German Industry Returning to Cities

Abstract

Is the German manufacturing industry, which has been leaving cities for less densely populated areas since World War II, being lured back into urban centers? This report analyses industrial start-ups from 2012 to 2016 and derives their preferred locations. The analysis shows that the start-up intensity in large agglomerations is on average almost 40 percent higher than in the other regions of Germany. Agglomerations attract start-ups with the advantages they offer, namely proximity to both research facilities and customers for the new (digital) industry. Accordingly, many new companies are being founded in city centers. To tap cities’ growth potential, not only must the influx of risk capital, knowledge, and skilled workers be secured, but space bottlenecks eliminated as well.