Viewed from the 38th floor of a newly-built skyscraper in the centre of the city, Frankfurt resembles a construction site.The gridiron streets that surround the now-iconic towers of Deutsche Bank, UBS and Commerzbank are eclipsed by layers of scaffolding.Meanwhile, continually moving giant orange cranes loom above the few green spaces that remain in the increasingly urbanised financial district.Despite its small size – it is home to under a million residents – and its unfair but unshakable reputation for being somewhat dull, Frankfurt is winning the battle for the spoils of Brexit Britain’s economic heart; the City of London.Egged on by Germany’s finance minister, Wolfgang Schaeuble, and enthusiastic emissaries from the state of Hesse, many of Europe’s largest financial institutions have already announced their intention to relocate jobs here.
Many banks’ patience with the protracted Brexit negotiations, through which regulatory frameworks for foreign exchange trading and conditions for access to the Single Market must be thrashed out, seems to have run out.Morgan Stanley, Citigroup and Standard Chartered are among those who have chosen Frankfurt as their new European base, while others such as Goldman Sachs and UBS have promised to move thousands of jobs to the German hub.Predictions for the number of bankers set to descend on Frankfurt vary wildly, from tens of thousands, up to 100,000. Last week, a study by the WHU-Otto Beisheim management school suggested that the city could gain 10,000 new banking jobs and an extra 88,000 jobs in other sectors in Frankfurt and the surrounding Rhine-Main region.
There have also been reports speculating that the city is fast running out of office space.Quite the contrary, says Oliver Schwebel, the man in charge of Frankfurt Economic Development, a city-backed body tasked with enticing companies to the area.”We have a plan for 20 new skyscrapers,” he says, surveying the ever-changing skyline of the city locals dub “Mainhattan”.There is approximately a million square metres of office space in Frankfurt available for immediate occupancy, he says, and an extra 250,000 sq m will be available in the next few years. That’s almost triple the current level of demand.Careful not to seem triumphant, Mr Schwebel adds that while there has undoubtedly been a boost in real-estate investment in anticipation of an exodus from the City of London, “these are all plans from the last 10 or 15 years, nothing to do with Brexit”.
Elvin Durakovic, a partner at estate agents Knight Frank, also downplays the supposed Frankfurt surge.”Last year, when Brexit was announced, I got calls: ‘Elvin, are you partying? Elvin, are you happy everyone is coming to Frankfurt?'”, he recalls.”But unfortunately, it is not really the fact.”Although “10 or 11” companies with offices in the city have called to say they are double-sizing, “the truth is people are coming, looking around, but not making decisions.”Part of this, says Mr Durakovic, is down to a reluctance to abandon the cosmopolitan British capital – where many bankers have built comfortable lives.”No one is aware of what will happen in one or two years, what will be the result of Brexit, what payments they will be forced to make if they stay in London,” he explains.”They feel very comfortable in London, but they have to be prepared.”
City and state officials balk at talk of a “race” for Brexit exiles; the somewhat undignified scramble for the business of the City of London is not in step with the self-assured image Frankfurt prefers to project. But representatives have nonetheless been employing the “hard sell”. A recent video campaign produced by the German government as part of its bid for Frankfurt to host the European Banking Authority – filled with shots of millennials skating and surfboarding to a pulsating soundtrack – looks more like a chart-topping music video than a policy proposal.And as Mr Schwebel is keen to point out, Frankfurt has a lot going for it: its manageable size, its largely English-speaking population, its convenient air and rail connections, and its family-friendly suburbia. For bankers, its favourable time zone also allows for a “never-ending day”: Asian markets can be serviced in the morning, the US in the evenings.
Then there is the price. “Here we are talking about 38.50 euros (£35) a square metre a month,” says Knight Frank’s Elvin Durakovic, referring to the cost of office space. “In London it is approximately double”.Yet Frankfurt’s pole position in the post-Brexit contest is largely down to pure convenience – most banks are already in the city, all they need to do is expand.They won’t be doing so without some local consternation. Rolf Janssen, a veteran of the local Mieterschutzverein, a tenant’s rights agency representing some 20,000 renters in the Frankfurt area, is concerned that the city – already one of the costliest in Germany – will become even more expensive for those not on the high salaries that are common in the financial services industry.Half of Frankfurt’s inhabitants earn an average of 2,000 euros a month, while rent for a modest flat can be around 1,200 or 1,300, he explains.”Thousands of people will come who have a lot of money,” he says of the anticipated post-Brexit influx.”This is a very difficult situation. It used to be difficult for students or temp workers [to afford rent], but now it’s a problem for regular employees, and the middle class.”Crucially, higher rents affect the Mietspiegel, or rental index, which is compiled by calculating average property prices for the previous four years, and used to regulate the rental market.
Nonetheless, Mr Janssen is keen to point out that he’s not suggesting UK workers be prevented from coming to the German financial capital.”It is very important that so many British bankers are coming to Frankfurt,” he says. “We don’t live in the middle ages, so we can’t say this is a castle and we keep the drawbridge up.”Instead, the Mieterschutzverein wants to see more investment in affordable public housing – an issue that is already a talking point in the upcoming federal elections.For city administrators, meanwhile, the lack of clarity on numbers is proving to be a planning headache.”If 10,000 people show up in one year do we have space? Absolutely not,” says Paul Fochtman, the head of Frankfurt International School, which educates many of the children of those who work in the city’s skyscrapers.The institution is bracing for a surge in pupils, but determining the capacity required is an impossible task.”We ask ‘how many are you bringing’ and [the banks] say ‘we can’t tell you that yet’,” says Mr Fochtman, betraying some frustration.”They are certainly coming – no question,” he adds.”But how many and how quickly, that remains elusive”.