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Increase in office rents

Posted by Tanya Yujelevski on 21/04/2019

Experts predict that office rents on the outskirts of Berlin will jump by over 50% in the next five years

Dizzying pace of price increase and lack of availability in the city center force companies to move to the city outskirts

Due to the fact that rents in the center of Berlin are rising at such a rapid pace, coupled with the fact that there is almost no supply for vacant office spaces in the city, it is very difficult to find a space of 6,000-7,000 square meters in the center of Berlin.

It is estimated that over the next few years a shortage of 1.5 million square meters of office real estate will be created in Berlin, and then companies will have to compromise on less central locations, such as Teltow, which has an estimate of 6,000 sq.m of free offices.

In addition to that, the renting prices there are half the amount required in the city center. Rents now stand at 9-10 euros per square meter in an old building, or € 14-16 per meter in new construction.

For the sake of comparison, in the center of Berlin companies will have to pay at least € 28 per square meter, and even in Potsdam, which is a fairly small sub-market, the price will not be less than € 20 per square meter.

Not only are the rent for office space in central Berlin extremely high, they are also constantly rising. In prime locations in the city, such as the Charlottenburg-Wilmersdorf district, rent rose to 32 euros per square meter in the third quarter of 2018, compared to only 21 euros in 2013.

The rise in rents in Berlin is also the highest among other major cities in Germany. While the rise in prices from second to third quarter in 2018 was relatively high and stood at + 1.9% in Hamburg and Düsseldorf, and + 1.3% in Munich and Frankfurt, Berlin led with an impressive increase of + 3.2%.

Another factor that makes Berlin’s outskirts a more desirable place is a relatively low business tax. In Germany this tax consists of a federal tax base and a tax that is imposed by the municipality independently. Thus, in Munich or the center of Berlin this tax will amount to about 30%, while in remote areas such as Teltow, half of the amount can be paid.

The only problem is finding funding: many German lenders will refuse to finance the development of offices outside the city center, even despite price increases.

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