So turns out you can just go online and see how much it costs to rent or buy empty plots of commercial land in berlin. Lets compare 2 similar ones!

We'll compare one at Gürtelstraße 40, and another at Frankfurter Allee 58. They're both located in Friedrichshain, 10247 Berlin, about 900 meters apart, so that's a 12 min walk according to Apple maps. I took a look at these on the 29th of January 2025, the rest of this post is based on the listing details as of then, though they may have changed afterwards.

GurtelStrasse 40

The plot is located between two hotels, the back seems to be on to the ringbahn, seems to be across from a little park. It's about a 7 min walk to the S bahn Frankfurter Allee, a little less to the ubahn.

Frankfurter Allee 58

This one right on a busy street, most the buildings either side seem ground floor commercial with residential above. It's sarcastically close to the ubahn samariterstr, like maybe 12 meters.

The numbers:

• Gürtelstraße 40: size 531sqm, price sale of 3,300,000e, 6214e/sqm
• Frankfurter Allee 58: size 300sqm, rent price of 24000e per year, 80e/sqm/year

... that rent price seems suspiciously low when compared to the other purchase price. Here's the math:

Gürtelstraße is selling for €6,214 per square meter. If we assume Frankfurter Allee's land is worth the same (not the worst assumption given they're so close), its 300 square meters would be worth €1,864,200 (300 × €6,214) The annual rent of €24,000 as a percentage of this land value gives us a rental yield of just 1.29% (€24,000 ÷ €1,864,200)

That's a remarkably low return for a commercial property - if your goal was rental income, you could do much better putting that money elsewhere. So what's going on here?

What's up with that rent?

Digging into the listings, we see the Gurtelstr is selling for someone to develop. The listing gives reports on the state of the ground for construction, and makes a big deal of the hotels next to it to tout its commercial potential.

Whereas Frankfurter Allee is specifically a short term lease, which give the owner a lot of power to end it, stresses "Freifläche" which (I think) is like "open space", so like gardens/car parks etc. It also has a "notarielle Zwangsvollstreckungsunterwerfung" (notarized submission to immediate enforcement) requirement, which is a legal instrument to make evictions easier. It also includes a "annual increase of €1/sqm" to rent which is unusual according to the LLM I asked (claude.ai).

All that would suggest a much higher rental yield for actual development on this land.

So what might explain this unusually low rental yield at Frankfurter Allee? I don't know but here are some of my guesses:

• The owner could be waiting on planning permission before development, using short-term rentals to generate some income during the process. If this is the case, it would suggest Berlin's planning system needs improving - right now it's leaving prime land next to public transit sitting underutilized.
• The owner might be primarily interested in capturing rising land values in this rapidly developing area of Friedrichshain. The short-term lease terms, easy eviction clause, and built-in rental increases all suggest they want to maintain flexibility for future plans. In this scenario, the rental income is just a small bonus while they wait for land values to appreciate further.
• There could be other factors I'm not seeing - perhaps issues with the land itself, local regulations, or specific arrangements between the parties involved.

What Could Make This Better?

As this blog explores Georgist ideas for Berlin, cases like these two plots offer fascinating insights into how our current property system shapes land use. From a Georgist perspective, the Frankfurter Allee situation perfectly how property taxes based on improvements (rather than land value) can create unexpected incentives. There's currently no tax disadvantage¹ to keeping prime transit-adjacent land in low-intensity use while land values appreciate.

This brings us to an interesting question: how could a land value tax change these dynamics? Under an LVT system, holding prime land for speculation becomes more expensive - the tax is based on the land's potential value, not its current use. The Frankfurter Allee situation is particularly revealing here. This empty plot next to a U-Bahn station would face the same tax bill as the neighboring productive mixed-use developments. An LVT would create strong incentives for all valuable urban land to be put to productive use.

And what about that €6,214/sqm price tag at Gürtelstraße? How does that land cost affect development viability, and what role could LVT play in making development more feasible? I'll explore these questions in a future post.