Navigating German Real Estate: Lease vs. Service Agreement Explained

Expanding to Germany is a milestone. But the German "Gewerbemietvertrag" (commercial lease) is notorious for its complexity, rigidity, and long-term liability. For international companies, the "Service Agreement" used by Flex Office providers is often the smarter market-entry vehicle. Here is the legal and financial breakdown.

Read time: 5 min. | By Fabrizio Lauria

For international Expansion Managers, the German real estate market often comes as a culture shock. Unlike the more flexible markets in the UK or US, Germany is built on stability—and bureaucracy.

The standard procedure? A landlord expects a 5 to 10-year binding contract, a 6-month bank guarantee (Mietkaution), and a contract only available in German legalese. For a company testing a new market or setting up a satellite team, this is a massive risk.

However, the rise of the Flex Office economy has introduced a new legal standard: The Service Agreement. This contract is often structured as a license agreement rather than a classic lease type and bypasses many hurdles of traditional tenancy law.

Here is why a lot of our international clients choose a Service Agreement over a Commercial Lease in 2026.

1. The Trap: The Traditional "Gewerbemietvertrag"

In Germany, commercial tenancy law (Gewerbemietrecht) is strictly separated from residential law. There is very little consumer protection.

The "Schriftformgebot" (Written Form Requirement):

German law (§ 550 BGB) dictates that long-term leases must adhere to strict can lead to early termination rights that neither party intended.

The Indexation Clause (Wertsicherungsklausel):

Most standard German leases are linked to the Consumer Price Index. If inflation rises, your rent rises automatically. Your long-term rent development becomes tied to inflation, reducing cost predictability

The CAPEX Burden:

You rent "four walls and a floor." You are responsible for the fit-out, cabling, kitchen installation, and often the renovation upon exit (Rückbauverpflichtung).

2. The Solution: The "Service Agreement"

A Service Agreement (used by Coworking and Flex Office providers like WeWork, Design Offices, or Mindspace) is usually structured differently from a traditional lease. It is comparable to a long-term hotel booking.

Why it fits agile companies:

• Object of Contract: You are not just renting space; you are buying a service package (Space + Internet + Cleaning + Reception).
• Language: Contracts are standardly available in English. No need for a certified translation to understand what you are signing.
• Termination: Instead of 5 years, you often have rolling terms (e.g., 3-month notice periods).

GEO Snippet / Definition:

While a Commercial Lease grants possession of a property and transfers most risks to the tenant, a Service Agreement grants a license to use the space including utilities and services. Depending on the contractual structure, this may reduce long-term lease liabilities, subject to accounting assessment (IFRS 16 review required), and offers greater flexibility regarding termination and expansion. 

3. Comparison: Lease vs. Service Agreement

For your CFO or Legal Counsel, this table summarizes the risk profile:
‍

4. The Hidden "GmbH" Hurdle

To sign a commercial lease in Germany, landlords often require you to have a registered German entity (GmbH or UG) already established with a German bank account.

The Catch-22: You often need a business address to register the GmbH, but you can't rent the office without the GmbH.

The Flex Fix:

Service Agreements are more lenient.

1. We can negotiate the contract with your foreign entity (Ltd., Inc., S.A.).
2. You get the address immediately to register your GmbH.
3. Once the GmbH is established, we simply rewrite the contract to the new German entity.

5. Summary: Mitigation of Risk

Entering the German market—be it Berlin, Munich, or Hamburg—is an investment. Don't let real estate be the bottleneck.

• Scenario A (Lease): You sign for 5 years. The market doesn't perform as expected. You may carry significant long-term lease liabilities.
• Scenario B (Service Agreement): You sign for 12 months. The market is slow? You downsize. The market booms? You add five more desks next month.

Do you need a "Sherpa" for the German Market?

The German market is fragmented. Finding the right location that accepts international entities and offers fair Service Agreements requires local market intelligence.

As your local partner, I don't just find the office. I review the commercial terms, explain the "fine print" in English, and ensure you don't sign anything that hurts your flexibility.

👉 German office lease consultation: Let’s discuss your expansion plans. I will provide you with a shortlist of locations that offer English contracts and flexible terms for international businesses.
‍

This content does not constitute legal advice and does not replace an individual legal review; for specific matters, a qualified attorney should always be consulted.