Google Suffers a Salutary Setback in Berlin

(Bloomberg Opinion) -- As 20 finalist cities in the U.S. compete for the right to host Amazon’s second headquarters, Google has had to drop plans for a campus in Berlin after the project was rejected by residents and the leftist city government proved unenthusiastic.

There are two ways of looking at this: It confirms a lasting U.S. advantage over Europe when it comes to enterprise and innovation, or it shows Europeans’ strength in defending livable cities against a dehumanizing tide of gentrification. The trade-off shouldn’t necessarily be this stark. The search for a middle ground can still be constructive.

Two years ago, Google decided to open a startup campus in Berlin, like the ones it already had in London, Madrid, Warsaw, Seoul, Sao Paulo and Tel Aviv, cities with lively tech scenes that provide an opportunity for Google to snap up talent and ideas before they become too expensive. In the German capital, the search giant chose premises in a former transformer substation on a narrow, tree-lined channel in the borough of Kreuzberg. 

It didn’t go well. The area, known as the Reichenberger Kiez, has been smarting from rising rents. Berliners live in their Kiez: the word stands for more than just a neighborhood, but rather for a community, with its own festivals and an informal support network. Last year, a beloved family bakery closed in the Reichenberger Kiez after the building owner raised the rent; this would be a mundane event in some other areas of Berlin, but in Kreuzberg, which is both seedy and artistic, the local communities are especially strong and vocal, and resistance to gentrification is more organized than elsewhere.

Kreuzberg is one of seven Berlin boroughs (out of 24) where the sale price of residential real estate has more than tripled since 2007. It also has the third-highest share of foreigners among new residents: Some would say it’s so quintessentially Berlin that people move there to experience the city’s free spirit. Even though it is a tourist destination renowned for bars and clubs, the borough is good at fighting off a touristy vibe.

Gentrification, of course, is difficult to escape — and perhaps not worth escaping altogether; there’s money in it for local establishments and for locals who don’t completely reject capitalism. But Kreuzberg is struggling to reconcile gentrification with the desire to remain true to its identity. A Google campus is widely perceived as being too much (see local websites dedicated to stopping the development). 

The examples the Kreuzberg activists cite are mainly American. By their standards, today’s San Francisco, where tech wealth coexists with extreme poverty, is an unlivable, dystopian city. And they would agree with the 2015 screed by Seattle native Chris Morris-Lent, who proclaimed, “Seattle is dead and Amazon killed it.” 

To some, Berlin is losing its vibe in the same way Seattle did with Amazon’s arrival. “The bars were too crowded; the food was too expensive; the bros and bores were too pervasive,” Morris-Lent wrote. I hear the same complaints about Berlin. Tech has long since ceased to be cool; on the contrary, it’s cool to consider it evil.

The Kiez residents’ perspective is different: Mainly, they just want to preserve their community, which means keeping well-liked establishments anchored and locals protected by reasonable rents fixed by long-term contracts. Berlin is a city of renters, so most locals aren’t interested in rising real estate values. But, in a way, their livelihood also depends on that Berlin vibe; once the connoisseurs rule that it’s gone, rents may slow down but the cafes and bars will empty out.

Google appears to have figured it out after two years of protests, which included a brief occupation of its premises last month. It gave up on opening a Berlin campus in addition to its office in the center of old East Berlin and handed over the Kreuzberg space to two local non-governmental organizations, one that does fundraising for various charitable causes and the other that takes care of street children. The tech company will pay rent and utility costs for these groups for the next five years, or about 14 million euros ($16 million). It’ll still work with startups, but it will be a smaller operation than originally planned.

The Berlin city government’s economic administration, headed by Ramona Pop of the Green Party, welcomed Google’s move as a sign of the growing importance of “socially- and ecologically-oriented enterprises and the nonprofit economy” in the city. But pro-business opposition parties were deeply disappointed. Christian Graeff, who represents Chancellor Angela Merkel’s Christian Democratic Union, called Google’s change of plans “a fatal signal to the whole world about how investor-unfriendly Berlin has become under the Red-Red-Green government.”

He may have a point. For the first time, Berlin has been overtaken as the German region where the most startups are founded. According to the just-published Deutschland Startup Monitor report, the state of North Rhine–Westphalia is now a bigger magnet for new firms. 

That doesn’t mean the city government was wrong to heed the grassroots opposition and decide not to support Google’s plans. In Berlin, with vast areas occupied by gray Communist-era high-rise blocks, there are plenty of neighborhoods for tech giants to try to transform. A Google campus in one of these splinters of East Berlin could be a blessing for the local community. At the other extreme, there’s space available in newer office developments in expensive neighborhoods that are less iconic than Kreuzberg.

Tech giants, which can bring lifestyle change to entire cities, should neither be objects of abject courtship, as in the case of Amazon’s second headquarters, nor absolute undesirables; cities can work with these companies to set off gentrification where it’s useful or spend their money where a high rent is extracted from them. But it makes sense to push these companies in the right direction, restraining their impulse to invade neighborhoods that look ready-made for their hipster workforce; let them create their own environment. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leonid Bershidsky is a Bloomberg Opinion columnist covering European politics and business. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.

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