The days of rent-free living in the shadow of the Berlin Wall may be long past, but for those seeking an upscale version of the German capital's once-vibrant squat life, look no further.

Opened in former factory offices near one of the last remaining stretches of the wall, Michelberger Hotel's mix of chic and shabby is a shrine to the city's industrial edginess and enduring culture of shared living arrangements.

Beds atop mezzanines reminiscent of New York lofts, sharp design gravitating around voyeuristic glass cube showers, common areas with the feel of a boutique hotel - it's hard to imagine it started on the fly.

"We didn't even have all the permits when we started ripping up the old flooring," says Tom Michelberger, owner and one-time business student who drew inspiration from California's dot-com boom and Berlin's once endless supply of vacant space.

"You can do a lot with a little in this town."

Rooms go for 65 euros to 140 euros a night, with "The Big One" - sleeping up to nine - negotiable.

"We didn't want to price anyone out," says Michelberger.

Reception may be wearing waist-long dreadlocks, and the black-tiled bar is staffed by aspiring actors, but small-town origins peek out from a wall of cuckoo clocks, one of which, outflanked by names of metropolises like Tokyo and Rio de Janeiro, marks time from a rural corner of Germany.

In another nod to the heartland, the restaurant serves at least one German dish for each sitting - albeit alongside light international fare and a soundtrack of minimal breakbeat or rare groove funk music.

The clientele, ranging from artists to businessmen and assorted freelancers in between, testifies to a location near the German headquarters of Universal Music and MTV, pegs of a redevelopment plan along the river Spree.

An elevated subway line provides backdrop for a lobby bedecked with vintage finds, steel cage bookshelves, reworked fixtures, graphic art, and a baby grand piano - all laid out on raw concrete.

"We pretty much discovered everything along the way, and planned it during construction," Michelberger says, from a café table where the menus are hand designed on plywood to walls which still bear the builders' measurements.

Despite the immaculate rooms, the air of a work in progress pervades the hotel - a hint of ongoing construction that parallels Berlin's continuous recovery from wartime ruin.

During the Cold War, hundreds of buildings along the wall were left in disrepair, damaged in the final battles of World War Two, left decrepit by the death of the city's industry and undesirable for their position on the front line of the Iron Curtain.

The conditions were perfect for flat shares and squats when Berlin emerged as an alternative mecca in the late 1960s, buoyed by a special dispensation from compulsory military service and aided by tax subsidies designed to boost a declining population.

The result was an easy living scene that endures, aided by a population still waning within city limits, although more central districts have evolved into hot spots for real estate agents.

Wherever property prices go in the future, hard investments outside the stock markets will likely continue to attract capital - as the Michelberger can attest by its own discovery of an angel investor who boosted the project mid-way through.

"It's direct, immediate, and staffed by a creative team that worked on the design themselves. Nowadays I think investors are happy to put money into something concrete," Michelberger said.

And with rents still low compared to other European capitals, Berlin has built a reputation as a low-pressure town for everything ranging from careers to creative business ventures.

"A project like this, on this scale, just wouldn't be possible in London, Paris or New York," Michelberger said.