Berlin’s office market is on the rise
19 million square feet to be finished in 2021
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. In 2017 and 2018, it was under significant pressure with squeezed supply and exploding demand, especially within the startup sector.
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’s the capital's abundance of cultural attractions, rich heritage, and thriving club scene that truly lures in a young, tech-savvy crowd. In turn, this has been a major driver behind international companies’ decisions to locate here.
A study by McKinsey&Company predicts this growth to result in 100,000 tech startup jobs by 2020, many of which will be opportunities for non-German speakers as companies look to expand across the European market. The Berlin ecosystem is considered one of Europe’s most dynamic cities, with 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).
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Given this steady influx of businesses and people, the demand for offices has grown rapidly in recent years. With a vacancy rate at less than 1,9%, the office rental market is tense, but real estate providers have responded. More than 4 million sqft of new office space is currently under construction - around twice as much new office space as in previous years. In 2020 this will increase to almost four times as much and, by 2021, a total of around 19 million sqft will be finished. No other city in Germany can compete with this kind of area increase.
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The growth of Berlin’s sub-markets
Competition for space has led to the development of new and existing submarkets, 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 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 submarket for occupiers and investors alike.
While the new Spreeturm, a 20-storey office high-rise in the Ostbahnhof railway station area will have a gross lettable area of about 13,500 square metres. The property will provide highly presentable office accommodation and is scheduled to be completed in the course of 2020.
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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 revolutionary architecture of East Side Tower building is set to become a new landmark on the Berlin skyline, while construction of the Stream Tower, a new vertical folding office high-rise will bring a floor area of 430,000 sqft.
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. Friedrichstrasse has drawn major attention from investors and renters, the most obvious sign of which is the prominent Rocket-Tower development which serves as headquarters to Rocket Internet. The new OMA-designed Axel Springer campus construction points to a bright future for this submarket.
Spandau completely sets itself apart from the other districts of Berlin and the bright and buzzing up-and-coming district is a real contrast to the typical big city life. Embedded in Berlin’s green belt, conveniently connected to the westerninner city, and right on the Havel riverbank, near the Spandau railway station, the Spandauer Ufer three buildings of 40, 60 and 80 metres are planned to be completed by 2022.
Van Caem Projects plans to develop 118,4000 sqft of commercial space in 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. The new DSTRCT building is going up in close proximity and will have 527,000 sqft of sustainable and innovative architectural mobility.
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 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 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.
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The city continues to evolve
Berlin’s growth continues to skyrocket and, 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 importantly cost of living play a big role in the city's appeal. With the UK possibly losing tech talent to Brexit, friendlier locales like Berlin appear even more attractive to adventurous entrepreneurs. The capital's open attitude and cool image appeal to a young, tech-savvy crowd, along with the relatively low residential rents and affordable cost 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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Text: Melissa Embury