Troubled times in Mainhattan

28th April 2004, Comments 0 comments

Frankfurt has been through some tough times recently. The economy has been stagnating, jobs have been cut and there has been a string of big corporate mergers and companies shifting out of the city. Andrew McCathie takes the pulse of Germany's financial capital.

Frankfurt skyline

Mainhattan waits for an economic upswing

With its vast, open spaces and an impressive collection of cultural and lifestyle activities, Frankfurt might consistently score high marks in international surveys as a good place to live.

However, after a protracted period of fast-paced globalisation, three years of economic stagnation and a less-than-sparkling performance by the Frankfurt stock market, Germany's finance centre is still struggling to set itself up on more solid economic ground.

As is the case in the rest of Germany, business confidence has been picking up in Frankfurt as signs of a moderate economic pickup emerge.  

But uncertainty about the global economic outlook, combined with a focus on costs by corporations, means, according to Andrea Zielak, manager of Schaper apartment services in Frankfurt, that companies appear to be dispatching fewer employees to the city. And when they do, it is for a limited time.  

While terrorism has been a key new factor shaping the real estate market for expats in other cities around the world, Zielak said her business has been hit primarily by the bleak economic times in Germany.

*quote1*"There are not many people coming to Germany and many people have returned to their home countries," she said.

She estimates that there has been a 30 to 40 percent fall off in her business in recent years with a lot companies have cancelled projects in Frankfurt. This, she said, has been across the board, including companies in the finance sector, construction, accounting, and consultancy.

Zielak said the global corporate tendency towards keeping costs down means that most companies try to keep their employees stays on foreign assignments as cheap as possible and often enough, do not seek out accommodation in the best areas.

What is more, she said, their stays are often for shorter periods and, where possible, companies are using locally engaged staff.

With apartments in Germany's key cities - Frankfurt, Düsseldorf, Berlin and Hamburg – Zielak said that those people that are coming are often seeking out long or short stay serviced accommodation as an alternative to hotels.

*quote2*Furthermore, she said that people renting serviced apartments often take them for between one and three months and use them as a base for house hunting before shifting their family from their home base.

Because of the shift to more short-term visits, costs such as cleaning have been on the increase. Zielak said her company has also started offering breakfasts in the apartments.

While tourism has emerged as a new major drive force behind the economy in parts of Germany, she said that apart from Berlin, tourism only represents about 5 percent of her company's business.

Lying along the foreshores of the river Main and with skyline reflecting its aspirations to  rival New York. Tokyo or the City of London as a banking and financial centre, Frankfurt has been dubbed Mainhattan or Bankfurt.
Home to the European Central Bank, Frankfurt had hoped that the arrival of the euro would transform the city into the new throbbing financial heart of the 12-member eurozone and allow it to eventually eclipse London as Europe's premier financial centre.

But despite the euro's strong start to the year, more than five years after the launch of the common currency the dollar still reigns supreme in global financial markets. And while the US economy storms ahead, the eurozone and its biggest economy, Germany, is facing another year of meagre growth.     
Also overshadowing Frankfurt is the prospect of a major shake-out in the nation's "overbanked" banking industry with talk that the country's biggest bank, Deutsche Bank,  could be gobbled up in a merger with a foreign-owned financial house.

As it is, Deutsche is forced to regularly rebuff rumours that it is considering abandoning Frankfurt and shifting its headquarters to London. 

Added to this, Frankfurt has in recent years found itself facing competition from within Germany for the role of the nation's financial capital.
In particular, this involves the Bavarian capital, Munich, which is home to a string of leading German companies including Europe's biggest insurer, Allianz and the nation's second biggest bank, Hypovereinsbank.

Allianz is also the parent company of another German bank, Dresdner. 
Several foreign financial houses have already decamped from Frankfurt to London and a string of big corporate mergers has created nervousness about future employment prospects in the city.

The latest sign of concern about jobs emerged in April following the merger between Franco-German drugmaker Aventis with Paris-based rival Sanofi-Synthelabo.

There are fears the deal, which will create the world's third- largest drugs company, could lead to job losses among the group's 9,000 workforce in Germany.

In its latest real estate market forecast for Europe, Jones Lang LaSalle said that office rents in Frankfurt are not expected to rise until 2006 with a positive recovery in rents not predicted until a year later.

Nevertheless, several big companies have been pulling out of the centre of Frankfurt, seeking office space on the city's rim.

Others have also been moving further a field, notably MG Technologies. Previously known as Metallgesellschaft, MG Technologies is moving out of Frankfurt and to the city of Bochum.
Despite the move of a number of companies out of the centre of Frankfurt to areas beyond the city's business heart, Zielak said that the majority of people on foreign assignment in the city still wanted to live close to the centre of town.

April 2004

[Copyright Expatica 2004]

Subject: Life in Germany, relocation, Frankfurt. Serviced apartments

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