Unusually Tall Buildings Are in the Works as Housing Demand Soars

Rendering of a residential tower that Hines plans to start building. Gehry Partners/Hines

Developers are moving forward with plans for unusually tall apartment buildings in this low-slung city in response to demand for housing that is greatly exceeding supply.

Houston-based Hines plans to begin construction next year of a 150-meter residential tower designed by Frank Gehry in Alexanderplatz, a transportation hub, shopping area and public square in what used to be East Berlin. Streletzki Gruppe, the developer of the planned Estrel Hotel in the city's up-and-coming Neukölln section, is expanding its plans to include a 176-meter tower with a residential component.

"After 20 years, Berlin is growing," said Christoph Reschke, co-managing director of Hines Germany. "For the first time in many years, its economy is outperforming that of other German cities and the influx of residents is rising."

Russian developer MonArch AG is considering another tall residential project in Alexanderplatz, according to people familiar with the matter. MonArch has signed a letter of intent to buy the land next to Alexa Shopping Mall for a tower as tall as 150 meters. But it isn't clear how that deal will be affected by the crisis in Ukraine, which has greatly intensified tension between Russia and Western European countries and the U.S.

The residential projects reflect the strong demand for housing from Berlin's rising population, which jumped 1.5%, or 41,324 inhabitants, from 2011 to 2012, and rose by another 19,000 inhabitants in the first six months of 2013, according to the latest census data. The growth is partly being fueled by the city's expanding technology sector.

Construction activity is up, too, but still is falling short of the current demand for housing, according to a report by JLL, formerly Jones Lang LaSalle. Around 7,500 new residential units will be delivered in 2014, up from 6,000 in 2013, according to research firm Bulwiengesa AG. But the Federal Institute for Research on Building, Urban Affairs and Spatial Development has estimated that Berlin needs to add more than 16,000 new apartments a year to keep up with growth.

And even that estimate may be low in a city where vacancy currently is below 2%, according to JLL.

"By 2030, Berlin will have 250,000 people more than today," said Regula Lüscher, a senior housing official with the Senate of Berlin, the city's governing body. "We really need housing."

But plans for the tall towers have sparked public debate. Housing advocates point out that the buildings target upscale buyers and renters and won't help the city's low-income population that increasingly is being priced out of the city.

Some critics also say the high-rise projects don't fit in well with their low-rise neighbors. The Hines development "could be in Dubai, or Abu Dhabi," said architect Hans Kollhoff, who designed a master plan for Alexanderplatz in 1993. The project "has nothing to do with Berlin," he said.

Developers are planning high residential towers in several cities in Europe and world-wide. London is experiencing a skyscrapers boom, with 236 towers in the planning or construction stages, 80% of which are residential, according to think tank New London Architecture.

Berlin is new to this trend. The capital's skyline still is low compared with other German cities. Frankfurt, the country's finance center, boasts the 259-meter-tall Commerzbank Tower, Europe's second-tallest building, and other notable Germany skyscrapers. Berlin's tallest building—aside from two television towers—is a relic of the communist years: the 125-meter Park Inn Hotel overlooking Alexanderplatz that was developed in the 1960s.

After Germany's reunification, a master plan financed by the city of Berlin envisioned a radical transformation of the concrete Soviet-style Alexanderplatz, with the construction of 10 150-meter buildings. Because of a lack of funding, the 1993 plan never came together.

Developers now are moving forward with plans for the area that was the center of Berlin's night life in the 1920s. "The demand for new residential housing is highest in Berlin's center. Alexanderplatz is at the heart of Berlin's Mitte," said Mr. Reschke of Hines. "This is simply the right location and the right time."

MonArch is one of Moscow's largest developers and worked on sites for the 2014 Winter Olympic Games in Sochi. Since 2012, MonArch has developed residential projects in Berlin and plans to expand across Germany and Europe. The final price tag for the Alexanderplatz lot should be close to €30 million ($41.4 million), according to people familiar with the deal.

"We are working on potential solutions for the sale," said a representative of the current owners of the land, Portuguese retail operator Sonae Sierra and French investment company Foncière Euris SA.

MonArch declined to comment.

An expanding population and rising gross domestic product have pushed up residential prices. Over the past five years, the average rents in Berlin rose 28.9% to €7.36 a square meter a month, compared with a national increase of 11.9%.

Costs for condominiums rose 40.9% to €2,099 a square meter, compared with a national increase of 21%, according to data from ImmobilienScout24, a German property website. Rents rose to €13.50 a square meter a month for newly built luxury buildings in Berlin's center, according to JLL.

Despite the strong demand for housing, government officials believe that the number of tall towers will be limited. Ms. Lüscher predicts they will rise only in Alexanderplatz in the East and Kurfürstendamm in the West.

"It is great that we will have two central areas where it is possible to build high-rise buildings, but I don't think we will have more," said Ms. Lüscher. "It is not good for the skyline. "?

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