The walls are beginning to go back up in Berlin: British developers have dramatic plans for reviving former East Germany. Tom Stevenson reports

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The Independent Online
RONNIE LYON, the property developer known for his companies' collapses in the 1970s and 1980s, is making another comeback - in Berlin, the city many view as Europe's most exciting development opportunity.

Work began this week on one of the biggest property schemes in what will again be the political centre of Germany, as ministries move back from Bonn to the former capital by the end of the decade.

Konigs Park, 50 minutes from central Berlin, is a 309-acre site that will provide housing for 4,500 people as part of a DM1bn ( pounds 420m) development that will also include industrial and office buildings.

The development is one of the few to have got off the ground in Berlin, where grandiose plans led to a boom in the property market immediately after reunification. That has proved difficult to sustain after expected demand failed to materialise.

The plan for Konigs Park was devised by Nobleclear, a joint- venture company set up by Godfrey Bradman, former head of Rosehaugh, one of the casualties of the late-1980s property boom in the UK. Mr Bradman is no longer involved following a rumoured dispute with Christiani & Nielsen, the Thai-controlled construction company that bought 72 per cent of Nobleclear earlier this year.

Mr Lyon has worked on the project for three years, negotiating with 82 landowners who held 40 parcels of land. Tenants to have signed up include Deutsche Telekom and Total. Their presence should make the scheme a success.

Another partner in the Konigs Park project is the East German Investment Trust, a closed-end fund quoted on the London stock market, whose shareholders include Norwich Union, the ICI pension fund and the Universities Superannuation Scheme.

Pillar, another recently floated property developer run by Raymond Mould and Patrick Vaughan, was pipped at the post in a race to take a stake in this scheme by Christiani & Nielsen, originally a Danish construction and civil engineering group, which injected DM40m to secure the deal.

Christiani & Nielsen recently committed itself to another Ronnie Lyon project in Swindon for a pounds 70m, 1 million sq ft warehouse and distribution centre, which marks a return to the British property scene by Mr Lyon, whose first experience of liquidation was in 1974 when Ronald Lyon Holdings went under owing pounds 50m. Another venture - Arunbridge Group - went into voluntary liquidation in 1983.

The Konigs Park development is one of several planned in the former East Germany by British property developers.

Chelsfield, Elliott Bernerd's recently floated company, is developing a project based around the Babelsberg film studios, where Marlene Dietrich made many of her films during the 1930s. Taylor Woodrow, Norwich Union and SPP/LET have also been involved in Berlin property developments.

Some of the more exciting projects are in the Mitte, the former heart of the city, which for 30 years existed under the shadow of the Wall, and since its fall has become a wasteland while parts of the former eastern sector of the city have become a sea of cranes.

A massive office and residential scheme is planned on the former Potsdamer Platz, which, before the Second World War, was one of the liveliest places in Europe.

Promoted by Daimler-Benz, Sony and ABB, buildings designed by Richard Rogers, Renzo Piano and other internationally renowned architects are expected to make the site the cultural centre of Berlin once more.

The potential of Potsdamer Platz is hard to visualise at the moment since the construction of the Wall and the no-man's land behind it brought about the destruction of practically every building in the area.

Other developments include the refurbishment of the Reichstag building, including the sinking of road and rail links beneath planned government ministries.

At Checkpoint Charlie, the former Allied crossing point, a site covering five blocks on either side of Friedrichstrasse will include a memorial to the hundreds who died trying to cross the Wall.

Not everything is rosy in Berlin's property market, however. Despite the accepted need for the city to catch up with other German centres - there is half as much office space in Berlin as in Hamburg and only a fifth as much as in Frankfurt - agents believe oversupply could create a slump in the second half of the decade.

Stuart Reid, of Weatherall, Green & Smith, one of the most active UK agents in Berlin, said: 'Even though take-up has increased and should amount to 250,000 square metres by the end of the year, the supply of new office buildings will be in excess of 500,000 square metres a year over the next three years. This will lead to a two-tier office market and a cap on rental growth.'

Building is planned to meet the expected demand of 12 million square metres of space by the year 2010 - a scale of construction reminiscent of the Bismarck era. With delays in the transfer of government from Bonn - it had been hoped the move would take place by the mid-1990s - it is not clear where the demand will come from.

Many developers' plans have been scuppered by falling rents in the city, which has been hit by the German recession. Rents, once predicted to reach DM120 per square metre, have fallen as low as DM55.

Other problems include the cost of reuniting two cities whose transport, sewage and communications links were all cut in the 1960s, and the duplication of many cultural and administrative buildings.

(Photographs omitted)