The government plans to modernize Soviet-era housing, and OEMs are optimistic about the opportunities.

by Eugene Gerden

As the German government continues restoring old Soviet-era housing in former East Germany, global elevator manufacturers are considering accelerating expansion plans in the market, as these structures are served by outdated — and potentially dangerous — elevator systems. Housing of the former pro-Communist German Democratic Republic holds significant business opportunities, say those in the elevator industry.

Even though the Berlin Wall fell more than 30 years ago, economic development in most East German provinces still lags behind that of West Germany, which, in the past, formed the capitalist German Federal Republic. The almost complete destruction of German housing stock as a result of mass bombings by Allied forces at the end of the World War II forced the new German government to start active recovery early — at the end of 1940s. The recovery of housing stock in East Germany, due to its protectorate by the Soviet administration, was primarily in the form of building large apartment blocks based on Soviet construction concepts.

This housing stock did not receive any renovation until the mid-1990s, when a number of state programs were, for the first time, approved by the German federal government. Despite those efforts, the share of outdated Soviet-built residential buildings in East Germany remains high, forcing the government to revisit housing renovation plans. These plans include the need to replace many old elevators, some of which, according to German technical regulators, could pose a safety threat. Examinations by Germany's Technical Inspection Association revealed more than one in six such elevators has serious defects.

 

Need for Renovation Fuels Demand

Industry analysts say the need for further renovation of German housing will fuel demand for elevators in the short-term and could provide growth opportunities for major OEMs operating in the market. Representatives of these companies say they consider state initiatives very promising.

 

thyssenkrupp Elevator spokesman Michael Ridder states:

"Thirty years after the reunification, a lot has been achieved already, but we also see that many of the old, prefabricated concrete slab buildings [entire housing estates] in Berlin still have some old elevator technology. Over the last couple of years, six Berlin [public] housing associations have been actively working to modernize their [facilities] and continue to do so — but only a certain number of them. We are well represented in this process, and we are tackling the issue of replacing systems to ensure a modern and safe way of transportation."

 

KONE is also interested in meeting urban-redevelopment elevator needs. Nicole Köster, a spokeswoman for KONE's German subsidiary, observes past East Germany urban-redevelopment efforts were not focused on replacing elevators in old Soviet-era structures. However, that could change, she says, which would make competition brisk. Köster says:

"Apartment buildings are, of course, one of our core markets within the residential sector, and we have exactly the right modernization products and solutions to meet market requirements. However, our competitors are pursuing a similar strategy, and the modernization market is highly competitive. In general, the modernization and conversion of buildings offers great future potential for the entire [elevator] industry. In addition to the right products, [having] good technical consultants is crucial when modernizing existing buildings, and we are very well-positioned in that respect."

Otis also sees potential in Germany. "Otis is present [throughout] Germany — in the main metropolitan areas, as well as the small towns and rural areas," Otis spokeswoman Kathleen Padgett observes. Otis Germany has approximately 30 branches and, says Padgett, "one of the densest service networks." The company, she says, is well-equipped to handle additional business resulting from government efforts to modernize old housing. "Germany will continue to play an important role in the future for us," she says.

Finally, the potential of the German elevator market may attract interest from Asia-Pacific vertical-transportation (VT) manufacturers traditionally focused on domestic markets. Yoshinori Inoue of Toshiba Elevator and Building Systems Corp. recently said that, although the company currently does not operate in Germany, that could change in the future.

 

Effects of the Pandemic

OEMs interviewed said the pandemic-associated economic downturn has not had catastrophic effects on business, either in Germany or worldwide. According to them, a large share of their revenue came from the service sector, which proved resilient in the financial crisis of 2007-2008 and again during the pandemic.

thyssenkrupp Elevator is among those focused on ensuring mobility, especially in healthcare facilities and public buildings. Like many other major players, thyssenkrupp sees big market potential in solutions, such as sanitation products and touchless systems.

VT market analysts predict that, despite the pandemic, the German elevator market will maintain its growth over the next several years, but it will be slightly lower than before. U.K. Research firm Technavio says the VT market in Germany is projected to reach nearly US$3.6 billion by 2021. According to Technavio, in addition to renovation of the country's housing stock, the increasing adoption of energy-efficient VT equipment will be a key factor in boosting the market's growth.

"We are tackling the issue of replacing [elevator] systems to ensure a modern and safe way of transportation."

— Michael Ridder, thyssenkrupp Elevator

 


Eugene Gerden is an international freelance writer based in Russia who specializes in coverage of the global firefighting, emergency-medical- services and rescue industries. He can be reached at gerden.eug@gmail.com.