When Tesla announced in late November that it would build its so-called gigafactory in the greater Berlin area and simultaneously set up a design and development centre in Berlin proper, it caused a bit of quarrelling over who deserves credit for the achievement – the State of Berlin or the State of Brandenburg. Of course, the quarrel reflects a political vanity contest that has little to do with the decisive piece of news, which is that the Berlin-Brandenburg metro region has a strong gravitational pull for innovative companies which in turn attract high-skilled professionals. In mid-December, shortly after the good news of the Tesla deal, word of another auspicious development got out, involving a new BASF factory in the state’s Lusatia region (source: tagesspiegel.de).  

Rapidly Growing Economy

Apparently, the chemical conglomerate plans to invest half a billion euros for the purpose of producing components for electric car batteries. It should also be remembered in this context that Siemens intends to invest 600 million euros to raise an entire urban quarter including offices, industrial plants and dwellings in the western part of Berlin. Brandenburg and Berlin mutually boost each other with their different fortes, which collectively makes it possible to attract even large-scale businesses to the region.

This is one of the reasons why Berlin’s economy grew by an estimated two percent in real money terms in 2019 whereas the German economy as a whole stagnated (source: morgenpost.de). It is the sixth time in as many years that Berlin’s growth outpaced the national average. Worth noting is that the brisk growth of Berlin is fuelled not primarily by the industrial sector but by the service industry, especially by the areas of information and communication financial services and insurance as well as gastronomy (source: rbb24.de).  

Prices Rising in the Suburbs, Too

The economic strength of Berlin has for some time now driven up not just residential rents in the city proper but also in its suburbs. In the same sense that Berlin and Brandenburg form a single economic region, their housing markets are synchronised as well. The BBU Association of Housing Entrepreneurs in Berlin and Brandenburg noted that rent rates on new lettings went up by 5.5 percent in 2018 and thus rose faster than rates in Berlin proper (plus 4.7 percent). The average rent rate among BBU member companies remained lower in the greater region (at 6.74 euros/sqm) than in the capital (7.80 euros/sqm) (source: berliner-zeitung.de).

Berlin’s economic clout and the great appeal the city has for young people and highly skilled workers are fuelling demand for housing inside the city property and in its gravy belt. Since housing construction falls well short of the mark anyway and will probably decline further as a result of the planned rent cap, the strain on the housing market in the metro region will hardly ease in 2020 and subsequent years – despite the tightening regulation or indeed because of it.