The recent history of Berlin's economy is one of growth, which has particularly affected the office market. ‘Poor but sexy’ was the German capital’s slogan until not so long ago. Today, Boomtown Berlin is more the image that is being portrayed of the city, not least internationally.
None of Germany's top seven cities (which include Hamburg, Munich, Cologne, Frankfurt, Duesseldorf and Stuttgart) has grown as much as Berlin in the last 20 years, both in terms of economic performance (Berlin: +41 per cent versus the average across the top seven of +27 per cent) and in terms of employment (Berlin: +30 per cent, average top seven: +25 per cent).
Despite the impact of Covid-19, the office market should prove to be robust, especially since it was characterised by excess demand before the crisis and continues to have one of the lowest office vacancy rates in Europe.
The stabilising role of the public sector is another factor. Although it is no longer as important as it was two decades ago, the public sector continues to be one of the largest office tenants in Berlin.
Nevertheless, there are also office users whose business situation has deteriorated as a result of the crisis. A recent Ifo Institute for Economic Research survey suggests that this mainly affects companies in the publishing, advertising and market research sectors. However, unlike the public sector, these sectors are of secondary importance for Berlin's overall demand for office space.
Another aspect which could prove to be a stabilising factor for the German capital’s office property market is that its tenants are distributed across different sub-markets. Unlike Frankfurt’s banking district, Berlin does not have a sub-market whose dominant users give it its name.
Although there is a comparable Berlin office sub-market in the form of Mediaspree, this location was given its name even before it became established as an office location. While numerous media companies are based here, they do not dominate the sub-market. The largest office users of Mediaspree include Coca Cola, Daimler and Zalando - companies from other sectors. The public sector also occupies a considerable amount of office space.
Another sub-market, Mitte, has a large proportion of Berlin-based insurance companies, pension funds and broadcasters. The most likely location for companies from comparatively badly affected industries is near Alexanderplatz. More than 100 companies from the publishing industry are located there (Berlin as a whole has approximately 900) and almost one in 10 companies from the advertising and market research sector.
However, information and communication as well as management consultancy (including legal and tax consultancy and auditing) are among the top five office users both at Alexanderplatz and in almost all other central office submarkets – two sectors which are likely to be relatively unaffected by the Covid-19 crisis overall and which promise further growth in the long term. As a result, Berlin’s boomtown image might well continue for years to come.