Berlin Airfield Is Battleground for Scarce Housing: Real Estate

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Source: BE Berlin GmbH lohrer.hochrein landschaftsarchitekten bdla via Bloomberg

Howoge Wohnungsbau GmbH's Lindenhof residential development project stands in Berlin in this photo illustration.

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Source: BE Berlin GmbH lohrer.hochrein landschaftsarchitekten bdla via Bloomberg

Howoge Wohnungsbau GmbH's Lindenhof residential development project stands in Berlin in this photo illustration. Close

Howoge Wohnungsbau GmbH's Lindenhof residential development project stands in Berlin in this photo illustration.

Photographer: Krisztian Bocsi/Bloomberg

A former runway, with the Fernsehturm television tower in the back, at Tempelhof airfield in Berlin on March 20, 2014. Close

A former runway, with the Fernsehturm television tower in the back, at Tempelhof airfield in Berlin on March 20, 2014.

Photographer: Krisztian Bocsi/Bloomberg

An aircraft sign on the tarmac at Tempelhof airfield in Berlin on March 20, 2014. Close

An aircraft sign on the tarmac at Tempelhof airfield in Berlin on March 20, 2014.

Photographer: Krisztian Bocsi/Bloomberg

A cyclist passes Tempelhof airfield as a remote radar post stands behind a fence in Berlin on March 20, 2014. Close

A cyclist passes Tempelhof airfield as a remote radar post stands behind a fence in Berlin on March 20, 2014.

Photographer: Krisztian Bocsi/Bloomberg

A statue stands in Eagle Square outside Tempelhof airfield in Berlin, Germany, on Thursday, March 20, 2014. Close

A statue stands in Eagle Square outside Tempelhof airfield in Berlin, Germany, on Thursday, March 20, 2014.

Photographer: Carsten Koall/Getty Images

Visitors barbecue food and relax at the park located on the site of Tempelhof airfield. Close

Visitors barbecue food and relax at the park located on the site of Tempelhof airfield.

Christoph Breit stands atop a squat lookout tower surveying the former Tempelhof airfield, now a vast park where windsurfers barrel down the runways that had been the city’s lifeline during the 1948 Berlin airlift.

Breit, 38, is in a fight to stop construction of almost 5,000 apartments and a library at the airfield, which since 2010 has served as a recreation area bigger than New York’s Central Park. Breit moved to Berlin 10 years ago and settled in the Neukoelln neighborhood adjacent to the park. He helped collect close to 200,000 signatures to force a May 25 referendum to block the housing, the city’s response to a home shortage.

“Would anyone try to transform Central Park into a housing complex?” he said on a sunny winter morning, pointing to skaters and windsurfers pulled by giant kites along the runways where American planes, nicknamed ‘‘Candy Bombers,’’ once delivered food to a city besieged by the Soviet Army. “There are many other places more suitable for building.”

More than two decades after the fall of the Berlin Wall, the city is divided over how to address a housing shortage. The long-awaited post-reunification growth is finally happening, with 50,000 people moving to Berlin last year and another quarter million forecast to arrive by 2030. The German capital’s unique history has provided it at the same time with plenty of central areas to build, and a populace skeptical about the intentions of politicians and real estate developers.

Urgent Necessity

Building is now an urgent necessity to meet rising demand for everything from inexpensive rentals to luxury condominiums.

At stake in the referendum is the kind of city Berlin will become: one where those on low incomes can still afford to live in downtown locations, or somewhere like London, Paris or New York, where the center is dominated by the relatively wealthy.

Construction cranes already dominate the skyline in central neighborhoods like Mitte and Kreuzberg. Private builders such as Groth Development GmbH and Peach Property Group AG are building in the center, putting up housing for the minority of Berliners who buy their homes. Aided by low interest rates, private construction companies have steadily increased their output in the past five years and completed 6,000 apartments in 2013, according to data compiled by research firm Bulwiengesa AG. That was the most in 14 years.

About 60 percent of the condos they’re building are sold to homebuyers from outside of Berlin, said Christian von Gottberg, a broker at Hamburg-based luxury-homes seller Engel & Voelkers. Buyers from western German cities account for about 40 percent of the total, while 20 percent of the homes go to purchasers from other European countries, the U.S. and Asia, many as investment properties to rent to locals.

Cheaper Option

“People are moving here because Berlin is suddenly like London and Paris, but significantly cheaper,” Gottberg said. “Foreigners who buy here are looking for stability, they know they’ll get their rent payments.”

Sites like Tempelhof offer a rare opportunity to provide low-cost housing close to the center. At least half the 1,700 homes planned for Tempelhof in the first phase of construction would be affordable, according to Martin Pallgen, a city spokesman.

When Stefanie Frensch joined city-owned developer Howoge Wohnungsbaugesellschaft mBH as chief executive officer in 2011, the company had built nothing in at least 10 years. After reunification in 1990, an expected surge in population with the city’s rebirth as the capital of a new Germany had spurred a brief building boom. When the people failed to come, Howoge and its sister companies focused on collecting rent and maintaining the properties. The city had even been demolishing some apartment buildings.

Slow Burn

“Berlin was always interesting, but it took 20 years for people to realize that it was the most important city in Germany,” said Frensch, 44. “When the population started to grow, we realized we didn’t have enough housing, so we went back to being a construction company.”

Howoge plans to build about 3,000 apartments in the next four years. Its projects include a conversion of a former hospital into 500 apartments surrounded by parks, and a high-rise with 200 apartments.

Unlike most German cities, Berlin has many undeveloped properties. Some were empty lots left after the Berlin Wall came down in 1989, while others were World War II ruins the East German government hadn’t repaired. Many of those spaces were filled with the help of construction subsidies in the 1990s, and now the capital’s second building boom is beginning to close the ones that remain in districts such as Mitte and Prenzlauer Berg.

Goering’s Ministry

Tempelhof, designed in 1934 to 1936 by Ernst Sagebiel, an architect in Hermann Goering’s Reich Air Ministry, is unique for any city. Its buildings, where as many as 1.1 million travelers per year once passed, now serve as exhibition space, and the airfield itself is as big as the principality of Monaco.

Six years ago, the fate of Tempelhof Airport itself was decided by a referendum in which those who opposed its closure - - including Chancellor Angela Merkel -- lost out because of a low turnout. The result: the city’s plan to build Berlin Brandenburg Airport as a single transport hub on the city’s outskirts stayed on track.

Originally scheduled for completion in 2011, the airport’s opening has been delayed several times and there’s currently no target date. The project was budgeted at about 2 billion euros ($2.8 billion) and the latest projection is almost 5 billion euros, Berliner Morgenpost reported in January.

The last flight from Tempelhof was in 2008 and the next year local residents staged demonstrations, demanding the airfield be opened to the public, which happened in 2010.

Neighborhood Transformation

For the residents of Berlin’s Neukoelln neighborhood, it was almost as though without moving they had gone from living in New York’s Jamaica, Queens, neighborhood next to JFK Airport to suddenly finding themselves in Brooklyn’s Park Slope, one of the city’s most sought-after neighborhoods, adjacent to the borough’s biggest park.

When Breit arrived, Tempelhof was still open, with planes roaring overhead, and the neighborhood, he said, was crime-ridden and struggling, dominated by drug dealers and the destitute. It was “written about as one of the worst places to live in Germany,” he said. Now, Breit points out the families at the local playground, including his, the fresh coats of paint on many buildings, and the new restaurants and businesses on almost every block.

Merkel’s Support

This time, the referendum on Tempelhof’s future coincides with a European parliament vote, which should boost turnout.

The ballot measure, if passed, would block all development of the airfield, leaving it just as it is. To pass, the majority of those who vote on the referendum must vote “yes” and their total number must be equal to a quarter of all Berliners entitled to vote. That number was about 670,000 on March 25, according to the Berlin Elections Commission.

Breit and his group, 100% Tempelhofer Feld, had to collect about 174,000 signatures to win the right to hold a ballot, and ended up with about 185,000. That’s more than 7 percent of all Berliners who are allowed to vote.

The plan for Tempelhof includes a new library, school and kindergarten, as well as 4,700 housing units, which will be built over several phases.

All of the developments would be on the edges of the former airfield, Pallgen said, leaving the rest of the site as a public space that would still be bigger than Berlin’s Tiergarten, a park on the west side of the Brandenburg Gate.

‘Unique Space’

“The Tempelhof field is a unique open space in Berlin’s inner city,” Pallgen said. “It’s big enough to allow for several uses at once.”

Berlin’s city planning commission last year published a proposal to build 1,700 apartments in the first phase, at least half of which would be affordable. In order for the plan to be binding, it must be voted on by the Berlin parliament after the planning commission lays out the project’s financial feasibility. After the first phase, city planners expect to add another 3,000 apartments, although the exact scale and pricing has not yet been determined, Pallgen said.

“We have a long history of distrust in Berlin between the Senate and the people,” said Breit, a co-founder of 100% Tempelhofer Feld. “That’s because the politicians have a long history of saying one thing and doing something else.”

Berlin needs to build 10,000 to 12,000 housing units every year to keep up with its growing population. Since 2005, the number of people living in Berlin has risen 3 percent to 3.4 million. The city’s government expects 7 percent more residents by 2030.

Greek Jobseekers

Newcomers include students and artists attracted by rents that are among the lowest in northern Europe, and workers from Greece and Spain looking for jobs in Europe’s largest economy, said Karl Brenke, a researcher at the DIW Economic Institute.

That’s beginning to change. Demand for housing pushed up rents by an average of 23 percent in the past three years, according to data compiled by Bulwiengesa. The biggest gain was in Friedrichshain, a trendy district in eastern Berlin, where tenants had to pay 45 percent more.

“Housing has become an issue,” said Andre Adami, head of Berlin residential property at Bulwiengesa. “Rent increases in the past few years have forced some people with lower incomes to move out of their neighborhoods.”

Berliners have about 17,000 euros of disposable income per year on average, compared with about 20,000 euros nationally, according to data compiled by the Federal Statistics Office in 2011, the most recent year for which data is available.

Renters Rule

“Berlin is a city that can’t stomach rising rents because its economic structure is simply worse than Hamburg’s or Munich’s,” said Reiner Wild, head of the Berlin Tenants Association, the city’s most powerful tenant advocacy group. “Berliners don’t have the kind of incomes that allow them to buy apartments.”

As a result, about 85 percent of Berliners are tenants, compared with 75 percent in Munich and Hamburg, according to data from the Federal Statistics Office. An apartment in Berlin costs about 8.20 euros per square meter to rent, compared with 15 euros in Munich, Germany’s most expensive city, Chicago-based broker Jones Lang LaSalle Inc. estimates.

The rising cost of living in central neighborhoods such as Friedrichshain, Mitte and Kreuzberg already is pushing some Berliners to the outskirts, as the city’s economy lags behind the country as a whole. The unemployment rate of about 11 percent compares with a German average of about 7 percent.

In some parts of Berlin, local governments have taken other measures, such as requiring private developers to add affordable homes to their plans. In Prenzlauer Berg, city planners have banned renovations such as combining apartments or adding balconies.

‘Social Mix’

“These types of renovations are aimed at increasing the price of an apartment so they can be sold,” said Jens-Holger Kirchner, head of city planning in Prenzlauer Berg. “You don’t want a mono-culture in your district; cities thrive on the social mix.”

Groth Gruppe, a Berlin-based developer that was set up in 1982, plans to construct about 500 homes this year and 1,000 next year, compared with 300 in 2013. The company is putting 270 units on a former railyard in Kreuzberg that’s not far from Potsdamer Platz. The average asking price is about 4,400 euros a square meter, or 420,000 euros for a two-bedroom with nine-foot ceilings, hardwood floors and a balcony.

While that’s in line with prices for other newly built homes in the area, it’s less than London’s 9,200 euros per square meter and Paris’s 10,662 euros, according to data from CBRE Group Inc.

‘Concrete Gold’

“It’s a good time to be in construction,” said Rainer Kieschke, head of project development. “Demand for apartments started to rise at the start of the euro crisis in 2008, because people felt they needed a safe place to put their money. People are investing in concrete gold.”

Breit, who lives less than a mile from Tempelhof and spends weekends there biking and flying kites with his children, says building apartments on the site is just the beginning of a land grab that would force middle-class Berliners to the periphery. New arrivals are already pushing a rising number of people from central locations to the outskirts, according to CBRE.

“It’s important to keep Tempelhof as a historic site to commemorate the important things that happened decades ago,” said Breit. “In the long term, we’re going to regret having taken a space like this to build on.”

To contact the reporters on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net; Rob Urban in New York at robprag@bloomberg.net

To contact the editors responsible for this story: Andrew Blackman at ablackman@bloomberg.net; Rob Urban at robprag@bloomberg.net Kara Wetzel

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