Choosing your business location is a crucial step in starting or expanding your business.
Germany as a business location has many benefits – it is the economic powerhouse of Europe, with a central location and a leading innovation landscape. However, Germany is a large entity, split into federal states and regions which vary in their economic structure.
In order to choose the right location for your business, you must consider a number of factors that will inform your decision. Here are some important questions to ask yourself:
What makes Germany such an attractive destination for businesses?
Given Germany's strong economic growth, convenient location within Europe, cost-effective production, skilled workforce, and emphasis on innovation, it is widely considered a highly competitive location for businesses. Additionally, Germany has surpassed the United States as the leading country for inbound foreign direct investment, with 1,537 projects in 2021, according to the Global FDI Annual Report 2022. Overall, Germany's favorable business environment and strong track record of success make it a desirable location for both domestic and foreign investors.
Overview of locations in Germany for your business
While it is not feasible to list every state and region in Germany, we will provide an overview of the top five locations based on the latest report from The Hamburg Institute of International Economics (HWWI). The report takes into account various factors such as a city's current economic performance, anticipated demographic changes, and essential business factors like education and innovation, international connectivity, and accessibility.
Berlin has ascended to the top of the list of the 30 largest cities in Germany, up from fifth place in 2017. It's also the only eastern state to make it into the top five. This is mainly attributed to its significant population growth of 4.1% and employment growth of 6.8%, as well as a noteworthy improvement in productivity and favorable location factors.
Saxony's largest city, remained in second place, with its economic performance improvement unmatched compared to other locations. Leipzig has seen the largest population growth of nearly 7% compared to other cities in the list, and it is expected to continue its growth through 2030, especially in terms of under-20s and people of working age. The availability of skilled workers will be a critical factor in attracting businesses to the city, as location attractiveness increasingly relies on the expansion of the working-age population.
The Bavarian state capital has dropped to third place from its previous first-place ranking in 2015 and 2017, indicating a limit to its growth for the first time. However, Munich still boasts the highest productivity among the other cities, thanks to its highly skilled workers and knowledge-intensive industries. This puts the city in an advantageous position despite rising living and business costs.
Frankfurt am Main
Frankfurt am Main has a high proportion of academically educated employees with good accessibility and internationality. Demographic predictions for under-20s and working-age people are favorable for this financial center.
Cologne offers an excellent balance of business and quality of life factors, and similar to Hamburg (which ranks as the sixth best location in Germany), it has been a consistent performer in economic performance, future demographic development, and key business factors such as education and innovation, internationality, and accessibility.