16 March 2016, by Paul Tostevin
An in-depth look at the emerging success story of tech-savvy cities Dublin and Berlin
The two cities emerging as big hitters on the global stage – Dublin and Berlin – epitomise what is happening in successful European centres. Located in countries with contrasting economic stories, as cities they have a remarkable amount in common. Vibrant and affordable, they are where footloose, creative global talent wants to live and work.
TECH AND TALENT
The attractiveness of both cities goes hand in hand with the development of a burgeoning, digitally enabled and creative tech industry. Start-ups, scale-ups and established corporations in the tech space are competing fiercely for skilled employees, and it is in vibrant cities such as Dublin and Berlin where this talent wants to live and work. With the magic formula of high-quality urban environments, favourable regulatory backdrops and low property costs, Berlin and Dublin have emerged as havens for Gen Y creative talent.
Berlin’s offer is dominated by online, e-commerce and software-driven tech that has seen success stories such as music cloud storage platform Soundcloud and early-stage incubator Rocket Internet.
Ireland’s corporate tax rate of just 12.5% initially made it attractive to large US tech firms, which have set up their European headquarters in Dublin; Google, Facebook and LinkedIn are among the best-known firms that are now domiciled in the city. These major tech firms, based in either Dublin Docklands or ‘Silicon Docks’, have been a catalyst for the wider industry, building confidence among local start-ups.
Digital industry has fuelled a growth in jobs in both cities. The number of jobs in the information and communication sector grew by 23.3% in Dublin between 2005 and 2015, at a time when total employment in the city increased by just 3%. Further growth of 25.9% is forecast over the next 10 years.
Berlin saw similar levels of employment growth in the sector – up 20.5% over the past decade – against a eurozone average of 9.8%. The information and communication sector has outperformed across Europe, but it is in cities such as Berlin and Dublin where growth has been most marked (see fig. 1).
Source: Oxford Economics
QUALITY OF LIFE
What makes these cities attractive to the fast-growing tech industry? We know that human capital is the most important resource for the tech-enabled sector, and although both cities generate graduates through their own universities, they attract skilled migrants too.
People like to visit and live in cities that have history, creativity, tourist attractions, lively mixed-use city centres, a diverse retail offering and leisure activities. Both Dublin and Berlin offer this, and on a smaller footprint than their megacity rivals. The compact nature of Berlin and Dublin equates to short average commute times (by world city standards at least), supporting a positive work/life balance.
Dublin has a lively social scene, with an especially high ratio of bars and restaurants per head of the population, which has proven integral for networking and business development. In central Berlin the ‘kaffeekultur’ of Kreuzberg and neighbouring Mitte districts, with its high density of both coffee shops and cheap workspace and collaboration spaces, has been one of the catalysts for innovation.
Although rising, real estate costs in both cities are very cheap by international standards for both commercial entities and individuals. This gives them an edge over their big-city rivals, equating to affordable office space for young start-ups and freeing up capital that would normally be used to service rent for business development, expansion and paying for talent (see fig. 2).
Dublin saw falls in residential and commercial values in 2006/07 and 2011, making it more competitive in terms of property costs. Office rents of the type occupied by small, growing companies are 20% below 2008 levels. For those looking to buy a home, prices are still 36% below their 2006 peak, at values that are half those in London and two-thirds those of Paris.
In Berlin, residential capital values never fell and have almost doubled in the past decade but are still low by global standards, while rents have remained affordable thanks to tenant-friendly letting laws. The cost of office space of the type occupied by growing tech firms is on a par with that of Dublin.
Source: Savills World Research (London values converted at December 2015 exchange rates)
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