Booming Leipzig struggles with its success

leipzig urbanization, housing
Also known as Hypezig. Source: DPA

Leipzig, the Saxon center of East Germany’s peaceful revolution, has long been called the “better Berlin.” As the capital grows more gentrified every year, Leipzig has become a magnet for young creatives, with a vibrant art scene, striking architecture and cheap rent.

And Mayor Burkhard Jung has something his counterpart in Berlin must be deeply jealous of: huge swaths of undeveloped land near the city center. The problem is that Leipzig can’t build fast enough to keep pace with the booming population.

Leipzig, famed for its rich musical heritage as the home of Bach and Mendelssohn, is growing faster than any other German city. Between 2007 and 2017 the population grew by 13 percent to 578,000, and the housing vacancy rate dropped to less than 3 percent from more than 10 percent in 2008.

Unemployment has also dropped by half to less than 7 percent over the last decade. The university is a magnet, and research bodies like the Fraunhofer Institute for Cell Therapy and Immunology are keeping academics in the city once they’ve finished their studies. Top companies including Porsche, BMW, Amazon and DHL have been busily recruiting for their Leipzig operations, as have startups such as Spreadshirt.

After reunification in 1990, Leipzig’s population dipped to less than 440,000 as eastern Germany’s rusting industry collapsed and workers moved west to find jobs. But in the past decade, growth has picked up the pace. “No one predicted that would happen,” Mr. Jung said.

Rising real estate prices

The rise in population has predictably triggered increases in rents and real estate prices. Apartment sale prices last year increased by 6.5 percent on average to €1,800 per square meter ($634 per square foot), according to a study conducted by consultancy vdp Research for Handelsblatt. The prices of one-family and two-family houses increased by 7.7 percent to €2,300 per square meter (m2).

Rents in Leipzig are still quite low compared with other German cities. But so is average purchasing power; Leipzig ranks 334th on a list of 401 cities. Currently average rents range from €5 to €15 per m2, said property developer Christoph Gröner of CG-Gruppe. Mr. Gröner has built 3,000 apartments in Leipzig since 1995. From his office near Leipzig’s main station, he can see his biggest project to date: an entire city district on the site of a former freight railway station, to have 3,000 apartments, offices, kindergartens, schools and football pitches.

It’s not the only big venture in town. To the west of the main station, developer Buhlmann Immobilien plans a mix of housing and commercial real estate on 36 hectares of land. Near the Bayerischer Bahnhof southeast of the center, another 3,000 flats are to be built.

The waiting game

But it will take years for all these new homes to go on the market. Construction work on Gröner’s project isn’t set to begin until 2020 at the earliest. And even those projects won’t be enough to alleviate what Mr. Jung calls Leipzig’s growing pains. There’s no end in sight to the boom. The population could grow to 720,000 by 2030, according to a forecast by the city administration. But even if it only reached 674,000, Leipzig would still need to add 3,600 new apartments every year. That’s more than twice as many as it’s built in recent years.

Investors are scouring the city for possible properties, even in formerly undesirable districts, said Karsten Jungk, director of real estate consultancy Wüest & Partner Deutschland.

Like in parts of Berlin, the surge in modernization and new construction often isn’t affordable for existing residents. Mr. Gröner admits that his apartments, which rent for €10 per m2, mainly attract newcomers to the city who earn more than old Leipzigers.

There’s only one way to tackle the problem, said Mr. Jung, the mayor: “Build, build, build.” It’s the biggest challenge since the Monday demonstrations began in 1989, when hundreds of thousands of people called for democratic reforms in East Germany.

Mr. Jung won’t have to deal with it, though: After 12 years in office, he’s leaving to take a job in the banking industry next year.

Matthias Streit is a correspondent for Handelsblatt. To contact the author: m.streit@vhb.de

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