City of dreams

Berlin, a Magnet for Europe's Squeezed Middle Class

berlin_view on tv tower
Berlin is a city on the up.
  • Why it matters

    Why it matters

    Germany’s capital is growing in confidence, as the economic migration to Berlin of many skilled professionals and entrepreneurs underlines the parlous state of many European cities.

  • Facts

    Facts

    • Berlin’s city government is encouraging newcomers to move there to start businesses.
    • Living costs in Berlin are much lower than in other major European capitals. Quality of life is also considered higher.
    • The city is rapidly developing and catching up with its European rivals.
  • Audio

    Audio

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Tess O’Leary did what many young professionals living in London do. She looked at her tiny apartment, sky high living costs and insane working hours and decided to quit the city. But instead of moving out to the suburbs, she jumped on a plane and came to Berlin.

She is not the only one. The capital of the country with the largest economy in Europe, Berlin is becoming a haven for the middle classes who are feeling the squeeze in their own cities.

More than 40,000 people moved he city in 2013 alone, according to the Statistical Office for Berlin-Brandenburg. Many of these were students, but there are also workers from Eastern and Southern Europe and a growing number of middle class professionals, often working in tech or creative industries, who either escaped their shattered economies or their overpriced home cities.

“I wanted to leave London, and I knew that I can afford to live in Berlin and keep our place in London,” said Ms. O’Leary, who runs Tropolis, a creative agency that helps companies to develop cultural strategies in different cities. As her client base is global, she can work from anywhere.

In Berlin, almost 50 percent of new companies were founded by foreigners

Ms. O’Leary is not the only one who recently moved to Berlin to work or start a company. Every fifth new business in Germany has been registered by a non-German citizen in 2013, according to research by the KFW Bankengruppe. And in Berlin, almost 50 percent of new companies were founded by foreigners, said Alexander Dennenbaum, a spokesperson for the Berlin Senate. The number of firms registered as being in the creative industry, of which software and video games feature prominently in the city, grew by 12 percent between 2009 and 2013.

There are several reasons behind the growth. Berlin offers affordable living conditions compared to other big cities in Germany or elsewhere. In Berlin, the cost of a square meter of property is around €2,000 ($2,525), in Munich almost €4,600. In London it can be up to €18,000.

“London is a city for the mega rich and it is a very stressful place to live in,” said Maria Angeli, a singer who also manages her father’s art collection in Rome. She lived in London, and moved to Berlin almost two years ago.

For her, the city offers a good mix of efficiency and creativity. “In Rome it is impossible to do anything. A simple transaction at the bank takes hours to get through,” she said. “At least, even after a lot of paper work, things get done in Germany. In Italy, you can’t even be sure of that.”

 

Source: own
Maria Angeli finds Berlin less stressful than other European cities. Source: Maria Angeli

 

Changes in the German legal system have also made it easier for people to set up a business. The Unternehmergesellschaft (UG), which was introduced in 2008, allows entrepreneurs with start-up capital as low as €1 to form a limited liability company.

The city of Berlin is also looking to encourage newcomers. “Foreigners who come to Berlin with know-how and skills are more than welcome,” said Mr. Dennebaum.

“Berlin offers a nice ecosystem for young entrepreneurs ready to help each other,” said Stephane Berdugo, a native of Switzerland, who founded a UG earlier last year and said that he received help and tips from peers. He is now running an online company that allows people to book a three-course dinner prepared by a chef at home, which is called Qozy.de.

“I could live comfortably for a year in Berlin and pay for my business.”

Stephane Berdugo, Entrepreneur in Berlin

Mr. Berdugo started off with a capital of €40,000 and said he would have quickly ran out of cash in his home town of Geneva. “But I could live comfortably for a year in Berlin and pay for my business,” he said.

But of course this comes with a catch. Many of the new wave of professionals moving here work in jobs that require an affluent customer base. In London or Paris, these customers could be living next door.

In Berlin, which at 10.8 percent has the second highest unemployment rate in Germany, such customers are likely to be a plane ride away.

Ilias Lefas, a furniture designer from Athens uses Berlin as a base, but his clients are mostly from Milan, Athens, Geneva, Istanbul, and Vienna.

“I design the furniture here in Berlin and then usually travel by car to the place of destination, find local suppliers and work on site,” he said. He also sub-lets his apartment in Berlin while he travels, to bring in some more money.

 

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Ilias Lefas is hoping his furniture business takes off. Source: Ilias Lefas

 

Of course, as more and more people arrive to take advantage of cheap living, competition is growing more fierce.

“Every year, it is getting more difficult to find projects and clients in Berlin,” said Gregor Drobnic, an interior designer from Slovenia. He opened his studio, Otto von Berlin, a year ago and has just managed to break even.

Berlin is already gentrifying. Rents are rising, and once derelict areas are being taken over by fashionable coffee shops and expensive boutiques. The city is beginning to resemble the places many people have left behind.

“With the wave of Brits coming to Berlin,” Ms. O’Leary said, “I fear we are bringing London problems with us.”

 

The author is an editor at Handelsblatt Global Edition and is covering Berlin and the start-up industry, among others. To contact the author: scheven@handelsblatt.com

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