Brand Germany may have taken a few knocks in recent months due to the Volkswagen emissions scandal, but the country remains a major player in the European investment arena and its cities are highly competitive at both the high and low end of the population scale.

Recent rankings by fDi Magazine pitted German cities against each other and found unsurprising winners among larger cities and also positive performances among its smaller, lesser known cities. Here fDi looks at some of the secrets to success of the country's leading cities, as well as the top-ranked region.

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Frankfurt’s safe haven

The rankings reveal that Frankfurt is top for FDI among the larger German cities with populations of more than 500,000, combining capital expenditure and project numbers per 100,000 people between 2010 and 2014.

The city has benefited from a number of flagship investments and projects, such as the construction of the European Central Bank and Terminal 3 of Frankfurt International Airport, which have had an impact on future investments. Oliver Schwebel, managing director of Frankfurt Economic Development, says the city also profits from Germany’s reputation as a safe haven for investments.

He says its strong transport and digital infrastructures are key to its success, adding: “Frankfurt is the international city in Germany, with new citizens pouring into the city at a rate of almost 300 per week. Its infrastructure is being continually upgraded and extended. The city also acts as the main hub for a wider region of more than 5.5 million inhabitants representing considerable consumption power.”

One of the challenges for Frankfurt is to keep up with increasing demand for new space. “In the future, we will co-operate even more closely with our regional counterparts on planning land use and development,” says Mr Schwebel. “This process supports competition among investors, which in turn raises the quality of investment projects in Frankfurt. In order to retain our position as a strong location for industry and to enable new investments, we have developed the Masterplan Industry 4.0, which identifies the space requirements of various sectors and details proposals for how to meet these requirements. The plan’s focus is on the reactivation of certain areas.”

Düsseldorf’s broad appeal

Düsseldorf is second in the large city rankings. “Investors tell us we are attractive because of our proximity to markets and customers,” says Uwe Kerkmann, director of the Office of Economic Development for the city of Düsseldorf.

“We’re not big compared to other metropolises in Europe but the region around Düsseldorf is one of the most successful economically in Germany and Europe, and we have a solid customer base," he adds. "We’re also centrally located with excellent infrastructure. Düsseldorf airport is close to the city and has lots of direct flights to Asia, the Americas and the rest of Europe. There are also good rail connections and several European and national ports along the River Rhine. We have several industry clusters. By focusing on a variety of sectors we have a solid economic base that makes us more stable and less susceptible to any crisis in individual industry sectors.”

Düsseldorf has built a reputation as an international city. “The people in Düsseldorf are used to dealing with foreigners, so we have a very welcoming culture,” says Mr Kerkmann. “And the city ranks highly for its quality of living.”

The city has won increasing investment from Asian firms, and has attracted big names such as mobile technology companies Huawei and ZTE, as well as investors from the steel and energy sectors.

Mannheim and Halle's small victories

Mannheim and Halle were ranked first and second, respectively, among the German cities with a population of between 200,000 and 500,000.

Major names such as ABB, Daimler, John Deere and Siemens have been part of Mannheim’s industrial landscape for decades. Its metropolitan region has increasingly attracted multimedia and hi-tech service providers through SAP and corporations such as BASF and Roche Diagnostics. It also offers opportunities for investors in sectors such as medical technology and biotechnology, as well as music and the creative industries.

Its Rosengarten Congress Centre, the Dorint Congress Hotel and the Maimarkt Trade Fair grounds are key locations for hotels and exhibitions.

“Halle is the hidden treasure,” says Eric Swehla, the city’s chief business development manager. “People know about the big cities, but we have to let people know about our green and medieval city. We have Nobel prize winners teaching at our universities. We’re some 30 minutes from Berlin, where the cost of an apartment can be much higher.”

Halle’s investment authorities say investors like its central location and its position as a gateway to eastern Europe. “We’re directly attached to the second largest cargo airport in Germany. And we’re directly on the motorway and the railway as well,” says Mr Swehla.

The city has a broad focus on sectors such as logistics, production, IT, biotechnology, industry 4.0 and robotics.

Mr Swehla says: “We have two shining stars here from China, including Greatview Aseptic Packaging – the biggest greenfield investment from China in Germany. The CEOs and investors/owners are happy with how quickly they can be up and running.” In 2014, 600 jobs were created in the city by FDI in Halle. In recent months, there have been several other investment successes, including the opening of eBay’s Enterprise Fulfilment Centre. 

Konstanz for IT

Konstanz came top in the ranking of German cities with a population of 50,000 to 200,000. The border city is a gateway to Switzerland. It is part of the four-country region of Lake Constance – Germany, Switzerland, Austria and Liechtenstein – and is also close to France and Italy.

“You might think tourism and catering are its main industries, but these sectors actually generate less than 10% of total local revenue,” says Bernd Stephan, deputy development officer at Konstanz City Council. “The highest investment activity is focused on the service sector, which supports more than 85% of all jobs in the city.”

Konstanz’s key industries are software and other IT services, alternative energy and life sciences. The city also has a strong focus on optics and scanning technology, and creative industries and media. These sectors have attracted investment from a range of companies including smaller Swiss IT firms keen to take advantage of the exchange rate between the Swiss franc and the euro. Other investors include medical suppliers Takeda and Dentsply DeTrey, and technology companies Seitenbau and wetter.com.

The second ranked city in this population bracket, Russelsheim, has an active automotive cluster with car majors Opel, Hyundai, Kia and Mitsubishi, as well as more than 20 suppliers present there, but rather than sticking to just manufacturing it has advanced into R&D and other high-end functions. The local RheinMain University of Applied Sciences' engineering faculty has 3200 students preparing for careers in advanced production, research, design and other high-level activities. 

Hamburg regional strength

Hamburg state came top of the regional ranking, both in terms of number of projects and capital expenditure.

“A crucial growth factor for us is the port of Hamburg, which ranks among the world’s largest and most modern container ports,” says Dr Rolf Strittmatter, chief executive at Hamburg Business Development Corporation.

In the mid-1990s, Hamburg launched its cluster policy. “Today, our diverse range of innovative industries adds up to a dynamic and strong infrastructure,” says Mr Strittmatter. “This confirms that the Hamburg Metropolitan Region is much more than a central trade and logistics hub: it also plays a major global role in sectors such as aviation, renewable energy, the maritime industries and life sciences, as well as IT and media.”

Companies that have set up shop in Hamburg include plane manufacturer Airbus, skin care company Beiersdorf, watch manufacturer Montblanc, optics specialist Olympus, mail order company Otto Group, and digital innovators Google, Facebook, Twitter and Dropbox.

Mr Strittmatter says: “In 2014 and 2015 we have attracted FDI not only for new, small private limited companies, but have also been able to support several major investments from a variety of industries and regions. This includes investments by US firm Tesla, Kellogg’s relocation of its operations from different locations to Hamburg, and Aida/Costa/Carnival establishing their functional headquarters over here. From China, we have seen the opening of the new ICBC branch and ZPMC establishing its European procurement headquarters here. Philips will also officially open its new German headquarters near the airport in early December.”