All grown up and nowhere to work: Berlin runs short of office space

As the city once seen as a low-cost government backwater comes into its own as a European business centre, office supply has not been able to keep up with the sharp rise in demand. 

“Berlin has come out of its pre-pubescent phase and is now becoming more grown up in a way that other big cities maybe already have done,” said Stefan Franzke, CEO of Berlin Partner, which promotes investment in the city and helps companies open offices.

Building activity is up 90 percent compared to a year ago with around 557,000 sq metres currently under construction, according to BNP Paribas Real Estate. This won’t bring much relief in the short-term, however, as only around one quarter of that will be completed over the next 12 months and the majority has already been pre-let.

Average office rents in Berlin are now the highest in Germany - although premium office space in Frankfurt is still the most expensive - and vacancy rates are under 2 percent, down from nearly 7.8 percent in 2010.

The shortage is challenging both businesses and landlords to be open-minded about how to define office space and how to keep down costs. Operators of coworking real estate are playing a big role pushing up rents, gobbling up around 71,000 sq mtrs of new office space last year, about 8 percent of the total take-up.

WeWork now has five offices in Berlin and plans to open another location early next year and a further site in summer 2019. But coworking space is not just for start-ups anymore. Deutsche Bahn has rented space at one WeWork office and will take over eight floors of another WeWork building in the autumn.

The arrangement helps the train operator meet growing demand for desks in the short-term as it hires employees to work on digital projects and facilitates networking with start-ups, a spokeswoman said. 

Amazon has several office buildings in Berlin’s central Mitte district, but also rents temporary and coworking spaces to accommodate the rapid growth of its Berlin-based staff, now numbering more than 2,300. 

“It’s hyper-competitive,” said Eva Glanzer, vice president of People, at online travel booking firm GetYourGuide, which has just secured space for a new headquarters after a two-year search left its 350 employees running between meetings at several different locations across the city.

While some start-ups have moved out of Berlin’s central districts, CEO Michael von Roeder of Sensorberg, which kits out buildings with digital technology, says he will struggle to keep talent if he ups sticks to the suburbs.

“In the past, if you spent enough money it was fairly easy to find space,” von Roeder said. “In the meantime, even if you don’t care what you pay it’s still difficult.”

Sensorberg has temporarily crammed its 30 employees into an office with another firm while it waits for a new co-working facility. It has also found an innovative solution to the rising costs by securing discounted space in the new space by agreeing to provide its own technology.

“The competition is heightened by the fact that landlords aren’t used to working with the new generation of high-growth startups like us. They’re old-fashioned, they prefer stability, and they want to see the numbers,” said Glanzer.