Insights | Strong East – Why Germany’s New Federal States Deserve a Closer Look

When thinking of Germany’s startup hotspots, cities like Berlin, Munich, Frankfurt, Hamburg, or Stuttgart usually come to mind. For a long time after reunification, Eastern Germany was considered economically weak and unattractive for entrepreneurs. But that image is changing. More and more companies are discovering the potential of the new federal states. An analysis – and a small love letter to the East.

Visualization of major German companies by headquarters location. (Source: Reddit / u/slightlylong, 2024)

A look at Germany’s corporate landscape reveals a clear pattern: the country’s largest and most well-known companies are predominantly based in the West. There are historical reasons for this: until 1990, the GDR had a planned economy – economic activity was state-controlled, and there were hardly any market-based structures. After reunification, many East German companies were dissolved or sold to West German investors through the Treuhand agency. As a result, a significant part of the region’s industrial base was lost – many traditional businesses disappeared from the market altogether.

At the same time, investments, media coverage, and political attention were focused on the West – where the DAX corporations were headquartered and where the economic rhythm was set. Eastern Germany remained structurally weaker, with a lower industrial base and less capital. Over the years, surveys and election results showed growing dissatisfaction in many Eastern regions: a sense of being left behind, a lack of recognition, prospects, and visibility. Demographic developments – shaped by migration, aging populations, and declining birth rates – further intensified these challenges.

But things are changing – strategically, economically, and politically. Eastern Germany is back in focus. The federal and state governments, along with funding institutions, have recognized that long-term stability and equal living conditions require active investment – not just in infrastructure, but in research, innovation, and future industries. Programs like the GRW funding initiative, the InvestEU fund, or state-specific growth initiatives create targeted incentives for companies to settle in structurally weaker areas – with grants, tax breaks, or investment bonuses. In addition, Eastern Germany offers structural advantages of its own: lower living costs, more available space, less competition, and often moderate local business tax rates. For SMEs, manufacturers, and growth-oriented startups, this creates real location advantages.

The region’s academic landscape has also developed dynamically: technical universities and research institutions in Dresden, Ilmenau, Freiberg, or Jena are known for practical programs, excellent research, and international networks. Cities like Leipzig, Halle, or Magdeburg are attracting more and more young talent – with great study conditions, high quality of life, and growing urban energy.

A special case is the so-called Berlin commuter belt in Brandenburg: it combines Berlin’s economic pull and international appeal with the more affordable conditions of the surrounding area. Cities like Potsdam, Wildau, or Ludwigsfelde benefit from their proximity to the capital and are becoming attractive business and research locations in their own right.

The result? More and more companies – including from abroad – are turning to the East. Large-scale projects like the Tesla Gigafactory in Brandenburg, TSMC’s new chip plant in Dresden, or the planned Intel factory in Magdeburg would have been unthinkable just ten years ago. Today, they symbolize a profound transformation. Eastern Germany is no longer a late bloomer – but perhaps soon one of the most exciting economic regions in Europe.