspot, will bring approx. 3,000 apartments and offices for approx. 16,500 people to 61 hectares of land adjacent to the main railway station.
Urbane Mitte fills one of Berlin’s last big gaps in the centre of the city. It links the Mitte, Schöneberg and Kreuzberg districts and forms a connecting bridge between the modern Park am Greisdreieck and the city. Seven buildings between 80 and 300 feet tall are in progress. The site is one of several development areas around Gleisdreieck railway station, where a new part of the city is being built.
Slightly less trendy, the down-to-earth area around the southern railway station Südkreuz has also been developed. Südkreuz Offices by Hadi Teherani Architects und pbp (prasch buken partner) has residential and business space in this well connected and up-and-coming part of town.
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The city continues to evolve
Berlin’s growth continues to skyrocket. As big-name overseas developers look to secure increasingly larger holdings, more new locations, particularly those convenient to transport hubs, are emerging.
Alongside investment opportunities, Berlin's culture and the overall quality of life and affordable cost of living play a big role in the city's appeal. The German capital's open attitude and cool image appeal to a young, tech-savvy crowd, as do the relatively low residential rents and comparatively high standard of living.
With offices being in such high demand, the importance of flexible workspaces and coworking is growing significantly. With over 100 locations, Berlin is Germany’s hub for shared office spaces. See our article on Coworking in Berlin.
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