Berlin’s Not as Cool as You Think 

Photographer: Krisztian Bocsi/Bloomberg

A worker positions a window panel lifted by crane onto scaffolding during the construction residential apartments in Berlin on June 20, 2014. Close

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Photographer: Krisztian Bocsi/Bloomberg

A worker positions a window panel lifted by crane onto scaffolding during the construction residential apartments in Berlin on June 20, 2014.

Cushy is encroaching on cool in Berlin.

From lobbyists and lawyers to shopping malls and luxury condominiums, signs are everywhere that Germany’s biggest city is developing into a mature capital from its post-Cold War adolescence. With plenty of neighborhoods still to be developed, the gentrification that’s prompted comparisons to London and New York still has legs.

The transformation isn’t driven by just artists, fashion designers and software programmers. Well-paid jobs spawned by the federal government have been increasing at an above-average pace. Add employers such as online retailer Zalando SE and affluence is in vogue.

“Take all those Internet startups -– these are people who want to make ideas work and turn them into money,” said Reinhard Messenboeck, 42, the head of Boston Consulting Group’s Berlin office. “That’s a new zeitgeist. It’s like investment banking, just more socially acceptable. It’s very different compared to three, four or five years ago.”

Mayor Klaus Wowereit coined the capital’s catchphrase in 2003 when he called Berlin “poor but sexy.” In the years that followed, the number of jobs in accounting, corporate consulting, public relations and advertising increased by 27 percent, more than double the growth in total employment, state data for 2006 to 2011 show.

Source: Archlab via Bloomberg

In March a 330-square-meter (3,550 square feet) penthouse in the high-end Lux apartment complex three blocks from the Brandenburg Gate sold for 3.5 million euros ($4.8 million. Close

In March a 330-square-meter (3,550 square feet) penthouse in the high-end Lux apartment... Read More

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Source: Archlab via Bloomberg

In March a 330-square-meter (3,550 square feet) penthouse in the high-end Lux apartment complex three blocks from the Brandenburg Gate sold for 3.5 million euros ($4.8 million.

It’s the latest shift for a city that went from Prussian backwater to Nazi capital in the 1930s, then languished as a divided, decimated haunt until the Berlin Wall came down 25 years ago. Its unique history and relatively low rents -- 45 percent of the median in Munich -- mean Berlin is still a draw.

Poor Is Past

“We’re doing what every other city does: trying to get high-end jobs,” said Cornelia Yzer, a former drug-industry lobbyist who heads the city’s economic development department. “Poor -- that’s the past,” though Berlin “is still sexy.”

The nexus of government and business is a boon for Nicole Alexander, who edits Politik und Kommunikation, a glossy monthly founded in 2002 that tracks everything from campaign strategists and newly created public-affairs jobs to powerful lobbyists and the lives of legislative staffers. By the magazine’s count, the number of lobbying groups in Berlin doubled to 126 last year from 63 in 2004.

“Berlin had a lot of catching up to do,” Alexander says over coffee at Cafe Einstein, a hangout for politicians in formerly communist East Berlin. “It’ll never be like London or Paris -- Germany is too federalized for that -- but it’s heading in the direction of a real capital that attracts a lot of what comes with a federal government.”

Prenzlauer Berg

With 700 lawmakers, thousands of government employees and an estimated 5,000 lobbyists in town, that trend is pumping up incomes in eastern neighborhoods such as Prenzlauer Berg. A hipster area of rundown tenements in the 1990s, the district is now home to Deputy Labor Minister Joerg Asmussen, the former European Central Bank Executive Board member, and Christoph Heusgen, Chancellor Angela Merkel’s national security adviser.

A newly built apartment in Berlin is 60 percent cheaper on average than in London and one-third the cost of a similar place in Paris, according to CBRE Group Inc., a Los Angeles-based property company.

In the influence game, businesses that relied on trade groups are hiring in-house lobbyists, Alexander said. Microsoft Corp. (MSFT) and Google Inc. have set up offices on Unter den Linden, the boulevard that heads east from the Brandenburg Gate.

Lobbyist Action

Hans-Christian Maass, Volkswagen AG (VOW)’s representative in Berlin, says his job includes making sure the government hears the voice of the world’s second-biggest carmaker. A former spokesman for Christian Democratic cabinet ministers, he knows Merkel from her earliest days in politics after the fall of the Berlin Wall in 1989.

“If the Chinese president comes to Berlin, we have to be right there,” he said. “China is our most important foreign market. We sold more than 3 million vehicles there in 2013.”

Interest groups from the Association of German Discotheques and Dance Establishments to the Federation of German Industries, which represents 100,000 companies, also have steadily expanded.

“Clearly, a class of people with purchasing power has arrived,” Alexander said. “They get older, they have children. People are getting settled.”

That grates on residents who see the city of 3.5 million losing its soul as grassy squares make way for office buildings and dance clubs turn into tourist traps.

Gentrification’s Discontents

Andrej Holm, a sociologist at Berlin’s Humboldt University, channels dissent on his “gentrification blog,” which features video of a building demolition and protests evictions. He’s written a book called “Rent Insanity: Why Housing Gets Ever More Expensive and Who Profits.”

His antagonists are people such as Alberto Martinez, one of the developers behind the high-end Lux apartment complex three blocks from the Brandenburg Gate, where a 330-square-meter (3,550 square feet) penthouse sold for 3.4 million euros ($4.6 million) in March.

“Two years ago, people were telling me you could never sell an apartment at that price,” Martinez said. Now, buyers “want their bedroom to have its own bathroom. The way of living is getting closer to European standards.”

Real gross domestic product in Berlin, which is also a state, increased 6.2 percent between 2009 and 2013, compared with a national average of 3.3 percent, and job growth last year was the strongest of any German state, according to the Federal Statistics Office.

Job Growth

While that helped push unemployment to 20-year lows this year, the jobless rate was still 11 percent in June, compared with 6.5 percent nationally and 3.5 percent in Bavaria, home to companies such as Allianz AG (AGFSECS), Europe’s biggest insurer, and auto maker Bayerische Motoren Werke AG.

Fifteen years of government presence after East and West Germany reunited haven’t healed the loss of Berlin’s industrial base. Its biggest employer is government owned railroad Deutsche Bahn AG, according to the local IHK chamber of commerce, and the capital has the most welfare recipients among German states.

“We still need years of above-average growth to catch up with other parts of Germany,” said Yzer, the economic development official. “There’s nothing wrong with wanting your city to be prosperous.”

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net James Hertling, Emma Ross-Thomas

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