The Renewal of Berlin Inc


VSUNVENTIONAL WISDOM wants the capital of Europe’s most powerful economy to be poor, Bolshia, chronically in debt and totally dependent on subsidies from richer states. The Berlin-Brandenburg Airport construction debacle, completed in 2020 nine years behind schedule and more than € 4 billion ($ 4.7 billion) in budget overruns, has confirmed all prejudices about the city. A political storm is brewing over real estate companies and rents.

Reputations are hard to lose. But the business community in Berlin is trying. During the tenure of Klaus Wowereit, mayor from 2001 to 2014, no company in the DAX, the index of the best chips in Germany, has taken up residence in Berlin. After the DAXSeptember 20 expansion from 30 to 40 companies, five are headquartered in the city. Zalando (an online fashion retailer) and HelloFresh (a meal kit hawker) joined three other Berliners, Deutsche Wohnen (one of the besieged real estate companies), Siemens Energy (a spin-off of the engineering giant ) and Delivery Hero (a food delivery darling), themselves recent additions. Berlin’s share in the total market capitalization of Germany has increased since 2000 (see graph).

Before World War II, Berlin was the birthplace of powerful companies such as Daimler and Siemens. After the partition of the city by the victorious allies, many companies moved their offices and factories to West Germany. Banks moved to Frankfurt, publishing houses to Hamburg, and industry to southern Germany. The exodus intensified after the erection of the Berlin Wall in 1961. After the reunification of East and West in 1990, these companies had little reason to back down. Instead, the city has attracted artists and aspiring club owners, drawn by low rents and countless abandoned factories and warehouses that have made fabulous studios and party venues. These cool new residents had a lot of fun, earned little money, and paid virtually no taxes. In 2003, Mr. Wowereit described his town as “poor but sexy”.

It is this sexy side that now explains the revival of business in Berlin. The young and hipsters he attracted brought in new talent, including entrepreneurs and technicians. In August, Google announced that part of its € 1 billion investment in cloud computing infrastructure will go to Berlin (alongside Hanau, near Frankfurt). Amazon Tower, a skyscraper in Berlin’s Friedrichshain district named after its largest occupant, will house 3,500 of the online giant’s employees. In the first half of this year, Berlin-based startups received € 4 billion in venture capital, half of the German total. In the spring, Olaf Koch, the former boss of Metro, a retailer, created a food-tech investment fund in the city with the aim of raising 500 million euros.

Between 2017 and 2020, Berlin’s digital economy grew by 30%, ten times faster than its overall output. Last year, as the pandemic focused on everything digital, Berlin tech employment rose 8.5%. Ramona Pop, Berlin’s Minister of Economics, expects jobs in the city’s digital industry to double over the next few years to 200,000. “Berlin is spearheading the digitization of the world. ‘whole German industry,’ she proclaims. After decades of impoverishing Germany, Berlin enriches it a bit: in 2019, the GDP per person was slightly above the national average. â– 

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This article appeared in the Business section of the print edition under the title “Berlin Inc”

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