Photo: Nastuh Abootalebi / Unsplash

Spaces for Scaleups: How Growing Startups Can Find Suitable Office Space

The Munich startup ecosystem offers young companies many advantages, such as the proximity to universities and corporates, but it also has a major disadvantage: a tight real estate market. In view of the above, the City of Munich has launched the ‘Spaces for Scaleups’ program under the leadership of the Department of Labor and Economic Development (Referat für Arbeit und Wirtschaft – RAW). We spoke with Alexander Schmidbauer, entrepreneurship and startup consultant at the Department of Labor and Economic Development and project manager of Spaces for Scaleups, to find out more about the aim of the program and how young companies can benefit from it.

Munich Startup: What exactly is the goal of the program? 

Alexander Schmidbauer: Despite all of the advantages that Munich offers as a startup location, affordable workspace unfortunately is and remains a scarce commodity. This is also clearly and regularly shown in studies. In the DSM 2020/2021, for example, three-quarters of the startups surveyed rated the point “affordable office space” in Munich as “bad/very bad,” while the national average was only 35.9 percent. 

Our interview partner: Alexander Schmidbauer, entrepreneurship and startup consultant, project manager pf “Spaces for Scaleups,” Department of Labor and Economic Development (RAW) (Photo: Alexander Schmidbauer, RAW)  

Our RAW survey of Munich startups that was conducted in late 2021 also came to a similar conclusion: The criteria named as the main difficulties when it came to finding workspace were “reasonable price” at 90.6 percent, “lack of suitable space” at 78.8 percent, “suitable location” at 73.8 percent and both “lack of available space” and “effort” at 72.6 percent. Long-term leases and a lack of flexibility, for example in terms of the size of workspaces, were often criticized. 

With a curated network of private workspace providers – i.e. Spaces for Scaleups – we as a municipal economic development agency want to facilitate a smooth transition to suitable and affordable workspaces by effectively networking startups and scaleups with private workspace providers. With shortened search processes and direct placement, startups will save valuable time and money. At the same time, it will make it easier to move into larger workspaces, which is often urgently needed. 

“There’s a strong demand when it comes to increased space requirements from 200 to 300 square meters” 

We’re working together with suitable and reliable partners in the Munich real estate industry who are supporting the Munich startup ecosystem with attractive workspace offers, temporary discounts and other services for innovative startups and young companies in order to make a contribution to a startup and business location that is successful over the long term. 

Munich Startup: Why does the program explicitly target rapidly growing startups, aka scaleups? Is it particularly difficult for companies in this growth stage to find suitable workspace in Munich? 

Alexander Schmidbauer: Yes, looking for workspace in this growth stage, which is often decisive for startups, is not easy. There’s a strong demand when it comes to increased space requirements from 200 to 300 square meters that could not be satisfied sufficiently in the market until now. This is something that the startup scene, startup centers and the MTZ, Werk1 and the Munich real estate industry have unanimously told us time and again. The few existing offers on the market are often not attractive for startups or scaleups – high prices, the search effort and high brokerage costs, for example for real estate agents, can have a deterrent effect. And especially for this target group, finding the right environment is much more important than for “classic” office tenants, which includes location, connections, atmosphere, cafés, flexible conditions and the community factor, such as meeting spaces, other startups and networking. 

The program is open to all growing startups and scaleups 

Munich Startup: Do scaleups have to meet certain requirements to participate in the program? 

Alexander Schmidbauer: No, the offer is open to all growing startups and scaleups. Ultimately, however, it is of course advantageous to already bring a certain proof of market and reasonably stable financing, because the decision in favor of a tenant lies exclusively with the providers of the workspace as the landlord. 

As the Department of Labor and Economic Development, we are acting solely as a networking partner in this project and would like to actively contribute to bringing together workspace providers and attractive scaleups – in the interests of both parties. Real estate developers and landlords are increasingly interested in attractive and versatile office locations that also include an interesting combination of corporates, startups and scaleups – which benefits everyone. 

Munich Startup: How exactly does the mediation process work? And where can scaleups find current offers? 

Alexander Schmidbauer: Interested startups and scaleups can find a current overview of the available offers at any time on the Munich Startup Pinboard. Direct contact with the workspace provider can be established through the pinboard. In addition, all of the startup centers in Munich know about our offers and can pass them on directly to their interested tenants. 

If there aren’t any suitable offers available, scaleups can contact our business support at the Department of Labor and Economic Development, which actively supports companies that are looking for workspace. The email address firmenbetreuung@muenchen.decan be used to get in touch. 

The network is constantly being expanded 

Munich Startup: Are there already success stories to share? 

Alexander Schmidbauer: The program is still under development. Due to the long lead time and construction time of real estate projects, there’s still a relatively limited number of offers currently available – these types of workspace aren’t created at the drop of a hat. The program is deliberately focused on the future and aims to remedy a known shortage as quickly as possible. 

The majority of the Spaces for Scaleups offers won’t be accessible until they are completed in the months and years ahead. That’s why there isn’t a large number of successful placements yet. What we do have is a great deal of interest from startups. There has also been a very positive response to our initiative from real estate providers, which we’re obviously pleased about. We’re going to continue to work on expanding the network and on soliciting real estate providers to make suitable and attractive workspace available for our program. 

Munich Startup: Many companies still work with a hybrid model even post-corona. Has the demand for office space still remained high or is the Munich real estate market relaxing somewhat? 

The boom in the Munich commercial real estate market came to an initial halt during the first corona year of 2020 with a significant slump in rentals amounting to 25 percent, but this decline was not – as often feared – permanent. The demand for office space has picked up again significantly since the third quarter of 2021. There has only been a “corona dent” so far: In the first quarter of 2022, the take-up of workspace increased by a remarkable 83 percent, and the more relevant 10-year average was even topped by 4 percent. In the second quarter of 2022 as well, this stable trend has continued at a high level with the vacancy rate at a low level of 4.3 percent. 

Generous work environments for sought-after specialists 

Even though hybrid working models have indeed become the “new normal” due to the pandemic, that doesn’t seem to mean that the need for workspace is decreasing: Workplaces are still needed in offices, especially for team collaboration and creative processes. Moreover, companies are competing for highly skilled specialists and want to offer them generous work environments with modern amenities. Meeting areas and additional offers, such as attractive culinary options, are also of increasing importance, which can trigger a greater need for space.