BERLIN -- Renato Oggier walked around his workshop and started sanding a metal sculpture he was welding together.
"It could be my last one in Berlin. I've always believed in this city, but the way things are going I won't be able to stay," said the 37-year-old Swiss-born sculptor.
The reason for Mr. Oggier's pessimism about Berlin just as it is starting to flourish again is a 160 percent rent increase that is sending the tenants of the old factory, who can't afford it, scrambling for new ateliers and workshops.
"But everywhere it's the same. Everyone wants to make a killing out of [German] reunification," Mr. Oggier said.
Mr. Oggier is one of thousands of artists and small-time entrepreneurs in both halves of Berlin who are facing rent increases of up to 600 percent in one year. Reunification and the recent decision to move Germany's government from Bonn to Berlin has turned Berlin from a Cold War backwater into a center of investment and commerce and one of Germany's most expensive cities.
"No one used to want to live here. It was empty, and we filled it. But now this phase is finished. Freak Town is out. Boom Town is in," lamented artist Willibrord Haas, 55.
Not only is the city threatened with the loss of the artists that gave it what little life and vigor it had during the past few decades, but Berlin's characteristic mix of housing and small shops also is disappearing.
"To call it a problem is an understatement. This is a catastrophe for the city," said Reiner Klemke, spokesman for the Berlin Culture Ministry.
Mr. Klemke said the city has set up a task force to deal with the problem of displaced artists and has established a special commissioner to find and rent ateliers.
But he conceded that few artists will be able to live in central districts such as Kreuzberg in the west and Prenzlauer Berg in the east -- areas that had been border districts next to the Berlin Wall but now are prime real estate in the heart of a united Berlin.
One of the more controversial aspects of the rent increases is that the federal government, which owns up to 25 percent of the city's commercial property, is demanding the hefty increases.
That is the case with the former military-uniform factory where Mr. Oggier works. The factory, near where the Berlin Wall ran, lay mostly vacant for years until a group of artists and craftsmen approached the government in 1983 and struck a deal. The government agreed to a low rent of $1,000 a month in exchange for the group's renovating the building.
Now, however, some of the leases are expiring and the government wants $2,600 a month, which it claims is the going rate.
"We only consider things fiscally. Our job isn't city planning," said Eva Bursch, head of the federal government's Real Estate Division in Berlin.
Others say the government's rent policy could be less driven by profit motives.
"Because they control so much property, they could keep their increases low and limit them to an acceptable level," said Berlin Economics Minister Norbert Meisner.
The government's need for high revenues to pay for German unification does not allow it the luxury of low rents, Mrs. Bursch countered.
Herbert Mondry, head of the 1,700-member Professional Union of Berlin Artists, said the city government must take action by providing cheap workrooms. Five hundred subsidized ateliers are needed to stem the loss of artists, he said.
"Soon there'll be just big fancy exhibitions like the [current] Rembrandt one or a couple of big theaters, but Berlin will no longer be a real city of art," he said.
The artists are especially bitter because they were used by West Berlin for years as one of the few symbols of the city's vitality, Mr. Mondry said. After the Berlin Wall was built in 1961 and big businesses deserted the city for West Germany, artists and a few small businesses were the only ones who would take the empty stores and factories.
They gave the city the reputation of being West Germany's artistic workshop.
In the East, artists and government opponents took over abandoned houses near the wall and turned the area into a lively center of dissent.
In both parts of the city, many small pubs and family-owned businesses are having to close in favor of the expensive bars and chain stores that are able to pay the higher costs.
Even for those who can stay, such as Mr. Haas, there will be a major change. One of nine artists who used to be able to afford to rent a gallery that allowed them the space needed to paint and exhibit big canvases, Mr. Haas said he now will be confined to his small atelier in the attic.
"I'm painting big canvases like crazy, because it won't be possible in a few months," he said.
Many of his friends are leaving Berlin for the countryside, but that does not appeal to Mr. Haas because he is inspired by the big city and because he has heard of neo-Nazi gang attacks against isolated artist colonies.