WBJ Observer March, 2016

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MARCH 2016

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ESTATE

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lll IN THIS ISSUE Try these:

lll NEWS 6-14 In Review Latest news 16 Dateline 17 Economy

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lll COMMENTARY

CRISIS ON THE HORIZON?

18 Law Minimum wage 19 Real Estate Fit-out market

lll INTERVIEW 24-25 Anna Wicha

26 57-87 LOKALE IMMOBILIA

31-33

INTERVIEW WITH ADAM DANIEL ROTFELD

lll FEATURE 26-28 Minimum wage Burden or necessity 37-45 IT insights 47-55 Made in Poland supplement 88-89 Ranking Investment fund management companies 90 Events Infrastructure diamonds

lll LIFESTYLE 92-93 Gadgets 94-96 Lifestyle Latin restaurants

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Morten Lindholm Publisher mlindholm@valkea.com Jacek Ciesnowski Editor-in-Chief, WBJ Observer jciesnowski@wbj.pl Beata Socha Managing Editor, Lokale Immobilia bsocha@wbj.pl Michael Evans Copy Editor Journalists Alicja Ciszewska aciszewska@wbj.pl Daria Mamont dmamont@wbj.pl Wojciech Rylukowski wrylukowski@wbj.pl Tomasz Chwinda Art Director tchwinda@valkea.com Aleksandra Szydło Junior Graphic Designer aszydlo@valkea.com Contributors Ewa Boniecka Alex Hayes Casper Pages Sergiusz Prokurat Adam Zdrodowski

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COMMENTARY / ON INFORMATION TECHNOLOGY

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JACEK CIESNOWSKI, EDITOR-IN-CHIEF, WARSAW BUSINESS JOURNAL GROUP

The WBJ Observer edition that you’re holding in your hands is the biggest one yet. With MIPIM, the biggest real estate event of the year, the focus is on this sector. In the 30 pages of Lokale Immobilia, we cover the office, logistics and residential sectors, and on top of that we talk to some major players in Poland and CEE right now. The beginning of the year is always a busy period for the industry as it summarizes the previous 12 months – how it compared with the preceding year, while analysts try to predict the future. We have not forgotten about other sectors, however. The main article focuses on the potential global crisis. Many factors point to another economic slowdown. Will it happen? What will cause it, and can it be avoided? We also tackle the minimum wage dilemma. Can Poland afford to raise it significantly? We also have an in-depth interview with Polish diplomat and former Minister of Foreign Affairs Adam Daniel Rotfeld, who was one of the authors of the report that was discussed at the recent Munich Security Conference.

FEBRUARY 2014 • WBJ OBSERVER

In our special Made in Poland supplement we would like to invite you to our conference on March 24, where we will discuss all things export-related. You can read all about our defense industry and its trade potential, while our IT Insights supplement has two articles – one on how Warsaw is trying to position itself as Poland’s start-up capital, and another on how the e-commerce and m-commerce worlds intertwine. We hope that all this content and more will keep you busy and engaged for the next month, and we will see you all in April after Easter.

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lll INREVIEW NEWS

News highlights of the past month

Łukasz Kamiński, head of The Institute of National Remembrance (IPN) announced that among documents seized from the house of late communist interior minister Czesław Kiszczak, are papers indicating that Lech Wałęsa was a paid informant to the communist secret service (SB) in the 1970s. “In a folder, there is a handwritten obligation to cooperate with the SB signed Lech Wałęsa ‘Bolek.’ Among the documents there are also receipts for money received signed ‘Bolek,’” said Kamiński. “The folder holds 279 pages in their original covers, there are numerous reports of a secret collaborator nicknamed ‘Bolek,’ and SB officers’ accounts of meetings with the collaborator. Some of the reports are

MARCH 2016 • WBJ OBSERVER

handwritten and signed ‘Bolek,’” Kamiński added. The documents concern the period between 1970 and 1976. They were seized on February 16 at the home of Kiszczak’s widow, who allegedly tried to sell them to the IPN. Maria Kiszczak denied this, saying that she contacted the IPN at the beginning of February to hand over the papers and the institute offered to pay her. Shortly after the action at Kiszczak’s house, Lech Wałęsa, who has been denying accusations of being a paid informant since the early 1990s, said: “They even fight over the dead body of Kiszczak ... You are not able to change the true facts through lies, slander and forgeries.” Wałęsa’s first reaction to the IPN press conference was a blog entry,

which read: “There can not be any materials originating from me ... I will prove it before the court.” He continued to deny the accusation that he was ever a paid informant and claims that the documents are fake. As of going to press, the documents have not yet been verified by graphologists. The alleged cooperation between Wałęsa and the secret service occurred after the repression of the 1970 Gdańsk strikes, in which Wałęsa participated. He broke ties with the SB in 1976 and went on to become the legendary leader of the Solidarity movement and the president of Poland after the fall of communism. Czesław Kiszczak was one of the masterminds behind the imposition of martial law in 1981.

Images: Shutterstock

IPN: Wałęsa was a paid informant in 1970s

NEWS

NEW BODY TO OVERSEE STATE COMPANIES WILL BE CREATED IN 2017 A new administrative body tasked with overseeing state-owned companies will be created by the middle of 2017, replacing the current Ministry of State Treasury, Minister Dawid Jackiewicz announced on February 26. Speaking to reporters at a press conference, Jackiewicz revealed that the new body will take control of the biggest and most important Polish state companies: “KGHM, Grupa Azoty, PLL LOT, PKO Bank Polski, PZU and maybe the energy companies.” He explained that the new government wants the body to be treated as one large capital group of the State Treasury. Jackiewicz also revealed that the legal basis of the new body was yet to be determined. Its formation will be preceded by a consolidation of some of the smaller firms owned by the State Treasury. PGNIG BEGINS TALKS OVER GAS CORRIDOR WITH NORWAY

Facebook opens its CEE headquarters in Warsaw

nternet giant Facebook has announced the opening of its regional Central and Eastern Europe headquarters in Warsaw. The company’s director for the region, Robert Bednarski, told the Polish Press Agency that the move “opens new opportunities for all businesses that use Facebook for

marketing purposes, regardless of their size.” Bednarski didn't reveal the details of the future location of the office. Facebook is yet another IT company that is investing in Warsaw. At the end of last year, Google launched its innovation hub – Campus Warsaw – in the Praga district of the city.

PGNiG has begun discussions about creating a gas corridor between Norway and Poland, company Vice-President Maciej Woźniak announced on February 24. During a seating of the Sejm’s commission on Energy and State Treasury, Woźniak said that bringing Norwegian gas to Poland would strengthen the energy security of the country. He explained that the company is looking into making an agreement with Denmark to transport gas from Norway by the use of existing Danish pipelines. “That would only leave the need for a pipeline to be built between Denmark and Poland,” he added. During a visit to Norway at the beginning of February, Prime Minister Beata Szydło declared that her government would do everything in its power to facilitate the creation of a gas pipeline from the North Sea to Poland.

PM: First retail tax was a ‘mistake’ P

rime Minister Beata Szydło has admitted that there were some significant flaws in the first version of her government’s retail tax bill, as it turned out to overly penalize domestic Polish retailers instead of focusing on foreign multinational companies, which was the stated aim of the measure. At a press conference on February 26, Szydło said that the

public appeals of Polish businesses and retail organizations prompted the lawmakers to take a second look at the bill and tweak it. According to Szydło, the adjusted version will contain “a higher tax exemption amount, which would exclude Polish businesses.” She added that the new version “is being finalized” in March.

WBJ OBSERVER • MARCH 2016

Images: Shutterstock

NEWS

MARCH 2016 • WBJ OBSERVER

NEWS

WBJ OBSERVER • MARCH 2016

NEWS

Marek Belka may run for head of EBRD Morawiecki unveils economic development plan oland’s government has accepted P a resolution concerning a longterm economic development plan for

the country. The program is based on five pillars: reindustrialization, the development of innovative companies, foreign expansion, sustainable social and regional development, and increased savings. The author of the concept, Development Minister Mateusz Morawiecki (hence “the Morawiecki plan”), has identified five challenges that Poland faces. These are: the middle-income trap, the lack of balance between Polish and foreign capital, the lack of innovative products, the demographic trap, and the weak institutions trap. In order to overcome them, the government has singled out strategic sectors of the economy which will be supported by the state. Spending on R&D is set to reach 2 percent of GDP, compared to merely 0.8 percent at present. Under the plan, PLN 1 trillion will be spent on investments within the coming years. The sum is to come from European funds, Polish companies’ savings and state-owned

MARCH 2016 • WBJ OBSERVER

companies. Up to PLN 80 billion will be delivered in development programs carried out in cooperation with international institutions, such as the European Bank for Development and Reconstruction, and the World Bank. One of the key ideas of the plan is the establishment of the Polish Development Fund (Polski Fundusz Rozwojowy), which will come from merging existing institutions, including the Export Credit Insurance Corporation (KUKE), development bank BGK, the Polish Agency for Enterprise Development (PARP), the Polish Information and Foreign Investment Agency (PAIiIZ), Industrial Development Agency (ARP) and Polish Investments for Development (PIR). The plan sets ambitious aims. It envisages that by 2020, Poland’s GDP will stand at 79 percent of the EU average, the level of investment will reach 25 percent of GDP, the number of small and medium sized companies will grow to 22,000 and Poland’s outward FDIs will increase by 70 percent.

Bank for Reconstruction and Development (EBRD) after his term ends, Puls Biznesu daily reported. The newspaper also adds that his candidacy would be strongly supported by the leaders of the Polish government, as well as Law and Justice (PiS) chief Jarosław Kaczyński. Belka has been head of the National Bank of Poland (NBP) since June 2010. His term is set to end in June of this year, whereas the term of the EBRD’s current head expires in July, making it a natural transition for the economist. The government is expected to announce his replacement in mid-March. Both the NBP and PiS declined to officially comment on the matter.

Images: Shutterstock, World Economic Forum

entral Bank chief Marek Belka C is considering running for the position of President of the European

NEWS

BNK Petroleum quits Polish market A

merican oil company BNK Petroleum Inc. has announced the cessation of a project in Słupsk (Pomeranian Voivodship). They plan to stop all activities in Poland. The company has expended $1.7 million on maintaining projects in Poland annualy. However, the main problem is the

inability to find a joint-venture partner for the project in Słupsk. “In this difficult time of low oil and gas prices, the closure of operations in Poland will contribute to significant savings for us,” said Wolf Regener, BNK Petroleum Executive Director. The company is planning to focus on

mining Tishomingo Field in Oklahoma, and looking for new opportunities in the US and abroad. It’s not the first time foreign companies have closed their mining work in Poland. Marathon Oil, Talisman Energy and Chevron have already put a stop to any kind of operations in the country.

Supreme Court’s groundbreaking ruling for same-sex couples P

oland’s Supreme Court adjudicated on February 25 that samesex couples can be classified as cohabiting. “Free interpretation of the verdict says that the court recognized same-sex couples as a family,” said Mirosława Makuchowska from the NGO Campaign against Homophobia (Kampania Przeciw Homofobii – KPH). The Supreme Court settled a question from the first president of the Supreme Court Małgorzata Gersdorf, who wanted to remove ambiguities arising from the decisions of the courts concerning the right to refuse to testify against an accused person in cases when it comes to same-sex partners.

“The system of legal protection cannot be differentiated with respect to gender,” said Supreme Court judge Jarosław Matras. According to the Criminal Code, the person closest to the accused may refuse to testify and is entitled to other powers, for example they may exercise the rights of the deceased. Under the Penal Code “a spouse, an ascendant, a descendant, a sibling, a relative in the same line or degree, an adopted person and his spouse, as well as people cohabiting,” are considered to be the closest person. “Until now, same-sex couples were regarded by the law as strangers,” Makuchowska commented.

WBJ OBSERVER • MARCH 2016

NEWS

Poland to invest hundreds of millions into AIIB

TWO POLISH WEB PORTALS AMONG TOP 10 IN UK A survey by the digital market intelligence company, SimilarWeb, showed that Polish publisher Wirtualna Polska’s wp.pl and another Polish site, onet.pl were among the top ten biggest media publishers in the UK in 2015. The two Polish websites ranked sixth and seventh with more than 1.5 billion and more than 1.3 billion combined page views (desktop and mobile) in 2015. They came ahead of such outlets as The Daily Mirror (10th), buzzfeed. com (11th), The Independent (12th) or The Financial Times (52nd). Another two Polish websites, londynek. net (34th) and gazeta.pl (37th) were included in the top 50 list. The survey found that the BBC dominated digital news in the UK last year with its two sites, bbc.co.uk and bbc.com, securing 18.9 billion page views, more than three times the traffic of its nearest competitor, msn.com, with 5.6 billion.

MARCH 2016 • WBJ OBSERVER

simultaneously act as an engine for infrastructural investments and the economic development of China. Along with 56 other countries, Poland signed a deal on June 29, 2015, declaring that it would engage in the bank’s creation. Deputy Minister of Foreign Affairs Katarzyna Kacprzyk told the members of the Sejm that “the decision to involve Poland in this undertaking was supported by a thorough analysis,” which showed that

the deal would be beneficial for Poland. She also added that the establishment of the bank would help strengthen relations between China and Poland as well as other Asian countries, giving Polish businesses more opportunities to expand in those regions. The AIIB’s capital is to amount to $100 billion; each individual country’s contribution will depend on its GDP and the purchasing power of its currency.

US Senators urge Poland to respect democracy

hree US senators, including former republican presidential candidate John McCain and two democrats Ben Cardin and Richard J. Durbin, have written a letter to Prime Minister Beata Szydło, in which they called for respect for the rule of law and democracy in Poland. The letter began with the assertion that the senators “are friends of Poland and have close ties to Polish-American communities in the United States.” The letter further read: “We urge your government to recommit to the core principles of the OSCE and the EU, including respect for democracy, human rights, and rule of law. The senators said that actions taken by Poland “threaten the independence of state media and the country’s highest court, and undermine Poland’s role as a democratic model for other countries in the region still going through difficult transitions.” They also urged Poland to “recommit to the shared democratic values enshrined in the Helsinki Accords and EU charter as a means towards ensuring stability, prosperity and peace in Europe.” Prime Minister Beata Szydło replied in a letter, saying that “the interest and goodwill of the American politicians cannot be changed into instructing and imposing actions concerning my fatherland.” Later, Foreign Minister Witold Waszczykowski said that the senators are misinformed about the situation in Poland and the letter was inspired by some people who “wish ill for Poland.”

Image: Shutterstock

he Sejm has completed the first reading of a bill ratifying the creation of the Asian Infrastructure Investment Bank (AIIB). No MP declared any objection to the bill, paving the way for Poland to fully participate in its formation. The Bank is a new Chinese initiative, designed to be an alternative to international financial institutions dominated by the US, such as the IMF or the World Bank. It will

NEWS

WBJ OBSERVER • MARCH 2016

NEWS

NBP: FX MORTGAGE BILL WILL BE VERY COSTLY

FOUR POLISH F16S WILL PATROL SYRIAN SKIES

PM SZYDŁO: RELATIONS WITH GERMANY ARE ‘EXCELLENT’

rime Minister Beata Szydło told German tabloid newspaper Bild that Polish-German relations are “excellent” and that she hopes Germany will back Poland in its efforts to increase NATO’s presence in the East. “Germany is our important and close European ally,” said Szydło, adding that she hopes certain decisions won’t be made without Poland’s accord. The prime minister gave the example of the NordStream 2 gas pipeline and the legal situation of the Polish minority in Germany, which doesn’t enjoy “special rights” similar to those granted to the German minority in Poland. Szydło said that her government wants to end the pursuit of foreign policy “on its knees” and that Poland is willing to have a better and more efficient representation in the EU. When asked if Poland will comply with the Venice Commission ruling over the Constitutional Tribunal law, she said that “although the decision is not legally binding, the government will take it into consideration.” Concluding the interview, the Prime Minister wished for more reticence and respect from German politicians.

Sejm passes 500+ bill W

ith 261 votes in favor, 43 against and 140 abstentions, the Sejm passed the “Family 500+” benefit program. “Today is a very important day for Polish families. This is the day when we can finally say that Poland has joined all those countries that know that a wise family policy is a matter of state in any nation,” said PM Beata Szydło. Under the program, the government plans to hand out PLN 500 per month for every child in a family whose per capita income is lower than PLN 800 per month, and for every second and subsequent child, regardless of family income. It is set to be introduced in April 2016. The sum is aimed at all parents, including single parents and is not subject to taxes. The government accepted the program on February 1, hence it took the government less than two weeks to proceed it to the Sejm. Passing through the 500+ program was PiS’ main pledge during the election campaign before the October general election. “I kept my promise,” said Prime Minister Beata Szydło while waving a copy of the document. “This is a draft of the bill, that in a moment I will present to the Speaker of the Sejm,” she added.

STORYTEL ENTERS POLAND Swedish e-book streaming service Storytel has recently debuted on the Polish market. For PLN 29.90, Polish customers will have access to e-books in Polish and English on a monthly basis. Initially, they may choose from 600 Polish and 16,000 English audiobooks as well as 4,000 English e-books. Storytel

MARCH 2016 • WBJ OBSERVER

works with iOS, Windows and Android. “Every month, ten new publications will be added to the offer,” Michał Szolc, managing director at Storytel Polska said. Storytel currently operates in Sweden, Norway, Denmark and the Netherlands. It has some 200,000 subscribers.

he National Bank of Poland calculates the cost of the Presidential foreign mortgage bill to be at least PLN 44 billion, Gazeta Wyborcza reported. Of that figure, PLN 35 billion would be required to convert the mortgages from Swiss francs to złotys at the favorable rates proposed by the president’s cabinet. Another PLN 9 billion would go to covering the mortgage spreads of the holders. However, the NBP warns that this is just the lower limit of the cost estimate, as there is potential for the złoty to weaken by 10 percent against the franc in response to the implementation of this bill, which could further increase the cost of converting the currency of the franc mortgages by another PLN 13 billion. In a separate report, the NBP declared that the FX mortgage bill would have a negative impact on the public finance sector’s stability. The legislative proposal would undoubtedly decrease banks’ cash reserves, which would reduce their ability to withstand other shocks, which in turn could cause credit ratings, for the sector as a whole, to fall.

RAILWAY FIRMS MAY SAVE LOT

The Polish government is considering a merger of PLL LOT with PKP Intercity or PKP Cargo, according to Rzeczpospolita daily. “The merger of PLL LOT and one of the railway companies is the idea of the State Treasury as a solution to save the carrier,” the daily informed, and added that funding LOT by the railway sector is also on the table. LOT’s net loss last year is estimated to have reached PLN 250 million. The ministry did not confirm the news, however it did admit that LOT needs money. PKP Cargo denied it was in such talks. Image: Shutterstock

ead of National Security Bureau (BBN) Paweł Soloch told Polish Radio that four Polish F16s jet fighters will patrol Syrian skies. “We are ready to participate in reconnaissance missions and we declare four of our jet fighter aircrafts ... Technical details are yet to be negotiated,” Soloch said. He assured that the issue of sending Polish troops to Syria is not on the table.

NEWS

WBJ OBSERVER • MARCH 2016

NEWS / ECONOMY

CALENDAR

MARCH/APRIL MARCH

MARCH

APRIL

6-7

MADE IN POLAND CONFERENCE Event: The annual Made in Poland conference, as always, will focus on problems Polish exporters are facing. Entrepreneurs, experts and representatives from government agencies will discuss challenges Polish companies face abroad and solutions to improve their foreign activity. Location: Villa Foksal, Warsaw Web: wbj.pl

8TH BROADBAND NETWORKS CONFERENCE Event: Taking place simultaneously with the above-mentioned Telecommunications symposium, this conference will gather broadband network infrastructure experts to discuss key topics regarding the development of the broadband industry. Location: The Westin, Warsaw Web: en.polskainfrastruktura.pl/

BANKING AND INSURANCE FORUM WITH GRAND GALA OF BANKING AND INSURANCE WORLD LEADERS

Event: This forum will bring together banking sector and public administration representatives to discuss changes currently taking place in the industry and create opportunities for key business contacts to be established. Location: Marriott Hotel, Warsaw Web: bankowosciubezpieczenia.pl/banking-forum/

MARCH 2016 • WBJ OBSERVER

MARCH

30-31 APRIL

5-6 APRIL

7-8

16TH TELECOMMUNICATIONS AND MEDIA WORLD SYMPOSIUM Event: This event will bring together the region’s most important and influential media leaders, as they discuss and debate the technological and societal changes affecting the media market, analyze recent trends, and share insight into how to adapt business models to further increase effectiveness. Location: The Westin, Warsaw Web: telekomunikacjaimedia.pl/sympozjum/

2ND EUROPEAN CONGRESS OF LOCAL GOVERNMENTS Event: Government officials, business leaders, regional elites and NGOs will all gather in Kraków for two days to hold discussions and workshops on the common problems facing all European societies, from investing without EU funds, to using Big Data to revolutionize local governance. Location: ICE Kraków Congress Centre Web: forum-ekonomiczne.pl/2nd-european-congress-of-localgovernments

EUROPEAN EXECUTIVE FORUM Event: Some of the biggest Polish and European business names, scientists and politicians will converge at the Warsaw Sofitel to discuss matters of economic growth, innovation, technological advancement and leadership. Location: Sofitel Warsaw Victoria Web: executive-club.com.pl/conferences/european-executive-forum

FACTS AND FIGURES Data overview for January-February

overview for January-February Data Data overview for January-February Data overview Data overviewfor forJanuary-February January-February

WARSAW STOCK EXCHANGE WARSAW STOCK EXCHANGE2016 AS OFSTOCK FEBRUARY WARSAW STOCK EXCHANGE WARSAW EXCHANGE AS OF FEBRUARY 2016 STOCK EXCHANGE AS WARSAW OF FEBRUARY 2016 AS OF FEBRUARY 2016

10.3% 10.3% registered 10.3% 10.3% registered unemployment rate 10.3%

486 486 486 486 486

AS OF FEBRUARY 2016

Number of listed companies Number of listed companies Number listed companies Number of listedofcompanies

registered registered unemployment raterate unemployment registered unemployment rate unemployment rate

Number of listed companies

-0.7% -0.7% was Poland's -0.7% was Poland's -0.7% CPI inflation

Trade volumes

PLN 1.72 BLN PLN 1.72 BLN BUDGET SURPLUS PLN 1.72 BLN

CPI CPI inflation was Poland's inflation was Poland's CPI inflation CPI inflation

Shares Shares Shares

PLN 28.5 billion PLN 28.5 billion PLN 28.5 billion Shares

AT THE END BUDGET SURPLUS PLN 1.72 BLN BUDGET SURPLUS JANUARY AT THE OF END PLN 1.72 BLN

Bonds billion PLN 28.5 Bonds PLN 28.5 billion

AT THE END BUDGET SURPLUS OF JANUARY JANUARY BUDGET SURPLUS AT THE END OF AT THE END OF JANUARY OF JANUARY

3.3% 3.3% 3.3%

3.3%3.3%

y/y industrial y/y industrial growth y/youtput industrial output growth output growth

Bonds PLN 181 million PLN 181181 million PLN million Bonds

Bonds

Futures PLN 181 million Futures PLN 181 million

Futures 1.13 billion 1.13 billion Futures 1.13 billion Futures

y/y industrial y/y industrial output growth output growth

Growth of main index (WIG), ytd

Growthbillion of main index (WIG), ytd 1.13 Growth of main index (WIG), ytd -2.23% 1.13 billion

3.1% 3.1% 3.1%

-2.23% -2.23%

Growth of main index (WIG), ytd Growth of main index (WIG), ytd

y/y retail sales growth y/y retail sales growth y/y retail sales growth

3.1%3.1%

-2.23% -2.23%

Deficit within limits

Poland’s registered unemployment rate, 11.5 January 2015 11.5 –11January 2016 12 11.5

11 10.5

Jan, ‘16

Dec.’15

Jan, ‘16 Dec.’15

Dec.’15 Nov.’15

Oct.’15

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Dec.’15 Oct.’15 Sep. ‘15

Jan, ‘16 Nov.’15 Oct.’15

Sep. ‘15

Sep.Nov.’15 ‘15 Aug. ‘15

Jan, Jul. ‘16 ’15

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Sep. Jul. ’15‘15 Jun. ‘15

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Aug. Jun. ‘15‘15 May ’15

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10 9.5 Jan. '15

10 9.5

May Mar. '15’15 Feb. '15

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11.5

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9.5

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-2 Aug. ‘15

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10 Jan. '15

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Mar. Jan. '15'15

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-2 -1

11.5

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-2

Jul. ’15 Jan. '15

-0.5 -1.5

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10.5

Feb. '15

-1

-1.5

"The law on the personal income tax threshold will come into force on January 1, 2017, while the decision about the scale of the increase will be taken in H2."

unemploymentunemployment rate rate in January in January

Year-on-year CPI inflation in Poland, -1 January 2015 – January 2016

Jun. ‘15

Jan. '15

-2

10.3% 10.3% the registeredthe registered

-1.5

Apr. ‘15

-1.5

in January unemployment rate unemployment rate in January in January

-0.5

-1

10.3% the registered 10.3% 10.3% unemployment rate the registered the registered

Steadily down

-0.5

May ’15

-1

Deflation holds

-0.5

Mar. '15

-0.5

Feb. Data'15source:

Central Statistical Office (GUS), Warsaw Stock Exchange

y/yMinistry retail of sales The Finance announced that y/ygrowth retail sales growth the nation's budget deficit did not exceed PLN 44 billion in 2015, meaning that the government managed to keep the shortfall within 3 percent of Poland's GDP. A full report will be available in April. The average monthly gross salary rose by 9.2 percent month-on-month and amounted to PLN 4,101. The number of people in employment totaled 5.703 million, which translates into an increase of 1.4 percent m/m, the Central Statistical Office (GUS) announced.

Henryk Kowalczyk, Head of the Standing Committee of the Council of Ministers

Jan, ‘16

was Poland's -0.7%

Trade volumes Trade volumes Trade volumes Trade volumes

WBJ OBSERVER • MARCH 2016

COMMENTARY / LAW

IZABELA SZCZYGIELSKA ADVOCATE, COUNSEL, WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

MINIMUM WAGE – FEATURES AND PERSPECTIVES The procedures for setting the minimum wage vary from country to country. Some countries do not provide a minimum wage for all employees. For example, in Germany, the minimum wage for specific sectors is laid down by collective agreements. In this context, it is worth noting that employees seconded to work abroad (within the EU) are entitled to receive the minimum wage in the country to which they are sent. In Poland, the statutory national minimum wage is set annually. In 2016, it is PLN 1,850 (gross) per month. The right of employees to receive a minimum wage derives from the Polish Constitution, which stipulates that the minimum rate of remuneration for work, and the procedure by which it is determined, are to be defined by statute. The right also stems from international and European law and has its roots in economic human rights. The minimum wage is the gross remuneration, and it does not include remuneration for overtime, retirement severance pay and/or jubilee awards. However, the minimum wage is not comprised solely of base salary. For example, it may include entitlements such as a functional allowance or seniority bonus. Currently, in the first year of work, an employee can be paid 80 percent of the statutory minimum wage. The statutory minimum wage in Poland is determined annually by the Social Dialogue Committee, which IF AN EMPLOYEE IS NOT GRANTED REMUNERATION AT LEAST EQUAL TO THE STATUTORY MINIMUM WAGE, HE MAY CLAIM COMPENSATION [FOR THE DIFFERENCE], AND THE EMPLOYER MAY ALSO BE PUNISHED WITH A FINE OF BETWEEN PLN 1,000-30,000.

MARCH 2016 • WBJ OBSERVER

comprises representatives of three groups of stakeholders: employees, employers and the government. The annual adjustment of the minimum wage not only affects monthly remuneration, but the process also sees adjustments to matters such as sickness benefits, severance payments, amounts exempt from deductions, and bonuses for night work. Under Polish law, if an employee is not granted remuneration at least equal to the statutory minimum wage, he may claim compensation [for the difference], and the employer may also be punished with a fine of between PLN 1,000-30,000. In Poland, the rules regarding minimum wage are only applicable to employees i.e. individuals employed under employment contracts (governed by the Labor Code). As a consequence, individuals hired under other types of contracts (i.e. civil law contracts, such as contracts of mandate or service) are not entitled to the statutory minimum wage. This is significant in the context of the current situation on the Polish market, where such civil law contracts have become an increasingly popular type of employment. In light of this, there has been major discussion about the hourly rates for individuals engaged under contracts of mandate and service. Recently, the new government proposed the introduction of a minimum rate for such contractual workers, amounting to PLN 12 per hour. This is almost equal to the minimum wage per hour for an employee. Nevertheless, the implementation of such a minimum rate would not eliminate many of the other differences between the pay conditions of individuals engaged under civil law contracts and employees (such as remuneration for annual leave, bonuses for overtime work, etc.). It still remains to be seen whether this is just an isolated initiative, or if it heralds a political willingness to close other existing gaps between different types of engagement. u

COMMENTARY / REAL ESTATE

AGNIESZKA KAWĘCKA, HEAD OF BUSINESS DEVELOPMENT, REESCO

FIT FOR PURPOSE The Polish fit-out market primarily covers works for developers, investment funds and tenants. This division can be made on the basis of the liability risk analysis resulting from lease agreements. The last 15 years of the office space market in Poland, and therefore of the fit-out segment, have seen steady growth. We owe this, primarily to the generation of people born in the years 1975-1985, and to the values they uphold, such us conscientiousness, reliability, humility and creativity. Large international corporations have noticed and appreciated this potential, which has contributed to the fast development of business centers in the local markets, which, in turn, promote faster economic growth. If we focus only on the capital of Poland, we can say, without a doubt, that we have observed a systematic growth on the available office space market. The saturation level of the market translates directly into the intensification of fit-out activities, which for us, no doubt, is a stimulus to diversify our services and broaden our portfolio of successful projects. Following the development of the office space market for over 15 years, we have noticed the marks left by time on some pre-2005 buildings. They signal the need for modernization and create potential for designers. Current challenges for the office property market include extensive and timeconsuming modernization of fairly new buildings, attempts to adapt old buildings to the requirements of new regulations (fire safety in particular), and attempts to upgrade existing office properties, taking, for example, local history factors into consideration. Practical evaluation of current trends reveals a distinct trend among large-project investors to order complex realizations of office spaces. The two factors that influence their decisions; the short completion time and the complex project implementation offered by their fit-out partners,

are essential in the current business reality. In the case of extensive projects, the scope of works should be negotiated individually, and once the agreement has been reached, it is crucial to act in accordance with approved schedules and budgets. Certainly, the human factor is always important, since the completion of a large-format project requires considerable human resources. The Project Manager appointed at the very beginning of the project’s implementation process is responsible for the proper fulfillment of the schedule and the work coordination at every stage of realization.

CURRENT CHALLENGES FOR THE OFFICE PROPERTY MARKET INCLUDE EXTENSIVE AND TIMECONSUMING MODERNIZATION OF FAIRLY NEW BUILDINGS, ATTEMPTS TO ADAPT OLD BUILDINGS TO THE REQUIREMENTS OF NEW REGULATIONS (FIRE SAFETY IN PARTICULAR), AND ATTEMPTS TO UPGRADE EXISTING OFFICE PROPERTIES, TAKING, FOR EXAMPLE, LOCAL HISTORY FACTORS INTO CONSIDERATION. The office space market sets a high bar for our industry, therefore, investors and property owners select such partners who provide timely services, observe the planned budgets and easily adapt to often changing external factors. As the fit-out industry is undoubtedly going to face more challenges in the years to come, creativity and experience will always be highly valued. u

WBJ OBSERVER • MARCH 2016

COVER STORY / LOOMING CRISIS?

THE NEXT WAVE OF CRISIS OR JUST A SNEEZE ON THE FINANCIAL MARKETS? FROM TIME TO TIME, THE GLOBAL ECONOMY FACES A CRISIS. ARE WE AT A CRITICAL MOMENT? LOW COMMODITY PRICES, UNCERTAINTY ABOUT THE DEVELOPMENT OF EMERGING ECONOMIES SUCH AS CHINA, PROBLEMS IN EUROPE AND DEBT LEVELS THAT HAVE TAKEN DEVELOPED ECONOMIES TO A RECORD HIGHS ENTITLE US TO ASK WHETHER THE NEXT WAVE OF THE CRISIS IS JUST AROUND THE CORNER? In the book "Bikenomics," Elly Blue is right to assert that a bicycle is not as simple a mechanism as it may seem. Particularly because it pays to look, not only at the bike, but also at the person pedaling, who uses the bike to achieve their goals. No matter if the chain breaks, a tire bursts, or we collide with other participants in the race – in the end, when we have an accident, the bikes runs into others, knocking them down. Countries participating in

MARCH 2016 • WBJ OBSERVER

the global economy resemble participants of a bicycle race, and once in a while we can see a spectacular crash. Is the crisis going to strike the global economy in 2016? Global uncertainty Carlos Artreta, Lead Economist at the World Bank’s Development Prospects Group, claims that global economic prospects have become more uncertain. However, the likelihood of a global crisis

appears to be low at this stage. At present, we expect global growth to edge up to 2.9 percent this year, from 2.4 percent in 2015, as recovery in advanced economies continues and headwinds for major commodity exporters gradually diminish. The World Bank report “Spillovers amid Weak Growth” warns that the slowdown in developing countries could spill over into other countries and threaten the initiative of pulling people out of world poverty. In recent years a few things have changed. Back in the 1990s, everyone nodded when economists expressed their opinion. Now it is different. We live in times of economic conformism. The objective is to maintain the status quo. Less than ten years ago, in 2008, we witnessed the deepest crisis since the Great Depression of the late 20s and 30s. We had to wait several years for economic recovery. Although it ultimately took place, the economic growth that occurred after the crisis came

Images: Shutterstock

B Y S E R G I U S Z P R O K U R AT

COVER STORY / LOOMING CRISIS?

from a different source than what we have seen in the whole of the last century. Gimmicked bailouts Recovery was driven by government bailouts and a modern monetary policy, which nobody would have called a stabilizer two decades earlier. The first to experiment was Japan, whose central bank – nearly 15 years ago – unable to cut interest rates, started to revive the economy through commercial banks. This gimmick was picked up by the FED, the central bank of the US, which printed a total of $3 trillion following massive capital injections in the form of programs such as quantitative easing. Part of the money fled to emerging markets, Asian countries and BRICS. The remaining part contributed to maintaining the status quo, which nobody wants to change. The problem is that just as you cannot stop the sunset by a decree, so monetary expansion, pumped with cheap money cannot last forever. These days, saving economies is like the relentless pumping of a bicycle wheel. You can ride with the punctured tire if you continuously provide it with the air that is leaking out through the hole. So, if an economy has a hole in it, and the air leaks out, it may turn out that we cannot ride any further and find ourselves on the verge of an upcoming global recession. Artreta from the World Bank slightly calms the situation: “The likelihood of

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a global crisis appears to be low at this stage. However, there are some significant downside risks to global growth that have become increasingly centered on emerging and developing countries in recent months. There is a risk that the slowdown observed in recent years becomes more protracted than currently expected and is accompanied by greater financial market turbulences.” In January, economists predict what the upcoming year will hold. And they unanimously admit, according to some symptoms, that a recession may soon be on the horizon. The debt crisis, which came to light in Europe after the 2008 crisis, has become a permanent concern of the Old Continent. PIIGS (Portugal, Ireland, Italy, Greece and Spain) were given bailout funds several times by the European Union and the IMF so that they could avoid embarrassing budget cuts, unwanted by the societies of southern Europe. Austerity programs were so unpopular that the Greeks elected an anti-austerity government, followed by a referendum that rejected the conditions under which support was to be granted by European Union countries. If Greece, although it is a relatively small part of the euro zone, left it or even the EU (Grexit), it could undermine the euro’s existence. Consensus is impossible to build in conditions when all parties feel that they have lost. Milton Friedman once made negative comments

about the euro, arguing that it was difficult to assume that in the long term it would create a stable system. As we witness this sad landscape, lacking in European unity, let us ask a question: is it really so surprising that the UK is seriously considering Brexit, i.e. exiting the European Union. Both the Brexit and Grexit could lead to a recession, and if Greece leaves the euro zone, it will encourage other countries to make a similar move. This may result in the collapse of the euro or diminish its significance, which in turn will bring negative consequences to the world economy.

There is a risk that the slowdown observed in recent years becomes more protracted than currently expected and is accompanied by greater financial market turbulences. Chinese dilemma Outside Europe, the source of the crisis can be found in the recent events in China. Over the past few decades, the Chinese economy has been developing at an unprecedented speed. Chinese GDP is the world’s second, right after the US, and it is only a matter of time before China overtakes the US in terms of gross domestic product calculated in nominal terms. If we take into account purchasing power parity (PPP), China became the world’s largest economy in 2014, according to data from the International Monetary Fund. Hats off to the entrepreneurial Chinese society. But let us keep in mind that this is also a great responsibility to the world. In the so-called “Central State”, capital is under governmental control, in order to stop the money from flowing abroad. For this reason, the dynamically growing Chinese middle class has relatively limited options when it comes to investing their new-found wealth. And it is not about the fortunes of tycoons, who know no limits, but average citizens. As a result of capital

WBJ OBSERVER • MARCH 2016

COVER STORY / LOOMING CRISIS?

controls, the two areas where the middle class could invest their assets are: the stock market and the real estate market. “Both markets are experiencing the effect of an overinflated bubble that is eventually going to pop,” says Christine Palonka from the Poland Asia Research Centre. A few months ago, the world was flooded with the news that the Chinese stock market had an average price-earnings ratio higher than anywhere in the world, even higher than before the dot-com bubble in the US in 2001. This may suggest that the Chinese stock market is one of the most unrealistic stock markets, providing overestimated valuations. Until recently, making a transaction on the Shanghai Stock Exchange was more like buying a lottery ticket than making an investment. It is no surprise that a correction was made.

Usually, when there is a slowdown, central banks apply an expansive monetary policy to stimulate the economy by lowering interest rates, opening market operations or through programs such as quantitative easing.

Third wave The shrinking of the Chinese economy has a huge impact on global commodity prices, which is reflected in the situation of commodity suppliers, mainly Russia. Undoubtedly, this will also reflect negatively on the state of the Polish economy, which among all EU

MARCH 2016 • WBJ OBSERVER

Images: Shutterstock

Exhausting sources The same happened with the boom on the Chinese real estate market, which led to a bubble in the residential sector. It is not even about the ghost cities, whole neighborhoods where nobody lives, but about the two following facts – that Chinese society will soon begin to age rapidly and that the current Chinese model has exhausted its sources. The number of people who can be moved from farms to factories has come to an end. If we take into account these two trends, it may turn out that housing prices undergo a dramatic correction. If the Chinese economy falls into recession, it is likely that it will involve the rest of the world. Since the beginning of the year, we have seen money fleeing Chinese markets. So far, trading on stock exchanges in China has been suspended twice. The pressure associated with capital outflows and a decline in the yuan is huge. The Chinese government will not allow a currency fall, because it could affect all those entities in China who have indebted themselves in a foreign currency. We do not know for sure how sick the Chinese economy is and whether the current correction is just a sneeze or a serious illness which could become contagious at any moment.

Images: Shutterstock

COVER STORY / LOOMING CRISIS?

member states is the most dependent on trade with Russia. Thus, the following question arises – are we facing the risk of the third wave of the global crisis, which may be caused by the economic situation in the BRICS countries, namely Brazil, Russia, India and China, who were until recently the leaders of global economic growth? Artreta from the World Bank says that in 2016 there are no grounds to claim so: “We currently project growth in the largest emerging markets - the BRICS countries (Brazil, Russia, India, China, South Africa) – to pick up this year, averaging 4.6 percent, up from a post-crisis low of 3.9 percent in 2015. China’s gradual slowdown and economic rebalancing is continuing, the recession in Brazil and Russia should slowly abate, and the robust pace of growth in India should continue to pick up.” Usually, when there is a slowdown, central banks apply an expansive monetary policy to stimulate the economy by lowering interest rates, opening market

operations or through programs such as quantitative easing. Back in 2008, central banks were able to lower interest rates even more. However, because we live in a world of interest rates close to zero and even negative interest rates, this tool is no longer effective. Now, central banks have far fewer opportunities to counteract the recession. To make matters worse, programs such as quantitative easing are one big experiment, the consequences of which we do not know. The global crisis is always going to be critical for Poland. The European Commission and the OECD predict that in the next 25 years the growth rate of our economy will remain at only about 2 percent. Meanwhile, government forecasts assume that GDP growth for at least the next year will be twice that. Local Polish forecasts are optimistic – reduced unemployment and wage growth associated with the more notable lack of skilled workers, plus higher economic growth compared to the countries of the old EU.

Interlinked vessels The problem is that any assumptions may pop like a bubble because we are dependent on the condition of the global economy. All markets are interlinked like vessels – thus, the world crisis would bring Poland to the ground, regardless of assumptions. In a sense, Poland is a bit like an alpheid shrimp that is dependent on fish from the Gobiidae family. The shrimp must dig a hole, which is used by both creatures, and because the shrimp is blind, it is heavily dependent on fish – just as Poland is dependent on other countries such as China and the US. The Alpheus shrimp keeps a lookout for the fish, constantly touching it with one of its antennae. Once the fish signals that danger is coming, the Alpheus quickly retreats into the hole. It comes out only when the alarm is called off. Being such an Alpheus, Poland is bound to careful observation of world trends. They are much more important than daily events in Poland, nonetheless, they often go unnoticed. u

WBJ OBSERVER • MARCH 2016

INTERVIEW / ANNA WICHA

UNDERSTANDING MOBILITY I N T E R V I E W B Y B E ATA S O C H A

WBJ Observer: Poland ranked 38th out of 109 economies in Adecco’s Global Talent Competitiveness Index, one spot better than last year. Is it a good result? Anna Wicha: It’s not a great outcome. It would be OK if we had made it into the top 10. Other countries from our geographical region are ahead of us, which is food for thought in itself. What seems to be Poland’s Achilles heel then? One of the biggest problems of Poland’s labor market is talent attraction. Poland ranked 77th in this category. It’s caused by low wage attractiveness. Young people get a university-level education and then move abroad to look for better pay opportunities. Secondly, we lack vocational education. Being a manual worker, even a highly qualified one, has long been out of fashion. I’m not talking here about simple repetitive labor, but about people operating computers, CNC machines etc. In the 1990s, Poles started seeing university as a must. As a result, we have too many university students. And, after they graduate,

MARCH 2016 • WBJ OBSERVER

they have higher expectations in terms of pay and responsibility. Meanwhile, as people without any experience, they have to start from entry-level positions and move up the ladder gradually. Isn’t that a generational issue? It is. Today’s university graduates, the Millennials, expect more: they want a good work-life balance. They want to earn over PLN 4,000 gross from day one. If they don’t, they get disappointed and disillusioned very quickly and start jumping from one job to another. That’s what creates a certain gap in the job market. On the one hand unemployment is close to 10 percent, on the other – we don’t have enough employees to fill vacancies. There is a wide gap between supply and demand on the labor market. What should Poland change in university education to make the gap smaller? We still don’t have courses educating people to do jobs that have existed for years in the market. Take a recruitment specialist. We have sociology and human resources

Do Poles lack soft skills? They absolutely do. There’s a big gap between Poles’ so-called hard and soft skills. Polish children have some of the best scores in PISA rankings. They have excellent analytical and mathematical skills, logical thinking etc. But they come up short on teamwork and mobility. But how do you reconcile that with the fact that over 2 million Poles migrated to other EU countries looking for work after Poland joined the EU? Indeed, Poles are eager to go work and live abroad. But they don’t want to move from one city to another within the country. Why? They don’t want to leave their parents’ home. Also, this lack of mobility stems, at least partly, from the insufficient number of apartments for rent. The rental market is severely underdeveloped in Poland, compared to other countries.

Image: Adecco

DESPITE THEIR EAGERNESS TO TRAVEL ABROAD FOR WORK, POLES LACK LABOR MARKET MOBILITY. ANNA WICHA, CEO OF ADECCO POLAND, EXPLAINED WHAT LABOR MARKET SHORTCOMINGS POLAND MUST TACKLE IN ORDER TO AVOID THE MIDDLEINCOME TRAP

management, but not a faculty educating people in recruitment. Meanwhile, there are 10,000 recruiters in Warsaw alone! We don’t have a university faculty specializing in training salespeople. Internet retail is booming, yet we don’t teach e-commerce. Best-case scenario, there is a semester squeezed in at the economics faculty, and usually taught by people who know e-commerce only in theory. That’s another issue – people who teach business at universities have little or nothing to do with business. They teach according to an outdated syllabus, with no practical experience in the field whatsoever. Private universities try to keep up by hiring people from the business world, but public universities rarely do. Luckily, one of the criteria for assessing universities nowadays is how many of its graduates find good jobs.

INTERVIEW / ANNA WICHA

Do Polish cities specialize in any particular business? Is there, for instance, any chance of creating a Silicon Valley in Poland? Cities do specialize, depending on which investors initially came to the city. The first major investor created a supply chain around it, attracting more companies to the area. Thus, we have several clusters, for instance the automotive cluster near Gliwice, the aviation valley near Rzeszów or electronics in Wrocław, logistics near Poznań and Kraków’s shared service center hub. Adecco’s recent study suggests that productiveness is one of Poles’ stronger suits. Is it really so?

The score for productiveness is higher than in attracting talent, but there is still a lot to be done. According to a study by employers’ confederation “Lewiatan,” we work 33 percent more than Germans, but our productiveness is 50 percent lower than that of Germans. How can Poles increase their productiveness? Polish companies need to give employees more feedback. They need to be more goaloriented. It motivates employees to become more efficient at work. If you have two employees: one very diligent and the other one, say, a slacker, and there is no feedback from their superior – it won’t motivate the slacker to put in more effort. Quite the opposite – it will demotivate the diligent employee. Polish firms are starting to adopt employee assessment schemes. Will that make a difference? If it’s a once-a-year analysis, not really. You need constant feedback from your superior, you need target-oriented management. When employees have clear short-term goals, they are motivated to meet them. Unfortunately, in many companies, even if such goals and targets are formulated, they are often known among the top layer of management, and are seldom communicated to low-level workers. There’s a number of other ways of motivating employees to more productive work: performance-related bonus systems instead of the so called “trzynastka” (an extra, “thirteenth” salary), which is given to all employees, regardless of their results. Do you think performance-related remuneration, like what you often see in sales departments, is the way to go for other jobs as well? For some reason Poles tend to think that their performance is measurable only in jobs where the employee is directly responsible for some end results, like in sales. But it isn’t entirely true. There are a lot of ways to measure how efficient a person is. In back office jobs: accounting, payroll, HR, a large number of everyday jobs can be quantified. For example: how quickly expenses from business trips are reimbursed, how quickly documents circulate around the company etc. This is also where innovation can be used as a motivator: if you make your job more efficient and you make some sort of lasting improvement from which the company can

benefit, the firm will give you a part of the extra money. Automation is also an obvious way of increasing productiveness, but it’s an area where Polish firms lag behind. Can it be remedied? It could, for example by introducing better tax incentives for modernization and automation. What are Poles’ biggest strengths then? We are very adaptable and flexible and good at problem-solving when difficulties arise. When the Russian embargo hit Polish farmers and meat producers, they quickly adapted and found new, creative ways of selling their oversupply. What helps Polish firms to be so flexible is the fact that 95 percent of all companies are SMEs, where all the decision making is done in one room. That’s what makes them respond so quickly. Coming back to attracting talent: Poland is still relatively young compared to Western Europe, but given our low birth rate, a time will inevitably come when we will need immigration to meet the demand for labor. Can we attract talent from abroad? Last year, there were some 400,000 Ukrainians working in Poland legally, another 400,000 or so – illegally. That gives us close to a million people working here. It isn’t an easy subject. We do not support their assimilation within our society and that could create some friction. We need to open up to immigration. People migrating for work bring a lot of positive qualities to the job market. They adapt to new realities and accept conditions that some Poles would not deem acceptable – it’s exactly the same thing that Poles brought with them to the UK. Given the recent new government policies, we may need immigrants even sooner than we thought. The 500+ program [where parents are given a monthly allowance of PLN 500 per month for the second and subsequent children; in poorer families the program includes all children] may create another gap in the market. A woman with three or more children will have a hard time deciding if she wants to go back to work for a minimum wage or stay at home raising kids with the state allowance exceeding her potential pay. u

WBJ OBSERVER •MARCH 2016

FEATURE / MODERN BICYCLES

Image: Shutterstock

Cleaning up the labor market

MARCH 2016 • WBJ OBSERVER

FEATURE / MINIMUM WAGE

B Y WOJ C I E C H R Y LU KOW S K I

IN SOME SECTORS, THE LOWEST PAID WORKERS CAN EARN AS LITTLE AS PLN 5 PER HOUR UNDER CURRENT REGULATIONS. THE GOVERNMENT IS MAKING EFFORTS TO ELIMINATE THIS NEGATIVE PHENOMENON BY SETTING THE MINIMUM WAGE AT PLN 12 PER HOUR. BUT THE LAW HAS ITS CRITICS

Image: Shutterstock

ollowing a sweeping victory in last year’s general election, the conservative Law and Justice party has begun to deliver on its social election pledges. After it passed the child benefit program through parliament, the party targeted the labor market. Recently, the government has launched public consultations over a draft bill that sets a minimum hourly wage at PLN 12 gross for those employed on civil work contracts. Companies that fail to comply will be punished with a fine of between PLN 1,000 and PLN 30,000. “Labor contracts are often used instead of full-time contracts to lower the costs of hiring,” the draft read. Minister of Family, Labor and Social Policy Elżbieta Rafalska said that the project would eliminate the labor market issues concerning wages of a few złotys per hour in selected sectors, such as security or housekeeping/ cleaning services. In these businesses the hourly wage is often significantly lower than the minimum monthly salary of PLN 1,850 legally set for those employed based on a labor contract. The draft bill also includes provisions that step up the powers of the Chief Labour Inspectorate (PIP), allowing it to run controls without prior notice. The Polish specificity Since they were first implemented in Australia and New Zealand more than a century ago, minimum wage laws have provoked discussion all over the world concerning their effect on employment. Basically, the division exists between employers’ associations and unions, with the former arguing that the minimum wage would harm the economy and increase unemployment, as entrepreneurs would not be able to afford raises. The latter proclaim that, by boosting domestic demand, the minimum wage would stimulate growth. Supporters add that it is the proper tool to secure the rights to self-sufficiency of those working in the lowest paid occupations. In looking for more balanced and empirically backed evidence, one might be disappointed, as the results of research on the effects of the minimum wage on employment are ambiguous. Al-

though many studies show very little effect, there is also substantial literature that states otherwise, and no consensus is reached. Be that as it may, the Polish case is somewhat different, as the minimum monthly salary is already in force, but it excludes some 1.3 million workers who are not employed based on a labor contract. As it was already said, these people tend to work in the lowest paid occupations, taking jobs as cleaners, security guards or construction workers. Until January 2016, civil work contracts were not burdened with obligatory social insurance contributions; hence they were preferred by employers, as the costs of hiring were lower. In addition, such contracts are not subject to the Labor Code, which requires a notice period of up to three months before letting an employee go. Although it operates on the edge of the law in most cases, this form of employment has become widespread in Poland over the past couple of years, depriving low-paid employees of their social security and workers’ rights. As the situation has been generating losses to the budget due to unpaid contributions to the Polish Social Insurance Institution (ZUS), the state has started taking measures. In order to fight with this phenomenon, the previous ruling PO-PSL coalition tied civil contracts with obligatory social insurance payments. Another step in tackling the problem will be setting the minimum wage at PLN 12 gross per hour, roughly the equivalent of the PLN 1,850 minimum monthly salary. Although the lawmakers expect that this move will discourage employers from abusing unwanted types of contracts, the outcome of the legislation is a riddle. Good Idea, Bad Execution According to Tomasz Czerkies, Compliance Manager at ADP Polska, a human capital management company, the proposed law would likely have a different impact on small and large sized companies. In the former case, it will result in pushing people into the grey economy, while large companies would probably move away from civil work contracts and offer labor contracts to their workers.

Employers’ union Pracodawcy RP (the Employers of Poland) has prepared a lengthy list of objections against the proposed law. The association argues that it may prove counterproductive, as instead of employing on labor contracts, entrepreneurs may rather chose another type of agreement — a specific task contract. This type of agreement is mainly suited to the creative class, as its duration is determined by a specific assignment to be undertaken (for example an article, a piece of art, etc.) Applying it to cleaning services or alike would no doubt constitute an abuse of law, but the contracts are already in use. Pracodawcy RP further asserts that the legislation may result in broadening the scope of the grey economy and that it is questionable from a legal point of view, as it interferes with the principles of the freedom of contract. The biggest drawback of the project, according to trade union Solidarność, is the ease with which it can be circumvented. Under the law, civil work contracts can include the return of expenses needed to perform the job. For example, in cleaning services one can include two contracts: a civil one for cleaning and another for renting a mop from the ordering party, thus a cleaner would get less than PLN 12 per hour. Marek Kowalski, from employers’ association Lewiatan, which represents Poland’s biggest companies, is also skeptical: “Setting a fixed wage of PLN 12 would be detrimental to companies’ growth,” he said. His assessment of the legislation is negative, as it upholds the dualism of the labor market, where two employees performing the same duties in the same company are employed based on two different contracts. Kowalski admits that he supports the idea of workers getting decent pay and he is not against the rate of PLN 12 in and of itself. But, he deems the underlying concept of the project to be wrong. “Workers deserve to be employed based on a labor contract,” because only in this way can they benefit from social securities guaranteed by the Labor Code, and this legislation won't achieve it. What the government is doing is a makeshift solution, which as the saying goes, lasts the longest.

WBJ OBSERVER • MARCH 2016

Moving in the right direction Although criticism is piling up, even from contending parties, it doesn't mean that the planned law is entirely bad. Solidarność’ expert Barbara Surdykowska claimed that setting the minimum wage rate at PLN 12 per hour is a good move in tackling “the exploitation of workers, which in some sectors is particularly visible. These situations undermine human dignity and are of a pathological nature.” But a fundamental issue, Surdykowska strongly underlined, is the monitoring of compliance of law as under the Labor Code. Currently, most civil work contracts ought to be transformed into labor contracts. That is also why Solidarność thinks that stepping up the powers of the

MARCH 2016 • WBJ OBSERVER

Chief Labour Inspectorate (PIP), included in the law, is a positive signal. “We would go further, nonetheless, and equip the institution with the right to transform civil work contracts into labor contracts. This kind of permission is present in many European countries,” said Surdykowska. Presently, if the labor inspection finds irregularities, employees can file the case with labor courts, which will settle the matter. In practice, it is not easy to convince low-paid and often poorly-qualified people to enter into a legal dispute. Both Lewiatan and Solidarność agree that the dualization of the labor market is negative, but their proposals on how to fight against it are completely different.

Lewiatan thinks that the government should act towards enticing employers to hire on regular contracts by decreasing labor costs. Solidarność, in turn, tables two possible solutions. The first one stipulates that every employment relationship should be regarded as a labor contract and parties should bear the burden of proving otherwise. The other possibility is to stretch some social benefits regarding holidays, maternity leave etc. stemming from regular labor contracts for those working based on civil work contracts. Although employers’ associations argue that the law would inhibit firms’ growth, there are examples that prove the contrary. Some of the largest companies (Amazon, IKEA) operating in Poland have already set the minimum pay at their firms at PLN 14-15 per hour, and despite that, they still struggle with staff shortages. Considering that over the last couple of years, the productivity of Poland’s economy has grown faster than salaries, it is unacceptable to tolerate hourly rates of PLN 5-7. In this respect, the project is worth pursuing because it changes the way the state perceives the labor market. Workers are entitled to social security and decent pay, so let's hope the law is just a transition phase in eliminating labor market ills and not a makeup solution that will go on and on. u

Images: Shutterstock

FEATURE / MODERN BICYCLES

FEATURE / MINIMUM WAGE

WBJ OBSERVER • MARCH 2016

COMMENTARY / REAL ESTATE

MARCH 2016 • WBJ OBSERVER

INTERVIEW / ADAM DANIEL ROTFELD

BACK TO DIPLOMACY? I N T E R V I E W B Y E WA B O N I E C K A .

PROFESSOR ADAM DANIEL ROTFELD, MEMBER OF THE INDEPENDENT INTERNATIONAL PANEL OF EMINENT PERSONS, WHICH PREPARED THE REPORT “BACK TO DIPLOMACY”, ADDRESSED THE ORGANIZATION FOR SECURITY AND CO-OPERATION IN EUROPE PRESENTED AT THE 52ND MUNICH SECURITY CONFERENCE. PROFESSOR ROTFELD TALKED WITH WBJ OBSERVER ABOUT THE RECOMMENDATIONS OF THE PANEL, THE NEW THREATS TO EUROPEAN SECURITY AND THE DILEMMAS FACING THE PRESENT EUROPEAN AND GLOBAL ORDER

WBJ Observer: How do you evaluate the title of your report “Back to diplomacy” as one of the 15 members of the Panel working under the leadership of the Munich Security Conference chairman, ambassador Wolfgang Ischinger? Is it a realistic suggestion? Adam Daniel Rotfeld: You raise a legitimate question. Current relations among the states are very tense and bleak, as Ambassador Ischinger noted at the opening session of the Munich Security Conference. It seems that global leaders are losing their control over present developments in the world. Our report does not propose a blueprint, a kind of “grand design” with entirely new solutions. In its essence it is rather a modest paper. It turns attention to the problems of the weakening international European order, as the result of violating the principles, norms and rules reflected in documents agreed upon in Helsinki (1975) and Paris (1990) after the end of the Cold War. The content of our report and its recommendations correspond to the old Chinese proverb that even the longest journey begins with a single step. As a rule, the first step determines the direction of the subsequent journey. So, the report points out that, regardless of how complex the present state of affairs among European nations is, there is a need to return to traditional, proven, robust diplomacy. Without dialogue and diplomacy we are doomed to return to security based on chaos, uncertainty, instability and unpredictability. Such a system cannot

eliminate even unintentional accidents and conflicts, not to mention intentional interventions. For instance, one may imagine a situation in which a Russian aircraft is shot down, not by Turkey on the border with Syria, but by Sweden or Finland at their borders close to the international waters of the Baltic Sea. No doubt, it would bring us closer to conflict, which nobody wants. The revival of diplomatic channels of communication would show that there are matters, which even in the present stage of international tension, could be put under control with the aim of at least avoiding unintentional conflict. This is the essence of our message “back to diplomacy”. Still, many politicians describe the present international situation as very dangerous. As you know, James Clapper, director of American National Intelligence, recently said that Russia’s intervention in Ukraine, and other Russian activities in the world could lead to a second cold war. And prevailing opinions in the West are similar, such a development is far from diplomacy. Do you think that a return to cold war status is possible? In fact, James Clapper used terminology reminiscent of the Cold War period, as did many other politicians (including Dmitri Medvedev, the Prime Minister of Russia). They think that the worst that could happen now is a second Cold War. It reflects their

conviction that the present international situation is more dangerous than that which existed during the real cold war. Such comparisons are not relevant for many reasons. The Cold War was the product of a bipolar period characterized by the confrontation of antagonistic ideologies. It was a period of the partition of the world into two blocks. The Soviet Union and its satellites dominated by communist ideology on one hand, and the

INTERNALLY, RUSSIA PRESENTS ITSELF AS A BESIEGED FORTRESS SURROUNDED BY ENEMIES AND RUSSOPHOBIC HOSTILE NATIONS. US and the democratic community of the West on the other. It was a period when the US and the Soviet Union controlled all developments within their respective spheres of influence. Also, they accepted an undeclared agreement that neither the Soviets nor the Americans would intervene when conflict erupted in relevant Soviet or American parts of the world. The two global powers respected such a line of division. In practice, Soviet military interventions suppressed the uprisings in Berlin (1953), in Budapest (1956) and in Prague (1968) without any

WBJ OBSERVER • MARCH 2016

INTERVIEW / ADAM DANIEL ROTFELD

military reaction from Western democratic nations. The two nuclear super-powers did not dare risk direct conflict between each other, with the consciousness that it would lead them to Mutually Assured Destruction. In other words, a high probability of nuclear catastrophe was accompanied by a high degree of stability. Therefore, nowadays many observers suggest that the present situation is more uncertain than previously. What has changed? After the disintegration of the Soviet Union, the dissolution of the Warsaw Pact and the political transformation in Central and Eastern Europe, a new type of relationship emerged in this part of the world. Instead of “limited sovereignties”, all the nations in the region declared their political will to join Western security institutions–NATO, the EU and the Council of Europe. However, in Russia, after the transitional period of the Yeltsin government, the new Russian leader, Vladimir Putin proclaimed his own political philosophy, which was quite different. Russia was to be “raised from its knees” and reestablished to its former global position of the Russian empire. Russia rejected universal values and viewed the western way of life as incompatible with Russian traditional habits and expectations. Internally, Russia presents itself as a besieged fortress surrounded by enemies and Russophobic hostile nations. Therefore, in the face of perceived NATO aggression, Russia has to show military strength and adapt the new world order to Russian aspirations. All in all, the present global security system is much more complex, multi-dimensional, inter-connected and contested. As a result, neither analysts and observers, nor politicians and decision-makers fully digest and internalize the deep distinction between past and present risks, tensions and threats. Since the challenges are not conventional there is also a need to generate new unconventional solutions. If you think that the doctrine of a new cold war is anachronistic, what is the root of such a tense international relationship? There are many new factors. I will confine myself to a few of them. In the past, international security issues and conflicts were mainly generated by a collision of interests between states. Now, the problems of international security are mostly shaped by developments within states. As an illustration, one can mention the relations between Ukraine and Russia. The internal processes within

MARCH 2016 • WBJ OBSERVER

Ukraine and Russia are on a collision course. Russia decided that it is unacceptable for Ukraine to define its own internal order and form of sovereign governance and foreign and security policy in its own independent way without asking Russia for permission. In other words, Ukraine took the decision to behave like a full sovereign state. The Russian military intervention in the southeastern part of Ukraine is a response to internal domestic Ukrainian developments. There are also some other factors. Some of them are produced by new technologies (digitalization of information); others are of a psychological nature reflected in the trust deficit; and some of them result from the cognitive dissonance of self-perception. By its aggression towards Ukraine, Russia has broken the principles of international

law and undermined the security order in Europe. So, how do you see a way out of that situation? The situation is, as I mentioned, complex and interconnected. It puts Russia in conflict, not only with Ukraine, but also with Western democracies. There is no doubt that Ukraine is able to build its own internal system, institutions and procedures allowing her to become a full sovereign European state in accordance with the expectations of the Ukrainian people. In the long run, Ukraine and the international community are searching for such a solution to end the present crises, which will reflect Ukrainian aspirations. Any eventual solution must take into account the simple fact that Ukrainians and Russians are close historical neighbors and have many common economic, spiritual, civil and cultural roots, which cannot be denied.

INTERVIEW / ADAM DANIEL ROTFELD

Image: Ministry of Foreign Affairs

At the moment, the full realization of the Minsk II agreement should be seen as the first and decisive step to end current military activities by both sides in Donbas. Ukrainians are skeptical, and for good reason. The guarantees offered to them by great powers in the 1994 Budapest Memorandum (signed by Russia, the US, Great Britain and Ukraine) re-assured Ukraine’s territorial integrity, sovereignty and full independence. Those assurances were given to Ukraine in exchange for its resignation from the nuclear potential positioned on its territory during the Soviet era. Such a solemn declaration was later forgotten and ignored by those who negotiated and signed the Budapest Memorandum more than 20 years ago. Keeping such an experience in mind, the Ukrainian political leadership is convinced that the definitive solution to the crises requires not only reliable international efforts, but also significant changes within the countries involved in the conflict. Since September last year there have been some signals that Russia is diminishing the military activities of separatists in Donbas. However, fundamental change will be possible in the distant future. It would require new generations who could take Russian responsibility to accept and recognize Ukraine as a free and democratic nation. Such an approach would create the conditions for a strong security order in Europe based on common values and mutual respect between Ukraine and Russia. The Munich Security Conference was working in a very difficult international situation burdened by the refugee crisis. However, your report concentrates on relations within Europe. You suggest a kind of revitalization of dialogue between NATO and Russia, proposing a return to the NATO-Russian Council. Could it happen? Why not? The West does not want to break off dialogue with Russia. Nobody is interested in pushing Russia to the point of no return. As long as the channels of communication are open the international situation will not spin out of control. Now, concerning the issue of refugees. This matter was not within the mandate of our Panel. The mandate was limited to the question of how to prepare “the basis for an inclusive and constructive security dialogue”. As you know, the OSCE membership covers 57 states of Europe, North America (the US and Canada) and Central Asia (Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and

Turkmenistan). Middle Eastern and North African nations do not belong to this community of States. The issue of refugees is now dealt with by the European Union and those European countries which are the main target states for the refugee inflow. In this respect, Germany and Chancellor Merkel personally demonstrated great moral standing and political responsibility. Angela Merkel has become the subject of strong criticism and political attacks, in Germany and outside her own country, for her courage and moral integrity. There is no simple solution to the problem of refugees. Nobody was prepared for such an influx of millions, neither Greece, Hungary, Austria, nor other EU countries. There is a need to deal with the problem in an innovative way, taking all financial, economic and diplomatic steps to bring peace to Syria and North Africa. Europe has to find the relevant resources to help refugees in temporary camps in Turkey and Jordan and other places. One has to realize that this new issue will be with us for a long time. There is a need to consider it as a challenge that must be solved in the spirit of human solidarity. Having said that, I would like to repeat once again, the refugee issue was beyond the mandate of the Panel of Eminent Persons (PEP). And how do you see the role of Poland in shaping a new European security system and EU relations with Russia? Considering the Polish role in shaping a new security order, one should not forget that Poland is an integral part of NATO and the

EUROPE HAS TO FIND THE RELEVANT RESOURCES TO HELP REFUGEES IN TEMPORARY CAMPS IN TURKEY AND JORDAN AND OTHER PLACES. EU. Each and every country defines its strategy as a result of many elements: the neighborhood, geographic location, military and economic potential, demography, economic development etc. And, so does Poland. In the last 25 years, our country has been perceived by many observers as a “success story” of the transformation–process from mono-party

governance and centrally planned economy to the free market and democracy based on rule of law. The Alliance and European Union membership are key determinants of our position in Europe and the world. As far as our neighborhood is concerned, we are in a unique situation: Polish territory is the same as before 1989, but all our neighboring countries are new. Instead of three bordering states (in the East the Soviet Union, in the West the German Democratic Republic and in the South Czechoslovakia) as the result of transformation and fundamental changes in Europe, Poland now has seven neighbors. And, none of them is the same as before 1989 (in the East the Russian Federation, Lithuania, Belarus and Ukraine; in the South the Czech Republic and Slovakia; and in the West the Federal Republic of Germany). The first non-communist Minister of Foreign Affairs Krzysztof Skubiszewski concluded bilateral conventions about the mutual recognition of borders and the confirmation of territorial integrity and a neighborly relationship with all of the aforementioned states. This series of difficult matters with Russia, which are deeply rooted in history, became the subject of a work by the “Polish-Russian Group on Difficult Matters”. The present Polish-Russian Group on Difficult Matters was established in 2008. The Group is composed of prominent Polish and Russian intellectuals, scientists, archivists, historians and other experts. Alongside the academic Anatoly Torkunov on the Russian side, I was appointed co-chair of the group on the Polish side. Over a few years, we were able to produce a pioneering common study, which discloses many dramatic moments in our mutual history. The results are presented in the book published recently in English by the University of Pittsburgh Press under the title: “White Spots—Black Spots. Difficult Matters in Polish-Russian Relations, 1918–2008”. The book met with great interest from all over the world, not only in Europe and North America, but also in Japan and South Korea, proving that it is possible to conduct Polish-Russian dialogue on the most difficult matters both between diplomats, independent academics and intellectuals. The results of the activity of this group influenced Western attitudes towards Russia to a significant extent. Poland was regarded as a kind of barometer for those relations. PolishRussian dialogue was observed in the West, not only with attention, but also with a special relief and understanding. u

WBJ OBSERVER • MARCH 2016

WBJ Observer presents

CHALLENGES OF TODAY'S ENTERPRISE Many industries are undergoing massive changes in business processes and the way in which they adapt new technology. How is mobility driving these changes? This is clearly an exciting time. From connecting people to connecting devices, mobility opens the door to new services and products and affects every aspect of doing business. Many of our customers see smartphones and tablets as an opportunity to reach new customers in an innovative way, accelerate work processes or use these devices to serve a very specific purpose such as a barcode scanner or location tracker. When we think about mobility we embrace the opportunities and tend to forget the risks. Are companies aware of the threats? The awareness is starting to appear. Every major data leakage impacts our awareness. Companies need to ensure their workers have the tools needed to do their jobs effectively (smartphones, tablets, other smart devices) but at the same time, one of the biggest challenges is keeping the data on these devices secure. So, what’s the best way to adapt mobile technology in the workplace? At FancyFon, our main concern is mobile security. Our mission is to help organizations successfully deploy and manage their fleet of devices. Most companies will find it sufficient to enforce password protection and encryption on the device and have remote wipe and lock capabilities in case the device gets lost or stolen. In more mature environments a lot of what we do is about experimentation in terms of what works, there’s no one-size-fits-all solution. With devices and requirements quickly evolving, you always need to balance security needs and user experience. Otherwise, you may cause your employees to stop using your app or a corporate mobile device, and that’s the last thing you want, also from a data-security point of view.

With more and more companies wanting to use tablets in specialized scenarios such as dedicated warehouse equipment or as point-of-sales devices, it’s essential that they know where to look for the right partner to realize these goals. And this is where we come in. The other thing we want to focus on is small and medium business – with these customers in mind we developed our simplified MDM product, FAMOC Lite, and I’m incredibly optimistic about its potential.

MARCH 2016 • WBJ OBSERVER

BARTOSZ LEOSZEWSKI, PRESIDENT OF FANCYFON

BROUGHT TO YOU BY FANCYFON

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IT / BODY LEASING

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FEBRUARY 2016 • WBJ OBSERVER

tel. +48 22 379 29 41

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IT / BODY LEASING

IT INSIGHTS

WBJ OBSERVER • MARCH 2016

IT / WARSAW START-UP SCENE

B Y A L I CJA C I S Z E W S K A

IF YOU CAN MAKE IT IN WARSAW, YOU CAN MAKE IT ANYWHERE

SKA

WARSAW IS NO LONGER A CITY OF OFFICE BUILDINGS DEVELOPED SOLELY FOR CORPORATIONS, IT IS GRADUALLY BECOMING A LIVELY AND HOSPITABLE ENVIRONMENT FOR START-UPS

Information hub The city hall of Warsaw established Centrum Przdsiębiorczości Smolna (Center of Entrepreneurship Smolna) in 2013. It is a place where an entrepreneur may receive advice on how to start a firm, how to write a business plan, where to get funding, or attend

MARCH 2016 • WBJ OBSERVER

professional workshops and lease an office or conference room. A sort of “information hub” for anyone interested in running a company. Centrum Smolna is also a start-up incubator, hosting some 17 fledgling entities. The facility cooperates with academic incubators as well as Campus Warsaw and the Startup Poland Foundation. The center was created to support start-ups and promote entrepreneurship in Warsaw, “human potential is one of the biggest assets of our city,” said Deputy Director at the Office of European Funds and Economic Development, Grzegorz Wolff. It provides various information and opinion leaders’ knowledge, organizes workshops held by experts from tax offices or the Social Insurance Institution (ZUS). Centrum Smolna stressed that Warsaw districts are very active in terms of building entrepreneurship awareness and that they work closely alongside them. In addition, one of the center’s objectives is promoting Polish design abroad at international investment fairs in Cannes, France or Munich, Germany. Hustle and bustle Warsaw has hosted numerous events aimed at start-ups and entrepreneurs in general, which were carried out by academic incubators, institutions and international corporations. Centrum Smolna co-organizes and financially supports such events as Wolves Summit, Startup Weekends, WAWCODE (with Google), Hackathon (with Poznań and Gdańsk) and many more. Students at the Warsaw School of Economics (SGH) created Let’s Startup, a three-

Images: Shutterstock, waw.ac, Paweł Kowalik/Google

ome 400,000 companies are currently operating in Warsaw, small and medium enterprises account for 200 of them. Additionally, 28 percent of the total number of Polish start-ups were started in the city, a report by Start-up Poland revealed. Warsaw attracts hopes of a better life, creative minds, money and big business ideas. Good infrastructure (well-developed urban transport and two airports), access to crucial institutions, international corporations and funds are what make the city the most frequently chosen destination for business. “Warsaw is the best place in Poland to work on a start-up. It's a sort of state within a state,” Mateusz Lebiedziński, director at academic incubator AIP SGH said. “Warsaw provides the best infrastructure of co-working space and other start-up locations, as well as the most opportunity to find financial support from capital funds or accelerators,” said Jacek Aleksandrowicz, the founder of Akademickie Inkubatory Przedsiębiorczości (AIP) and Polska Przedsiębiorcza. Annually, there are some 25,000 events addressed to start-ups and the start-up community in the capital, 11 start-up incubators are located in the Mazowieckie voivodship, eight in Warsaw alone.

IT / WARSAW START-UP SCENE

day event, during which 30 participants had to work in groups on their projects. The event also included a Dragon’s Den game (modeled on the American TV show), where start-ups could pitch to potential backers and convince them to invest money in their venture. Warsaw-based academic incubator AIP SGGW adopted the notion of speed dating into the start-up realm and invented Speed Business, a monthly gathering of up to 20 people – newcomers and investors - who have a short time to share their ideas. Corporations are becoming more and more interested in the start-up world, they more eagerly participate in various events, for instance a project organized by AIP SGH and Nestlé called “Your own company or a fulltime job. The choice is yours!” which was tailored to students. Initially, big companies gathered around the Warsaw School of Economics, now they seek cooperation with other universities, according to Lebiedziński. Talking about international corporations’ engagement in the Warsaw and Polish start-up environment, Google cannot be ignored. Its Campus Warsaw, based in Warsaw's Praga district was launched in November 2015. "The future growth of Europe is based on entrepreneurship and innovation. Campus Warsaw is our next step in helping Poland and the CEE region to

thrive in these two areas. It will be a new business space for entrepreneurs seeking knowledge, global networking opportunities and support in building companies which might change the world," said Matt Brittin, head of Google Europe. Despite the fact that the Baltic states perform better in various international reports (for instance Doing Business or the Innovation Index), Google chose Warsaw because Poland is the region’s leader, and the office based in the capital is the biggest in Central and Eastern Europe, according to Magdalena Przelaskowska, CEE Program Manager at Campus Warsaw. “We want to teach how to inspire people to launch startups. This is an open platform,” she described Google’s mission in Warsaw. The facility is Campus’ third after those opened in London and Tel Aviv.

Since November, it has acquired 4,000 members and held numerous events organized by Google or by start-up societies, in January, they had already clocked up 180 events. Room for creativity In ten years time, 50 percent of all Poland’s creative companies will be based in Warsaw, now it’s at about 30 percent. “Warsaw is a city of creative tension,” Wolff cited Wally Olins, the British practitioner of corporate identity. The majority of start-ups included in Warsaw-based academic incubators operate in the IT sector, followed by e-marketing, and interestingly, manufacturing. The city of Warsaw is to launch the Center of Creativity Targowa (Centrum Kreatywności Targowa) by the end of 2016, which will feature exhibition halls, confer-

WBJ OBSERVER • MARCH 2016

IT / WARSAW START-UP SCENE

Right behind the front-runner One may think that Warsaw is too small to catch up with the best in the world, however, those who work with budding Polish entrepreneurs claim the opposite. “We have nothing to be ashamed of. My knowledge and level of awareness is the same as that of people from Silicon Valley,” Lebiedziński said. The only difference is that they are more familiar with doing business, it's something natural for them, unlike for Poles who still think that starting their own company is a big deal,” he explained. “American start-up culture is on a higher level, that's all,” he concluded. In Lebiedziński’s opinion, Warsaw needs some ten years to develop and achieve the level of awareness and maturity that the world’s greatest technology nation has reached. Although Przelaskowska believes that it is hard to compare Silicon Valley to Warsaw, Poland should be proud of its engineering talents, and the only thing that Poles lack is self-confidence. “I think that we know a lot,” she concludes. The local authorities, academic incubators and big companies currently operating in Warsaw are eager to push on. u 40

MARCH 2016 • WBJ OBSERVER

THE FUTURE GROWTH OF EUROPE IS BASED ON ENTREPRENEURSHIP AND INNOVATION. CAMPUS WARSAW IS OUR NEXT STEP IN HELPING POLAND AND THE CEE REGION TO THRIVE IN THESE TWO AREAS.

Image: Paweł Kowalik/Google

ence rooms, offices and desks to let. By 2022, another facility, The Center of Creativity Nowa Praga (Centrum Kreatywności Nowa Praga) is to be delivered (construction work has not yet begun). This building will also be addressed to the creative industries, but unlike the one on Targowa street, it will offer workshops and studios. Experts at Smolna are convinced that the centers will gather creative artists and manufacturers willing to start and develop a business. “There was this guy who came up with the idea of crafting professional kitchen knives. He had so many orders, his schedule became full for over a year in advance. And a married couple who wanted to start a sewing company. There are loads of people like them. Therefore, I find such projects very helpful for young creative entrepreneurs in the long term,” Mateusz Lebiedziński pointed out. Although Polish customer culture is not ready for good quality local products, he continued, Warsaw is the best place for such ventures due to, among other factors, the metropolitan lifestyle and higher salaries.

IT / WARSAW START-UP SCENE

WBJ OBSERVER • MARCH 2016

IT / M-COMMERCE

Click ‘Buy,’ click ‘Pay’ B Y B E ATA S O C H A

THE GROWING VIRTUAL SECTOR IS HAVING AN INCREASINGLY TANGIBLE INFLUENCE ON A NUMBER OF INDUSTRIES – FROM LOGISTICS OPERATORS AND WAREHOUSE DEVELOPERS, THROUGH ELECTRONIC PAYMENT SYSTEMS AND BANKS, TO MOBILE APP PRODUCERS

MARCH 2016 • WBJ OBSERVER

FEATURE / MINIMUM WAGE

Image: Shutterstock

-commerce has seen some remarkable growth in Poland over the past years, growing at a pace of 15-17 percent a year, according to data by research firm PMR. In 2014, it accounted for 3.9 percent of total retail sales and is set to grow to 6 percent by 2020. There are several reasons for the rapid growth of the virtual sector. The proportion of internet users has increased from 30 percent in 2005 to 65 percent in 2014, according to Eurostat. A third of all Poles are e-shoppers, reported data from Dotcom River. The fact that a lot of Poles live in small towns (70 percent of Poles live in areas outside of hypermarkets’ catchment areas, according to the Polish Chamber of Commerce) is also a contributing factor. “Interestingly, due to the limited range of traditional stores, online shopping is more popular in small towns of below 20,000 residents, which often poses a challenge in terms of delivery,” wrote real estate consultancy JLL in a joint report with warehouse space operator Prologis.

A matter of time E-shoppers are looking not only for variety, but also for convenience and expedience. The growth of the e-commerce market is putting pressure on vendors and logistics operators to shorten delivery times. “Customers require rapid deliveries, typically same-day or next-day, as opposed to store deliveries on a weekly or bi-weekly basis,” JLL said. The rapid development of the e-commerce sector will likely lead to significant changes in real estate, as well. As much as 71 percent of third-party logistics firms declared they will develop returns processing centers and specialized e-fulfillment stores over the next five years, JLL also stated. Going mobile The growth rate of the e-commerce business pales in comparison to the pace at which the m-commerce section of the market is growing. According to a report by Mobile Institute “mShopper,” 44 percent of Poles use smart phones (and as much as 65 percent of Poles between the ages 19 and

24). On top of that, over a third of Poles use mobile devices to shop. “We will do our shopping more and more using mobile devices – our needs are driven by impulse, emotion, and increasingly effective marketing campaigns,” said Patrycja Sass-Staniszewska, board member at eCommerce Polska, a business chamber with focus on internet commerce. The market is still relatively small (some PLN 2 billion), compared to the entire e-commerce business (approx. PLN 30 billion), according to estimates by Deloitte, but is expected to grow at a rocketing pace over the next few years – over 100 percent annually according to the “mShoppper” report. Naturally, retail is a two-way exchange. With the revolution in delivery logistics and mobile apps making things better and faster, there must be an equal expedience in electronic payment systems. After all, customers expect their electronic purchases on their doorstep no later than two or three days after clicking the “Buy” button. Wasting a day or two for some ones and zeros to travel

WBJ OBSERVER • MARCH 2016

IT / M-COMMERCE

between two financial institutions seems an extreme waste of time.

Mobile everywhere Poles have also taken to cashless payments in brick-and-mortar stores. The country was one of the first in Europe to introduce NFC payment cards and has one of the highest shares of NFC payment cards in Europe. It also adopted mobile phone NFC payments as the third country in Europe, a year after the UK and France. Market analysts expect mobile phone payments to have the greatest potential for growth. It is also the area in which technology is developing most rapidly in order to make these payments as secure as possible. “It’s all absolutely secure. It relies on a multistep verification process between the smart phone and the client’s bank,” said Łukasz Gołębiowski, editor at Komputer Świat, an IT industry magazine, talking about the latest mobile payment technology developed by VISA and presented at the Mobile World Congress conference in Barcelona in February of this year. Not for Poland Despite being at the technological forefront of electronic payment systems, Poland has been ignored by global giants such as the likes of Google, Apple and Samsung as far as mobile payments are concerned. Digital wallets, such as Apple Pay, Android Pay and Samsung Pay were the topic of 97 percent

of social media conversations on mobile payments worldwide. Yet, there is no support for them in Poland. Luckily, local players are taking advantage of the absence of the tech giants and developing their own products for the Polish market, such as HCE payment by lender Pekao, supported by MasterCard. The system is now also available for Windows 10. We’re in the future VISA is also looking to appropriate more of the mobile payment market with its new technologies. Imagine the following scenario: while you’re driving, your car runs out of gas. Your car tells you about it, finds the nearest gas station and directs you there. (If you have a Tesla with Autopilot, it will also take you there itself.) Then, at the station, you can pay for the gas without leaving your car, via the on-board computer equipped with mobile payment system. Sounds like the future? Some mobile payment methods are even more futuristic, like straight out of a science fiction movie. According to a study by MasterCard, payment with wearables is the nest big thing. One step further – biometric verification system, which has already been incorporated in Fujitsu computers and may soon make its way into payment systems. A scenario where you wave your hand over a scanner to pay for your groceries, or looking into a camera that scans your face for verification are no longer far-fetched. Poles – technology-enthusiasts that they are, will likely be one of the first in line to adopt “Selfie Pays” and bio-scan payments. Just wait and see. u

Image: Shutterstock

Early bird? There are aspects of a country’s development, where the early bird does not catch the worm – the latecomer does. Such is the case with sewage systems – cities that developed their drainage systems centuries ago are now struggling with their limited capacity and the need for modernization. The same goes for payment systems. The countries that have had electronic payments the longest are now far behind countries that developed them relatively recently. The problem lies in the costs of switching from one technology to another, and the larger the system is, the more pricy upgrading it gets. That’s why the US still uses checks, which never really caught on in Poland. “Americans have very modern technology, but they will use more obsolete solutions if those devices don’t earn their value. They are paying the price for being at the technological forefront some time ago,” explained Mieczysław Groszek, deputy chair of the Polish Bank Association. It is also why Poland’s relatively new electronic payment system falls behind only that of Turkey, another latecomer to the table. The standard delivery time for a wire transfer in Poland is one working day. Period. Any longer and it’s considered a major nuisance. “There are several hundred banks in the world that want to catch up with Poland or Turkey,” said Bartłomiej Wyszyński, a strategy director at Artegance, a digital agency.

But even that is not good enough for e-shoppers, and faster systems had to be adopted. Thanks to such systems as Przelewy24 or PayU, payment is made instantaneously, thus reducing time between placing an order and delivery.

MARCH 2016 • WBJ OBSERVER

COMMENTARY / IT

PIOTR KOWALSKI KANCELARIA PAŁUCKI TRUSIŃSKI PRAWO I PODATKI SP. J. LEGAL ADVISER, MEMBER OF THE REGIONAL CHAMBER OF LEGAL ADVISERS IN WARSAW. IT LAW SPECIALIST.

IT SECURITY FROM THE POINT OF VIEW OF KNF DIRECTIVES AND RECOMMENDATIONS IT security is a field featuring a special hybrid of solutions, including strict IT and legal solutions. On one hand, legal regulation itself does not guarantee security. On the other hand, the implementation of specialized IT tools as such, without development, and more importantly, without the observation of appropriate standards and procedures, does not provide an adequate basis to claim that an sufficient level of security has been ensured within the given entity. Let us remember, that in the end, we attempt to look after security for each and every one of us: our funds, personal data or simple privacy. The subject of IT security has not received appropriate legal regulation in Poland. Because nature proverbially abhors a vacuum, the directives and recommendations of the Financial Supervision Authority (KNF) are considered a “panacea” for the indicated problems. However, is compliance obligatory? This question applies both to the legal nature of such regulations, but also to the scope of their subject and object (thus answering the question: to whom and what do they apply). The directives and recommendations of the FSA may not be considered sources of effective law according to the catalogue provided for in the Constitution (art. 87): they are not an act, a ratified international treaty, a resolution nor a local law act. On the other hand, however, the Authority is considered to be a so-called regulatory body, which performs its regulatory function by implementing acts resulting in standards applicable to specific entities. These competences have been granted to the Committee on the basis of legal regulation equivalent to acts, i.e. acts considered to be generally applicable. Thus, according to specific regulations of banking law, the act on savings and credit unions and the act on payment services, the Authority has been given the ability to issue recommendations (and, what should be noted) “good practices” related to cautious and stable management. One should not also forget the main role of the Authority, which is to ensure correct market functions, its stability, security and trust, as well as the protection of the interests of its participants through reliable information related to market functions (included in art. 2 of the act on financial market supervision).

FSA recommendations and directives are, briefly speaking, a set of good practices related to strategy and organization of information technology areas and security of the IT environment, its development, maintenance, operation and management. These practices apply mainly to the IT structure of the given entity, i.e. to the set of devices and transmission connections (various server types, matrices, workstations), the IT network (all routers, switches, firewalls) or software. They apply to many levels, beginning with the indication of the role of management boards and supervisory boards, the development of systems within a company, and finally, to the improvement of competencies of employees and user education. THE SUBJECT OF IT SECURITY HAS NOT RECEIVED APPROPRIATE LEGAL REGULATION IN POLAND. BECAUSE NATURE PROVERBIALLY ABHORS A VACUUM, THE DIRECTIVES AND RECOMMENDATIONS OF THE FINANCIAL SUPERVISION AUTHORITY (KNF) ARE CONSIDERED A “PANACEA” FOR THE INDICATED PROBLEMS.

It is beyond any doubt, that observation of such “good practices” should be in the interest of their recipients: public pension funds, insurance and financial security companies, investment funds, entities operating within the infrastructure of the financial market and investment companies – thus, the entities subjected to the highest levels of security were related to correct, efficient and safe support of activity by IT environments operating within such entities. In summary, IT security is regulated mainly by so-called “soft” laws (namely, by the aforementioned recommendations and directives of the FSA), however, they are laws with a “hard,” real impact. They are an attempt at keeping up with reality through fixed legal regulations. Regardless of how successful the attempt is, it should be stated that it is the correct direction, and demand for complex services (e.g. for legal-IT services) related to this issue will certainly see a continuous increase in each subsequent year. u

WBJ OBSERVER • MARCH 2016

EVENTS / POLISH INFRASTRUCTURE

COMMENTARY / LEGAL

TO ADVERTISE: TOMASZ PAWLAK, TPAWLAK@WBJ.PL, +48 501 791 461

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Made

in Poland 2016

Conference

MADE IN POLAND 2016 / EXPORT

New products and destinations

MARCH 2016 • WBJ OBSERVER

vehicles are among the success stories. Poland is also a powerhouse when it comes to furniture, windows and doors. While still, the bulk of production is being done for international companies, some Polish producers are selling them on their own, with great success. The country has always been considered an industrial powerhouse. While the coal mining sector is in dire straits, with KGHM being one of the world’s biggest copper and silver producers, metallurgy is thriving. So is logistics, with Poland’s central location at the crossroads of Europe it’s a perfect fit for the logistics sector. With the strong growth of e-commerce, hundreds of thousands of square meters of warehouse space are being added each year. For years, the biggest advantage Polish manufacturers boasted was a good quality-to-price ratio. Even though salaries in Poland are still significantly behind the EU average, the gap is getting smaller. In the last ten years, the average wage in Poland has grown by 36 percent, so the price factor is becoming less significant, while quality needs to be continuously improved in order to remain competitive. MADE IN POLAND 2015/2016

oland has always relied on its neighbors when it comes to foreign trade. But sometimes it can backfire. With the crisis in the east, exports to Russia and Ukraine are to drop significantly by 14 and 17 percent respectively. Despite all the turmoil, last year, Polish exports reached another record-high level of €163 billion (a growth of 5.2 percent). Still, Polish companies are continuously looking for other markets on which to sell their products. This can be very challenging, that’s why the Polish Information and Foreign Investment Agency has launched several programs aimed at helping firms reach many exotic destinations. It even has a Go Arctic program. That’s why in this year’s edition of Made in Poland we have decided to profile some of these destinations. We’ve picked China, Africa and the Middle East as places where exports from Poland are growing and where there are huge prospects for further growth. We write which companies have already entered those regions, what challenges they faced and which sectors might have a chance of success. Besides that, as always, we’ve picked sectors which we know well and hope will drive exports forward. In the IT section we decided to profile Polish video games. It might not be the largest industry, even in the IT sector, but it’s certainly the one that puts this country in the spotlight, as millions of people all over the world play them, which boosts Poland’s image as an innovative nation. The defense sector in Poland, even with the recent boost in military spending, relies mostly on imports. Yet some Polish producers manage to sell their products abroad. Communication systems, drones and armored

Made in Poland a guide to Polish

EXPORTS

2015 / 16

available now

COMMENTARY / LAW

MADE IN POLAND 2015 / DEFENSE

What are TUI, PZU and Play doing at Valkea Media? – Custom Publishing

more at: cp.valkea.com 46

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Revamping the defense sector

Poland’s defense sector reached its peak in the 1980s and since then it has experienced a steady decline. Poland’s government is making efforts in order to reverse the trend and boost exports

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one are times when one of the pillars of the Polish economy was its domestic defense sector. The end of the cold war marked the collapse of the overgrown industry, which didn’t have a place in the new era of “the end of history” and the thaw in the relations between the East and West. In the past 25 years, Polish governments have been making efforts to find a new formula for the sector, all to little avail. Recently however, the first signs of recovery have emerged. Past Glory To get the full picture of Poland’s defense industry one has to look back to the past, to the Warsaw Pact period. After WWII, the reconstruction of the defense sector required previously unheard of amounts of money. The country saw the second wave of increased spending on armaments in the 1970s, and one decade later, the sector reached the peak of its capabilities. According to Jakub Jaworski from the Polish Chamber of Defense Manufacturers, in the 1980s, there were 82 enterprises which had strategic defense company status, ten research centers and more than 600 firms that cooperated with the strategic companies. Within a year, Poland could produce 300 T-2 tanks, 160 jet fighters and transport aircrafts, 350 helicopters or 700 anti-aircraft missiles. The industry employed 250,000 people. During communism, the defense industry in the Soviet bloc states and its satellites was coordinated by the USSR, whose aim was to prevent each country from fully developing the potential of their defense industries. Soviet Russia forced the eastern bloc to work out a specialization within the alliance - only one country could make a final product with components supplied by other states. For example, parts to assemble a T-2 tank in Poland were imported from East Germany, Romania, Bulgaria, Hungary and the USSR. Because of the geopolitical realities of the cold war, the defense sectors in this part of Europe were massively overgrown. The scale of the industry in Poland had put a burden on the budget as expenses on armaments were said to stand at 12-15 percent of the annual budget. It shouldn’t come as a surprise, therefore, that in 1985, Poland was the fifth biggest weapons exporter in the world. Most of the exports, however, were

sent to the Warsaw Pact and its members had a limited possibility to sell the production elsewhere since the weaponry was usually made on Soviet licenses. Hard Landing After the 1989 transformation, such excessive funding was no longer available, bonds with former allies became more lax and demand for weapons was no longer secured. It was evident that the sector, burdened with overstaffing, needed to undergo significant restructuring to close the technological gap with the West. Efforts have been made throughout the 90s and 2000s to upgrade the industry so that it can compete on international markets. Nonetheless, results have not, so far, been satisfactory. According to analysts, the reasons behind the flop were manifold, including a lack of coordination between ministries, insufficient financing of restructuring programs, lack of control over money transferred to the troubled companies, or insufficient spending on R&D. Scaling down the employment can be named as one of the few successes. The transformation undermined Poland’s weapons exports as well. According to an

annual report by the Ministry of Foreign Affairs, Poland sold armaments worth €395 million to foreign markets in 2014. Of that sum, €294 million was in the ML10 category, i.e aircrafts, unmanned aircrafts, aircraft engines and components. In fact, this positive result was achieved by cooperators or subsidiaries of foreign producers operating in Poland (Sikorsky, AgustaWesland or Airbus Military). Regrettably, these companies are only suppliers and not able to make a final product themselves. Considering that the remaining €100 million included the sale of old, decommissioned weapons, “the real” value of Polish defense companies’ exports is estimated at around €30-€40 million, a figure as low as at the beginning of the 90s. It wouldn’t be an exaggeration to say that weapons exports are close to extinction. The government is making efforts to turn the fate of the industry around and to help it bounce back. One of its latest policies is the renewed attempt to consolidate state-owned companies into one entity, something that had previously failed twice. This time, with the newly created Polska Grupa Zbrojeniowa, the situation

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is expected to be different. In September, the head of PGZ, Wojciech Dąbrowski, announced at a defense fair in Kielce that the company “wants to act as an innovative supplier of specialized systems” and said that it will have revenues of PLN 12 billion in 2030, of which PLN 6 billion is to be generated in the civil sector. The majority of the sum is expected to come from exports. The company wants to introduce 100 new products in the next 15 years and become the 10th biggest weapons producer in the world. How plausible is that? It’s hard to assess right now, but achieving success would also boost production volumes and capabilities of private companies, who may become associates of the state-owned giant. And the private companies are faring well. In 2014, 13 of them generated revenues of PLN 870 million, and employed 5,000 people.

MARCH 2016 • WBJ OBSERVER

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MADE IN POLAND 2016 / DEFENSE

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MADE IN POLAND 2016 / DEFENSE

The leading company, WB Group, is successfully licensing the technology it had designed itself to international markets. The company’s biggest success is the sale of a license for Fonet, a digital internal communication system, to the US Army and several dozen other countries. Apart from that, the company is already cooperating with state-owned companies. In tandem with Huta Stalowa Wola, it is developing an unmanned gun turret, and recently it has become part of a consortium with PG to run in a tender for the Battlefield Management System for the Polish Army.

providing loans to the Visegrad Groupmembers (the Czech Republic, Slovakia and Hungary), the Baltic states, as well as Romania and Bulgaria so that they will be able to purchase Polish arms. The program’s goal is also to bind and coordinate the defense potential of all the countries in the region. There are initial indications that such a program could work. In July, Poland and Slovakia signed a letter of intent regarding cooperation in the defense industry, and as a result, the southern neighbor will buy 30 Rosomak Scipio vehicles for PLN 120 million. Meanwhile, Bulgaria, which is striving to cut dependence on Russia, has signed a €6 million deal with Poland to service its MiG 29 fighter jets. Of course, one swallow doesn’t make a summer, but combined policies may bring tangible results, and Poland may be able to rebuild its defense sector so that, once again, it can become one of the driving forces of the economy. u

Image: Shutterstock

New opportunities The company also sees its chances in the army modernization program worth PLN 130 billion, which was announced in 2013. Piotr Wojciechowski, the head of WB Group, said that both parties, the state and the enterprises, need to display

“economic patriotism” in order to make sure that Polish firms benefit from the program. “The ordering party cannot generate needs that would go completely beyond the possibilities of the sector, because that would eliminate the Polish companies,” he said. “The state has to give them a chance and order products that may not yet be perfect, but with time, these producers will fulfill more extensive requirements,” Wojciechowski added. In his opinion, the progress of the whole sector, including state-owned companies, is substantial. For example, Huta Stalowa Wola has developed RAK self-propelled mortars, the first weapon of its kind completely designed and produced in Poland since WWII. Besides the ambitious plans to consolidate the sector and modernize the army, the government has recently launched a program aimed at supporting exports. The “Regional Security Assistance Program 2022” stipulates

MARCH 2016 • WBJ OBSERVER

WBJ Observer presents

BLUE SKIES OVER POLISH CLOUD SERVICES Łukasz Polak, vice president of Beyond.pl, a data center and cloud services provider, discusses the prospects for the cloud computing business and the ever-present issues of data security How fast is the Polish cloud solution market growing? Do Polish entrepreneurs welcome such solutions? What are their advantages? Łukasz Polak: The Polish cloud computing market is growing at double-digit rate. In 2015 it grew seven times faster than the traditional IT service market (IDC Report). It is estimated that by 2019 its value will grow by up to $1.5 million. This shows that more and more businesses recognize and appreciate the advantages of such solutions. The first thing they notice is the positive impact cloud services have on areas such as improved business performance and service automation, lower costs, better flexibility and easier implementation of new products and solutions.

This is one on the most common myths about the cloud. You should remember that security is one of the key priorities for cloud service providers. They use a number of different security measures to ensure that the stored information is given a high level of protection, including encryption and two-step login verification, security certificates, cloud traffic control, network isolation, as well as physical and procedural data center protection. We believe that education is the best way to bust this myth. Right now, almost half of all managers admit that they don’t have sufficient knowledge concerning real cloud security. This is going to change in the coming years, though.

ŁUKASZ POLAK, VICE PRESIDENT OF BEYOND.PL

How do you protect your customers against DDoS attacks, which interrupt services and companies’ access to their data?

What are the advantages of using a local cloud compared to global cloud solutions offered by Amazon S3, Google App Engine, or Microsoft?

DDoS attacks are an increasingly common tool used by cyber criminals, and so are the global losses these attacks lead to. We offer our customers two-level protection. The first one is the IT infrastructure level. At Beyond.pl we use the latest technology, including power supplies, cooling and building architecture. We also look at the second level of protection, i.e. applications and networks. Thanks to our partners, such as Grey Wizard, we make sure our customers enjoy the most comprehensive anti-DDoS protection.

You can’t really call Beyond.pl a local cloud, however, since our resources are based in Poland, it is a clear advantage for all EU citizens. If you want to comply with EU and GIODO regulations on data processing, you have to store data in centers located within EU territory. When you look at the biggest “global” providers, you very often don’t know exactly where the resources are stored and you run the risk that they may be leaked outside the EU. Another key factor that makes these solutions different is the price, which is much better the more local your provider is.

WBJ OBSERVER • MARCH 2016

BROUGHT TO YOU BY BEYOND. PL

Many entrepreneurs are afraid that the cloud might leak their sensitive data (trade secrets, etc.). How do you ensure the confidentiality of customer data?

NEWS

FEBRUARY 2016 • WBJ OBSERVER

March 2016

SPECIAL MIPIM EDITION

STRETCHING SPACE AND TIME FLEXIBLE OFFICES MEAN MORE THAN DESK SHARING AND REMOVABLE PARTITIONS 64 FARMLAND DILEMMA COULD CONSTRAINTS ON LAND SALE SLOW DOWN THE WAREHOUSE BOOM? 70

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LOKALE IMMOBILIA / NEWS

>LOKALE IMMOBILIA

NEWS

WRONIA 31 will feature 16,000 sqm of GLA

l OFFICE

Ghelamco to develop office scheme near Warsaw Spire Property developer Ghelamco will carry out another office scheme in Warsaw. Wronia 31 will be located next to Warsaw Spire. Construction work on the new office scheme in the Wola district of Warsaw, at Plac Europejski has already started. The 15-storey Wronia 31 will feature 16,000 sqm of GLA. Its completion is scheduled for the second quarter of next year. Previously, Ghelamco received a loan of €30.6 million in order to fund the investment. u

ECHO INVESTMENT’S GALERIA KIELCE is part of the transaction

AMAZON WROCŁAW BIELANY center

l WAREHOUSE

Amazon sells logisitcs center for €70 mln E-commerce giant Amazon has sold its Wrocław-Bielany logistics center to GLL Real Estate Partners for €70 million. “Amazon is committed to creating longterm jobs in Poland and this transaction does not impact our commitment to the Polish market. We already operate this type of lease structure with the majority of our properties across the globe, this is a natural transaction for our business,” said Marzena Więckowska, spokeswoman of the company. Amazon runs three fulfillment centers in Poland with a total space of 300,000 sqm. It employs 4,500 workers and is still recruiting. GLL Real Estate Partners is a Munichbased real estate fund manager group, which invests on behalf of its investors in Europe, the US and Latin America. u

MARCH 2016 • WBJ OBSERVER

Largest ever real estate transaction in Poland completed

edefine Properties, Griffin Real Estate and Echo Investment have signed a Polish commercial property deal, estimated at €1.2 billion. It is the largest ever real estate investment transaction in Poland. Moreover, it is the largest ever single transaction of income generating real estate assets in Central and Eastern Europe. “The 18 properties tick all the boxes from an investment perspective and allow us to take advantage of what will be positive yield carry. This deal moves the needle as economic growth is driv-

ing demand for office space in Poland and opportunities in retail are even more exciting, as disposable incomes have improved in step with economic growth,” said Redefine’s executive Chairman Marc Wainer. A significant benefit of the agreement is further complemented by a right of first offer on over €500 million worth of newly developed properties from the large retail and office development pipeline of Echo, with more than 80 percent of the projects expected to be delivered within the next two years. u

Images: Amazon Fulfillment, Ghelamco Poland,Echo Investment, Q2 Studio, Budimex, Wikimedia

l INVESTMENTS

LOKALE IMMOBILIA / NEWS

l OFFICE

Warsaw office market sees a 12% y/y fall in vacancy rate Last year, over 800,000 sqm of office space was leased in Warsaw, where 23 schemes were delivered, CBRE reported. Experts at CBRE underlined that 2015 was a “great” year for the office market. Investor activity grew by 36 percent on a yearly basis, consequently, vacancy rates fell by 12 percent y/y. The most active sectors were IT and high-tech (19 percent of the total leased space) as well as finance (18 percent), the report pointed out. In the upcoming months, 30 new investment projects are to be completed. CBRE claimed that this year will be “challenging” for the market, as the competition continues to grow.u

GALAKTYKA shopping mall

l INVESTMENTS

Vantage Development sells commercial center

eal estate developer Vantage Development has signed a preliminary deal to sell a 100 percent stake in its subsidiary VD RETAIL II, which delivered the Galaktyka commercial center in Wrocław. The company expects to sign the final contract by May 15, the developer said in a statement. “The sale of the completed commercial investment is the next stage of the project aimed at releasing the funds involved in the investment. These funds may be used to carry out further investments,” a statement said. The Galaktyka mall comprises two buildings with a total lease space of 2,500 sqm. u

l WAREHOUSE

Waimea to build logistics park for over PLN 100 mln Industrial space developer Waimea Holding will invest some PLN 110 million in carrying out a logistics park in Młyny (Podkarpackie voivodship). The first industrial hall will be open in mid-April. Waimea Logistics Park Korczowa will feature three halls, totaling 50,000 sqm. Estimated costs stand at PLN 110 million, according to its developer. Waimea is in talks with potential tenants from the food and automotive sectors.u

l INVESTMENTS

GTC acquires office building in Poznań SUGAR FACTORY building in Żnin

GTC Wilson Par, a subsidiary of WSE-listed Globe Trade Centre (GTC), has completed the acquisition of Pixel office building based in Poznań. The value of the transaction stood at €32.2 million, which roughly translates to PLN 143 million. A preliminary deal was signed in December last year. Pixel was delivered in 2013, it offers 14,500 sqm of GLA. It is fully-leased by e-commerce firm Allegro. u

l H O S P I TA L I T Y

Arche to build hotel complex for PLN 100 mln

PIXEL office building in Poznań

Developer Grupa Arche is going to renovate a former sugar factory and carry out a hotel complex in Żnin (KujawskoPomorskie voivodship). The investment’s cost is roughly PLN 100 million. Arche’s scheme is to feature 32,000 sqm and 450 hotel rooms. Construction work is to take three years, according to propertynews. The property developer purchased the former factory building from Krajowa Spółka Cukrowa.u

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / NEWS

l LOGISTICS

Record-breaking tenant activity on the Polish industrial market

early 1 million sqm of warehouse space was delivered to the market, while a further 774,000 sqm is under construction, international advisory firm JLL said in a report. In total, 2.2 million sqm of industrial space was leased in Poland in 2015. Due to high tenant activity, the vacancy rate dropped to 6.2 percent. “The industrial market in Poland continued to be buoyant in 2015. Gross take-up reached a historically record-breaking total of over 2.2 million sqm. Central

Poland saw the highest volume of leased space – 527,000 sqm, while Warsaw’s Suburbs recorded 409,000 sqm followed by the Upper Silesia region with 359,000 sqm. The largest deal was signed by Leroy Merlin – 53,000 sqm in Panattoni Park Stryków II,” said Tomasz Olszewski, head of Industrial CEE at JLL. Net take-up totaled a strong 1.47 million sqm. This is the market’s best performance since 2008’s record-breaking volume of 1.55 million sqm. Headline rents in smaller SBU units

(located within city boundaries and characterized by higher rent levels compared to large distribution parks) are between €3.50-€4.00/sqm/month in Wrocław and €3.40-€4.30/sqm/month in Łódź (Central Poland). Headline rents in big box units are diversified by region and are at €2.60€3.20/sqm/month in Central Poland or €3.80-€4.50/sqm/month in Kraków. The highest levels are to be found in Warsaw Inner City areas, and are between €4.10 and €5.30/sqm/month. u

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Polish housing market marks record year – report

MARCH 2016 • WBJ OBSERVER

Images: Shutterstock

ast year was the best in terms of the number of sold apartments, research by REAS consulting company showed. In 2015, residential developers sold 51,800 units on the six largest Polish markets (Warsaw, Kraków, Łódź, Wrocław, Poznań and Gdańsk), up by 20 percent on a yearly basis. The fourth quarter alone saw a 9 percent growth q/q. According to REAS, the increase was, among other things, boosted by the MdM (“Apartments for the young”) government subsidy scheme. “What’s important is that it was a record year, while processes remained stable,” Katarzyna Kuniewicz, an expert at REAS, stressed. u

The best

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view of Warsaw

Cosmopolitan Twarda 4 is a modern, prestigious building, residents of which can enjoy upscale apartments. This is the only edifice of such kind in Warsaw accessible right now!

Cosmopolitan Twarda 4 represents a brand new approach to residence purchase. The apartments are handed down with top quality interior finishing. The designers focused on the comfort of future residents, unmatched quality of materials and creating a timeless elevation. Classy interiors and well thought-through finishing highlight the spaciousness of the apartments. Breath-taking window views make for an extra advantage. They perfectly complement the apartmentsâ&#x20AC;&#x2122; atmosphere and allow you to observe city life from a distant perspective. Each room is equipped with tilt in windows that are rare in the edifices of such class and height. The apartments will fulfil the expectations of even the most demanding residents. The lodgers have 24/7 access to assistance offered by a consierge, who is ready to help them with their every day tasks, as well as with the realisation of non-standard assignments. The service is available via the HMS intelligent apartment management system, which allows you also to control air conditioning, lighting, blinds or TV. On the fourth floor of the edifice the residents will find an exclusive relaxation area. Besides a fitness zone, the area features as well private and business meeting rooms. On the ground floor there are several concept restaurants that open the building to the city with its inhabitants. That makes Cosmopolitan Twarda 4 a common space for all the lovers of style and unusual solutions.

APARTAMENTY COSMOPOLITAN I +48 535 10 10 10 I www.apartamentycosmopolitan.pl WBJ OBSERVER â&#x20AC;˘ MARCH 2016

LOKALE IMMOBILIA / INTERVIEW

Tipping the scales The Warsaw market surprised market players with extremely robust leasing activity last year. Jeroen van der Toolen, managing director for the CEE region at Ghelamco, talked to WBJ Observer about last year’s results outperforming analysts’ forecasts, Warsaw’s CBD expanding westward, and the firm’s plans for the future, given the changes in the country’s financial landscape I N T E R V I E W B Y B E ATA S O C H A

MARCH 2016 • WBJ OBSERVER

ing to schedule. The whole complex, along with the surrounding public square, will be ready and open in May. The lease with Samsung for 21,000 sqm was one of the biggest and most talked about deals of the past year. How long did negotiations take on that one? What do you think tipped the scale for Samsung in favor of Warsaw Spire over other locations? In the case of Samsung, the company needed space to consolidate their R&D functions from three different locations into one single site. They were looking for a modern building that would allow for long-term expansion. Samsung also appreciated our landmark project for the fact that it’s equipped with state-of-the-art technical solutions. The company became our partner in this field and applied its latest air-conditioning system in the tower building. It is the largest implementation of Samsung’s DVM S Water system in Europe. We are also proud to hear from our tenants that they enthusiastically await much the opening of Plac Europejski, with all of its unique amenities. It’s a one-of-a-kind place in Warsaw, coherently designed by experts,

combining greenery, much needed in Warsaw, with great places to eat and art facilities. Besides, with our project we have set a new trend in Warsaw. There is huge interest in this location, and many companies are now eager to create their headquarters here, in the neighborhood of Rondo Daszyńskiego. Isn’t it somewhat surprising that companies that used to be located right smack in the city center are choosing locations outside the central district? With the second metro line, the border of Warsaw’s CBD is redefined and is moving westward, and Rondo Daszyńskiego in particular is becoming the new business hub of Warsaw. This area is something more than just an office district though. It’s an emerging, multifunctional part of the city, with modern housing estates, hotels, shops and quality public spaces such as Plac Europejski. We noticed the potential in the Wola district before other companies did, secured many plots there and started the transformation process of the whole the area. We developed Crown Tower, Crown Point, Crown

Images: Ghelamco

WBJ Observer : Not so long ago, market analysts looked skeptically at large schemes, such as Warsaw Spire, being added to the already hot Warsaw office market. Meanwhile, last year saw a record volume of leases, including in the capital. Ghelamco closed deals for 80,000 sqm – the highest volume among all developers. How much of Warsaw Spire has already been commercialized? Jeroen van der Toolen: Truly, some time ago, many doubted our chances of success based upon short-lived market forecasts. Warsaw was not supposed to be able to absorb such a large-scale project. And also, few believed Wola could turn into what it is now becoming – a new, lively business hot spot. We decided to develop such a project because we could see the big picture, analyze the situation with a long-term, broad perspective. We aimed high because we knew that a well-prepared, coherent project would always triumph on the market. Now we have it almost 80 percent leased, two buildings – B and C have been commissioned, and the A tower building is in the final phase of finishing work. Everything is going accord-

LOKALE IMMOBILIA / INTERVIEW

Square, and Prosta Office Center there in the past, and currently, Warsaw Spire office complex and Wronia 31. Sienna Towers and Spinnaker are also in the pipeline. We had a vision to bring change to the district many years ago, and now Ghelamco is still responsible for a great part of what is built in Wola. At the end of 2015, the company issued bonds worth PLN 320 million. What are the funds earmarked for? Do you plan more bond issues in the future? The Ghelamco corporate bond issue stemmed from the plans we have for 2016. We wanted to obtain financing for initiated and planned investments. This instrument works well for us and we do not rule out further issues in the future. We see great potential in the commercial real estate industry in Poland and we want to be prepared with the necessary resources to actively participate in this development. Is debt financing going to be Ghelamco’s primary source of financing now that the new bank tax makes bank financing more expensive?

We fund our projects both from corporate bonds and bank financing. Shifts in taxing don’t seem to be a problem that will limit the availability of resources for companies like ours. Even in bad times, such as the recent economic crisis, banks became more careful about granting loans only to smaller and less secure subjects. I believe this change can affect such type of companies, they will feel that the cost of financing, due to the tax imposed on banks, is a bit higher. In the case of bigger players, this is a small part of the costs that we have to secure in the development process, so I’m quite certain that this additional tax will not hurt the real estate industry too much. You have recently announced a new, smaller, 16,000 sqm project right next to Warsaw Spire. When is it due to be delivered? The project, Wronia 31 is to be built on the corner of Plac Europejski, near the intersection of ul. Łucka and Wronia. It’s an entirely separate building with 15 floors – 15,150 sqm of A class office space and 850

sqm of retail space. We provided an independent, underground car park with spaces for 195 cars combined with infrastructure for cyclists – 54 parking spaces and two changing rooms equipped with showers. Wronia 31 offers really great advantages for tenants in a moderate scale building and an excellent location at Plac Europejski. We started to work on the diaphragm wall last year, now the underground floors are being built. Completion of Wronia 31 is scheduled for the second quarter of 2017. What other projects are Ghelamco working on? Besides Wronia 31, we are finishing Wołoska 24, a 22,000 sqm office project in Mokotów, with retail functions on the ground floor. In Łodź we are developing a 24,000 sqm build-to-suit office scheme – Przystanek mBank. Besides these medium-scale office schemes, we are also commencing some large-scale projects this year, Sienna Towers and Warszawa Gdańska, our two largest developments. Sienna Towers is already under construction and is scheduled for completion in Q2 of 2019. Upon completion it will deliver 100,000 sqm of top quality space, distributed between three towers, providing the best location for office, retail, hotel and conference functions. It will also be one of the first commercial projects in Poland with a direct underground link to the metro station. We plan to implement unique, pioneering technologies in the buildings – it will truly be a project of the future. As for Warszawa Gdańska, phase one will begin in Q3 2016. In general, this project will include 165,000 sqm and will be completed in phases. The project consists of nine buildings: a train station combined with office, retail and hotel functions, all integrated with a multifunctional transport hub. It’s a visionary project that not only provides various transport services concentrated in one place (metro, railway, bus, tram), but also delivers green, resident-friendly public spaces. We hope it will be a model of a well-organized, modern city hub, where public spaces are harmoniously integrated with communication and a wide range of services. Apart from office projects, we will also be active in other segments of the market such as retail, and we will be entering regional cities with new projects as well. u

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / OFFICE

Looking for unlimited flexibility B Y B E ATA S O C H A

COMPANIES, JUST LIKE THEIR EMPLOYEES, VALUE FLEXIBILITY NOW MORE THAN EVER. THEY LOOK FOR IT IN OFFICE LEASE AGREEMENTS, FLOOR PLANS AND WORK ORGANIZATION. ARE THE TIMES OF DESK JOBS AND FIXED OFFICE HOURS COMING TO AN END?

MARCH 2016 • WBJ OBSERVER

LOKALE IMMOBILIA / OFFICE

Images: Shutterstock, AntyCafe

itting on a sofa with my laptop, I look around to see several other people with their devices working for different companies in the same room with me. There’s a Foosball table, a handful of square café-style tables and a kitchen corner with all the typical facilities. It’s not my office, it’s not a café either. It’s an office/café paid by the hour (or minute for the first two hours) located in Warsaw’s Wilanów district. Called AntyCafe “Poza Czasem” (in English: “Outside of Time”), the establishment caters for freelancers as well as regular office folk who, on occasion, telecommute rather than heading into the office. The office/café offers unlimited Wi-Fi, coffee, beverages, snacks and a place where you can settle in with your laptop without the fear of overstaying your welcome, unlike in a typical café. “We have a few regulars who practically live here. We launched in July, but we’re still in the early stages of development. As far as I know, we are the first such place in Warsaw that offers office space by the hour,” said the café’s owner Aleksander Chochłow.

Instead of pajamas

Teleworking, although not without its flaws, is an increasingly attractive option for employees and their employers. Com-

panies have long been fighting for talent ,and are increasingly open to making concessions in order to make their workers feel valued. From the point of view of the employee, working in a co-working space like this café seems a sensible compromise between working from your bedroom in pajamas and spending two hours a day in traffic. The extra fee (a subscription at the AntyCafe is PLN 149 per month) seems reasonable in comparison to the cost of being stuck in traffic jams, which Deloitte estimated at PLN 3,350 a year for an average driver working in one of Poland’s top seven cities. Whether or not this office model finds its niche remains to be seen, but the fact that 95 percent of Polish firms are SMEs, and that the vast majority of them are selfemployed freelancers, definitely adds to the demand for such a working environment. Co-working space

But, extreme cases aside, flexibility seems to be one of the top priorities for all companies looking for office space these days. “Signing long leases now, unless you are a huge corporation, is increasingly a thing of the past. And, even in a corporate environment, people are using the office like a hotel, sitting every day in a different place,” said Hadley Dean, CEO of Compass Offices EMEA.

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / OFFICE

Compass is a new player on the Polish market, currently offering its co-working office space in two locations: Plac Unii and Rondo 1. Its main competitor, Regus has been on the Polish market since the 1990s. In its early days, Regus leased offices to international companies that were setting up their first outposts in CEE. Now it has 14 locations, including five outside the capital. Its latest addition, the Zana building in Lublin, was launched in 2015 and caters mainly for tech and media firms. Atlas shrugged

The search for flexibility is, however, bigger than start-ups and freelancers. Major corporations are well aware of the trend as well. “The prevailing trend currently seen in the market is to make offices more flexible and comfortable, so that they can easily house more employees within the same space,” said Agnieszka Kawęcka, head of Business Development at Reesco, a fit-out and interior design firm. Desk sharing, quiet workrooms and phone booths – these can all be found in today’s modern office space. Increasingly often you can also see games rooms, green and recreational areas, showers and locker rooms. “Office space flexibility is a clear signal from the employer: ‘I focus on my employees and their needs.’ In today’s world an office worker has to be dynamic, mobile and creative, which needs to be reflected in his or her working environment,” said Kawęcka. Increasing the efficiency of how office space is used naturally requires larger initial outlays, but it seems to pay off over time. “Apart from increasing work comfort and aesthetic factors, companies also seek savings when redesigning their office space. The more flexible a solution is, the more expensive it is initially, but it also makes any future changes easier and cheaper, when for example, a company switches from one project onto the next,” added Kawęcka. Removable partition walls and maximizing sunlight is what companies want these days to ensure they can adapt to changing schedules and project requirements. More or less

Optimizing the existing space will not be enough though, if a company is looking to shave off a large chunk of its overheads – a lesson many firms learned after 2008. “Floor plans that were used even five years ago did not take into consideration the fact

MARCH 2016 • WBJ OBSERVER

LOKALE IMMOBILIA / OFFICE

that the office is never 100 percent occupied, and in some months falls to a mere 30 percent,” explained Kawęcka. Now, during a period of healthy economic growth and solid forecasts for the next few years, companies seem more concerned about whether the building they are in will allow them to grow harmoniously. “The flexibility of the lease has become more important for tenants, particularly in the BPO/SSC business. They want to be able to expand or reduce the space they occupy depending on the firm’s current conditions and needs. Just as companies increase or reduce their employment based on the number of projects they are working on,” said Katarzyna Kubicka, senior leasing manager for offices and hotels at Echo Investment. Put that in writing

ings who sometimes have to include break options in order to compete with newer and technically better schemes. In the case of the latter, the standard lease length is still the invariable 60 months. Other provisions that companies sometimes wish to include in their lease agreements include subleasing, rent revisions and options for renewal, Patynowski said. And with the market being the way it is, they will likely get more and more of what they want. u

Hadley Dean, CEO, Compass Offices, EMEA

Images: Shutterstock

It’s not only the space itself where companies seek flexibility. “Tenants, especially corporate clients, often ask to include a ‘break option’ within the agreement,” explained Karol Patynowski, Associate Director responsible for Tenant Representation at JLL. “The landlord has the obligation to take part of the ‘unwanted’ space or propose the lease of additional space. In the case of expansion, the tenant might have the opportunity to select a specific space, in a specific place and at a specific time (pre-defined option) or may have the right of lease privilege according to space availability,” he added. Patynowski admitted however, that it is mainly the landlords of older office build-

“What we see is that more and more companies need flexibility, which is becoming increasingly important for business. Signing long leases now, unless you are a huge corporation, is a thing of the past. And even in a corporate environment, people are using the office like a hotel, sitting every day in a different place. More and more attention is paid to the appearance of the interior itself – it should be furnished in a comfortable and creative way: comfortable chairs, sofas, something that will provide relaxation – arcade machines or a bowling alley. The way we use offices is changing very fast. Another trend is building a creative community of people who work around us. This community is rewarded with bonuses and discounts for mutual support in business, which means that traditional networking, which focused on the exchange of business cards during workshops, is now taking economic shape. I think what they got used to is a very boring space, where they cannot really express themselves or be free. On the other hand, you have many incubators that are full of eighteen-year-olds, who want to play baby football and listen to the latest songs. Our offer is for ‘adult’ business people who still want to have fun. They want to feel like the work environment is their second home and they can come to work and relax. Their team and staff can be a part of something real. And that is what we offer.”

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / INTERVIEW

THE RISK PAID OFF

WBJ Observer: Is Poland a mature market compared to Western Europe? Piotr Mirowski: 2015 was an exceptional year as far as investment volume is concerned. The €4.1 billion brought us to the levels we saw in 2005-2007. We saw price increases in all asset classes, as well as growing liquidity and a larger number of investors, who were also more geographically differentiated than ever. Until recently, the main market makers on the Polish market were German investment funds and insurance firms. Last year saw a significant widening of the investor pool, including Far Eastern investors from Hong Kong, Singapore, China and South Korea, as well as interest from Australia. The market has also witnessed strong interest in high-profile corporate acquisitions, the largest of which was the purchase of a stake in Echo Investment S.A. by a JV of Griffin Real Estate, Oaktree and PIMCO. Poland has proven itself to be a mature market. Still, the investment volume could be higher. On the one hand, €4 billion is 45 percent of the entire CEE volume (including

MARCH 2016 • WBJ OBSERVER

LAST YEAR’S INVESTMENT VOLUME OF €4.1 BILLION MIGHT SEEM A LOT FOR POLAND. BUT WITH ALL THE INVESTOR INTEREST AND CAPITAL COMING ITS WAY, ONE CAN’T HELP BUT WONDER WHY THERE AREN’T MORE TRANSACTIONS TAKING PLACE. PIOTR MIROWSKI, HEAD OF INVESTMENT AT COLLIERS INTERNATIONAL, EXPLAINS HOW POLAND’S MARKETS ARE DEVELOPING AND WHICH CITIES AND ASSETS ARE ON INVESTORS’ RADARS RIGHT NOW

Russia), but on the other, it’s less than 1 percent of the entire European volume. There are limitations that are difficult to overcome, mainly the availability of investment-grade product available for sale. How will the current political changes influence the real estate market? Investors are looking at us more carefully, but not much has changed. The Polish context pales in comparison to what is happening in the world and in the EU. Brexit, China’s slowdown and the immigration crisis are all much more important in the macroeconomic context, and in turn, for the real estate business. Both investors, as well as financiers are convinced the economy’s foundations are strong. We should not expect a breakdown. As far as the investment volume is concerned, this year should also see strong results. The thing that could potentially limit the investment volume is the availability of properties for sale. Last year we saw €4 billion of real estate assets change hands. But if we’d had more best-quality assets for sale, it could easily have been €8 billion.

Europe and global investors are all looking for yield. Europe, especially the CEE, still offers higher yields than Asia or Western Europe, for instance. That’s why those that have purchased properties here are in no rush to resell them. Since real estate prices in Poland are going up, and yields are getting closer to those in Western Europe, is Poland still attractive compared to Western markets? The gap has indeed decreased. But, there is still some cushion between yields in Poland and in Western Europe. I don’t expect prices to go up as much as they did last year. Which assets increased the most in price? Logistic assets gained the most and, consequently, saw the highest yield compression. The volume of transactions in this asset class was €400 million, (11 percent of the entire value), which is significantly smaller than the year before (when €750 million of logistics assets changed hands), however, demand and competition remained very high. The main transactions included the sale and

Image: Colliers

I N T E R V I E W B Y B E ATA S O C H A

LOKALE IMMOBILIA / INTERVIEW

leaseback of Amazon’s distribution center in Wrocław, while there was also substantial interest in performing multi-let properties with strong tenant retention, such as MLP’s warehouses in Tychy and Bieruń, which were successfully sold to Deka Immobilien, one of the largest players in the Polish market. Last year showed that there is strong investor interest in performing properties, there was also very strong demand for office properties. Similarly to warehouse projects, what investors pay the most attention to is the duration and quality of cash flow generated by such properties: the longer the lease agreements, the higher the pricing of such schemes. The largest transactions involved Skanska on the selling-side, including the office portfolio in Katowice and Kraków (four buildings in total) sold for ca. €160 million to a Swedish fund NIAM, and Dominikański office building in Wrocław sold to a fund managed by Union Investment. Well-leased, modern shopping centers that are dominant in their respective catchment areas, located in regional cities, were coveted by investors and benchmark yields were set along the way. Let’s look at individual markets then, starting with Warsaw. On the one hand, we have growing oversupply in the city, on the other hand, some of the most interesting properties are located here. For many investors, Warsaw is the first point on Poland’s investment map. While in early 2015 the development pipeline did seem to outweigh the demand, later on in the year demand picked up significantly, so much so that the vacancy rate has in fact decreased over the past 12 months. The market saw not only the highest gross take-up, but also the highest net absorption. Over the past five years, net absorption stood at an average of 180,000 sqm, while in 2015 it reached a level in excess of 280,000 sqm. This did have an impact on investors and their perception of the market. Aren’t the figures slightly obscured by the fact that some major tenants, such as Samsung, which consolidated its office space leasing 21,000 sqm in Warsaw Spire, are technically leasing both the new and the old space? It’s true, statistics don’t cover that, and therefore it might reflect on the vacancy rate later on. Notwithstanding the above, the level of net absorption was a highly positive factor. Where did this absorption come from? It’s predominantly expansions of tenants

already established on the Polish market, and we are also seeing new tenants from the financial and hi-tech sectors. They usually establish large hubs here, leasing several thousand sqm. What are the prospects for the market this year? The vacancy rate could increase towards the end of the year, given the fact that a few major projects are approaching completion. However, last year’s high tenant activity has already proven analysts’ forecasts wrong. Those forecasts saw the vacancy rate approach 20 percent. We already know that won’t happen. Now, let’s focus on regional markets. They seem to have taken center stage last year. It’s true. Until recently, the proportion between Warsaw and regional cities in terms of investment volume was more balanced. Last year, deals in regional markets amounted to 80 percent of the entire volume of €4.1 billion! That’s an amazing result, which clearly displays strong investor confidence in these markets and their fundamentals. We saw some record-breaking transactions in the retail market, including the sale of Riviera in Gdynia for €291 million, Karolinka and Pogoria in southern Poland for ca. €221 million, Stary Browar in Poznań and Bonarka in Kraków (as part of the corporate acquisition of Trigranit by TPG). The buyers behind these transactions are of different provenience: Germany, South Africa and the US. This shows how diversified capital sources are, and that they are targeting smaller cities. The office market is where the most has changed. Two years ago the feedback we got most frequently from investors was: “These are all shallow markets. They have yet to develop.” Meanwhile, over the past 18 months they have proven to be very active, with a lot of tenant demand. This has changed investor sentiment. There is a lot of tangible evidence. Companies such as UBS, Hewlett Packard, CapGemini and ABB are entering the regional markets and expanding their centers there. That’s the reason why all the major institutional players are eager to take advantage of the opportunity and acquire assets outside of Warsaw. What assets are they looking for in regional cities? Buyers put a lot of emphasis on location fundamentals during their underwriting. The buildings they are looking to acquire mustwell connected by public transport, close

to universities and the city center. We’ve taken part in a number of such deals over the past year, including the Dominikański scheme, a transaction that was initially signed in late 2014 at the early construction stage, as buyers are ready to commit to transactions on a forward-purchase basis. The deal was finalized in late 2015. The risk paid off: Skanska delivered a high-quality scheme, well leased to HP, UBS and other international corporate occupiers. NIAM, which acquired the portfolio of Skanska had confidence in the regional markets story: they have the right demand-supply dynamics, appropriate critical mass and deep labor markets. The latter is what attracts the BPO industry: young, well-qualified people with knowledge of foreign languages and displaying high work efficiency, entering the job market. Other investors, including GLL Real Estate Partners, Warburg HiH-Invest, TPG, Griffin Real Estate and Tristan Capital Partners had a similar approach, and subsequently concluded their respective deals in Wrocław, Kraków and Łódź. Wrocław and Kraków have long been considered the dominant regional centers. Now we can see the other regional cities opening up: Poznań, Łódź, the Tri-City. Are these cities and their assets considered “core”? In my opinion new buildings delivered to the market by the most renowned developers can be classified as “core.” They have all the elements a “core” asset needs: great locations, excellent technical specifications and typically strong cash flows underpinned by reputable tenants. They require very little asset management and that’s why they are coveted by passive investors who are looking for very low exposure to risk. Would you say that investors put Polish regional cities on a par with other CEE capitals: Prague, Bratislava, Budapest and Bucharest etc. Definitely yes. These regional cities are established CEE business centers. What should we expect this year? Higher liquidity and more capital coming into Poland. Whether or not we will repeat last year’s result of €4 billion is not certain, while we will likely see some transactions outside the official channels on an off-market basis, it largely depends on the availability of properties for sale. u

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / LOGISTICS

Off limits B Y A L E X H AY E S

Changes to the law regulating agricultural land threaten to hinder the sale of development land for the warehouse industry, but things are not as bad as they seem

n 2004, Poland acceded to the EU. At that time many countries, including Germany, demanded transitional measures to block swathes of Polish workers emigrating in search of employment. However, it was not just the countries of the so-called “Old Europe” that were being skittish about the prospect of free trade with what is now the sixth largest EU country by population. Poland, for its part, demanded controls on the sale of farmland to foreigners, which it feared was going to be sold off en masse due to its relatively low price. Until May this year, purchases of farmland by EU nationals who are not Poles will still require the permission of the government.

MARCH 2016 • WBJ OBSERVER

No-go zone

And after May this year, well who knows? The Polish government is trying to renege on its promise to free up land sale. In essence, the law that is about to come into force states that only those who are already registered as farmers within a given region may buy farmland there. Moreover, if someone wishes to sell such land, it must firstly be offered to its tenants, then those with adjacent plots and the previous owners, all of whom have the right to hold up the sale. With such restrictive conditions, it is difficult to imagine any farmland being sold to anyone once the Act comes into force in May. Still, there is no way of knowing for certain how the final law will be drafted, and

in one sense the proposed amendments are less restrictive than the law as it currently stands. A matter of definitions

The issue at stake is how the law will define what farmland is. “If the land is subject to the local zoning plan, the master plan, it’s no longer agricultural land, but only 30-40 percent of plots in Poland have a local zoning plan in force,” stated Tomasz Olszewski, regional director for JLL. This means that most of the land that would in the past have been suitable for industrial and warehouse development should, under the new law, be classified as agricultural land, which may only be bought by individual farmers living

LOKALE IMMOBILIA / RETAIL

in the district in question who have been farming for a period of five years. Currently, developers can apply for an individual planning permit (the so-called “W-Z” in Polish). The law that is scheduled to come into force on May 1 of this year will block this procedure, which means the majority of development land will be unavailable. Except for the fact that it will likely never come into force in this form, as the government is already working on amending it. “The latest draft of this new law brings us back to where we are today in terms of industrial acquisitions,” Olszewski summarized. For the warehouse industry, nothing will change. Nothing to worry about

Indeed, developers remain unconcerned. “The changes of the Act do not affect our business because, pursuant to existing legislation, companies with foreign capital may only purchase land covered by local zoning plans,” explained Paweł Sapek, the senior vice president and country manager of Prologis Poland. Besides, Prologis has no immediate need to find additional land for its projects: “Our existing land portfolio fully secures Prologis’ development plans for the next three years,” explained Sapek. He also pointed out that regulating the sale of agricultural land is nothing new in the EU. In France, almost all rural land transactions have to be referred to SAFER, a government agency which has the right of first refusal on most purchases. Nonetheless, foreigners and companies can still buy rural land in France, and because SAFER has to buy each property in its entirety, it is frequently unable to prevent large land transactions going through for simple budgetary reasons. In Poland, the new law will limit one person’s holdings to 300 hectares.

All images: Shutterstock

Is it really legal?

The question of the legality of such an Act remains unanswered. Just as Olszewski emphasized, “As you know, in the EU we have the freedom of capital movement, so theoretically everybody can purchase real estate of any type.” But, according to Józef Forystek, a partner in the Forystek & Partnerzy law firm, you don’t have to look as far abroad as Brussels to question the legality of the legislation, just a quick look at the Polish constitution will do. The regulations will ban the resale of agricultural land for a period of ten years, which contravenes Article 64. He also wor-

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / LOGISTICS

ries that the state will have a mechanism to nationalize farmland, in which the newly formed government body, the Agricultural Property Agency (ANR), will be able to dictate the price of land and exercise the right of first refusal. “For a legal Act to cease to apply, the Constitutional Tribunal must declare its unconstitutionality and its loss of legal effect. With the current political situation in Poland it is difficult to foresee anything like this in this field,” he explained. Hope for the best

All that warehouse developers can do now is cross their fingers, and hope that the new draft law being prepared by the government will not be changed so much as to once again prevent the purchase of development land. There is certainly still huge demand for new warehouse space. In 2015, “the total supply of modern space stood at nearly 10 million sqm. Demand levels last year were some of the best ever recorded. Developers delivered over 100,000 sqm more than in the previous year,” explained Magdalena Szulc, the business unit director for Central Europe at Segro.

MARCH 2016 • WBJ OBSERVER

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“IF LAND IS SUBJECT TO THE LOCAL ZONING PLAN, THE MASTER PLAN, IT’S NO LONGER AGRICULTURAL LAND, BUT ONLY 30-40 PERCENT OF PLOTS IN POLAND HAVE A LOCAL ZONING PLAN IN FORCE. TOMASZ OLSZEWSKI, REGIONAL DIRECTOR FOR JLL

Room for more

There is also still a lot more room for further growth, with Poland still lagging behind the space offered by Western European markets. “It is said that a mature market offers approximately 1-1.5 sqm per inhabitant. In Poland, with over 38 million inhabitants, so far there’s around 10 million sqm of warehouse space,” stated Szulc. By comparison, Germany, a country of around 80 million people, has some 80 million sqm of warehouse space. According to Segro, the fastest developing area of Poland is around Poznań where the largest amount of new space was delivered, and yet the vacancy rate remained

one of the lowest in the country. Despite the fact that the new proposed law makes it almost impossible for anyone to buy farmland, warehouse developers can be grateful to the government, firstly for delaying the implementation of the previous government’s legal changes, and secondly for reinstating the law in regard to the purchase of development land. But, as Olszewski pointed out, “We are living in a very uncertain environment,” and there is no way of being certain that the draft law, which is currently being discussed, will remain the same in principle when it is rushed into action before its May deadline. u

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / INTERVIEW

Tentative optimism

After a record-breaking 2015, this year is unlikely to be equally as good for the warehouse sector. WBJ Observer asked Robert Dobrzycki, managing partner at Panattoni Europe, to sum up the events of the past year and explain how the current political and economic changes in Poland could impact the warehouse market I N T E R V I E W B Y B E ATA S O C H A

The market saw nearly 1 million sqm delivered over the past year, with Panattoni having the biggest share in recent completions (443,000 sqm). How many projects are you working on right now and where? Currently, Panattoni Europe is expanding its own parks at key sites in Central Poland, Silesia, as well as in secondary locations, outside the mainstream – in Szc-

MARCH 2016 • WBJ OBSERVER

zecin, Bydgoszcz and Lublin. We are also building a BTS scheme, which includes manufacturing. As of the end of 2015, 567,000 sqm of new space (73 percent of the total pipeline) was in the process of development. JLL’s recent report states that 35 percent of all space delivered last year was speculative. Isn’t that too much? It’s still far from the levels we saw in 2006 and 2007, when the majority of space was built speculatively. Presently, there are few projects built entirely on a speculative basis, usually some of the space is already pre-leased. Besides, most of the speculative space gets leased while the scheme is still under construction, so there is no real cause for concern. Furthermore, construction costs for warehouse space are at an all-time low. Back in 2007, construction costs were somewhat inflated, which, coupled with a downturn in demand for warehouse space, resulted in a sharp increase in vacancies. Now, the situation is stable. The government is working on a bill that will regulate land trading. Some versions of the bill include a provision that land without a master plan will be almost impossible to sell. Could that have an impact on warehouse developers? Depending on the final version of the bill, it will likely have some impact on land

supply and availability. As always, limited availability leads to a temporary imbalance on the market and could lead to an increase in rents. For investors who already have a portfolio, this would be a positive, as the assets they already have will only get stronger. For developers, it might spell some difficulties. What about the other legal changes in Poland, the retail tax for instance, which will impose a tax on large retail tenants? Will these affect the warehouse market as well? The tenant market is rather stable and will not be influenced much. Competition has not changed, after all. What will be affected by the new tax is the investor market. It is the sensitive element here. Many market players find the current situation uncertain. Some transactions will be put off while investors wait for the dust to settle. This uncertainty is the biggest threat right now. Has the bank tax, introduced in February, increased the cost of capital for you? Yes, our cost of capital has risen due to the tax. Do you expect it to affect your business in any way? Of course, to some extent it will affect it, but it should not restrict the development of the market. All in all, do you think 2016 will be as good as 2015? I wouldn’t expect this year to be better than 2015, given the general geopolitical unrest, China’s slowdown, and the Russian banking sector. But, I would say it could be almost as good as last year. u

Images: Panattoni Europe

WBJ Observer: Last year was exceptionally good for the warehouse market, with a record-breaking 2.2 million sqm of space leased and net take-up close to 1.5 million sqm. Where did the demand come from? Robert Dobrzycki: While previous years brought more capital to the warehouse market, in 2015 we saw a significant improvement in the tenant market. We saw increased demand from the automotive sector as well as from e-commerce. Interestingly, the latter involves companies that are moving their logistics to Poland from Western Europe. Until recently, Poland served Western European markets in a manufacturing capacity. Now, it also serves its consumption needs. These days it’s not unusual to have goods moved from Germany to distribution centers located in Poland, only to have them shipped back to German customers. In terms of liquidity and capital, the market has been developing very nicely over the past year.

LOKALE IMMOBILIA / INTERVIEW

“THESE DAYS IT’S NOT UNUSUAL TO HAVE GOODS MOVED FROM GERMANY TO DISTRIBUTION CENTERS LOCATED IN POLAND, ONLY TO HAVE THEM SHIPPED BACK TO GERMAN CUSTOMERS.

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / RESIDENTIAL

B Y A DA M Z D R O D OW S K I

On a roll COULD THIS YEAR SEE THE SECTOR REPEAT ITS EXCELLENT 2015 RESULTS?

MARCH 2016 • WBJ OBSERVER

continue to perform very well this year, even though a number of new challenges lie ahead, in particular related to legal changes that could lead to a decrease in bank lending. Record apartment sales

Developers sold a total of approximately 51,800 apartments in the six largest new home markets across Poland – Warsaw, Kraków, Wrocław, the Tri-city, Poznań

Images: Shutterstock

The

residential market in Poland posted a record performance last year, with new apartment sales in the period having reached their highest level in history. The supply of new residential stock remained at a very high level too, reflecting the positive sentiment in the sector. Property market experts predict that both the demand, and the supply side of the market will

LOKALE IMMOBILIA / RESIDENTIAL

and Łódź – last year, which was over 20 percent more than in 2014, according to a recent report by Reas. The result was also almost 48 percent better than in 2007 – the best year of the housing market boom that preceded the outbreak of the global financial crisis. Sales improved throughout 2015, rising from almost 11,500 in Q1 to more than 14,400 in Q4, the REAS study found. Some of the major developers managed to achieve double-digit y/y growth in 2015. Warsaw Stock Exchange-listed Dom Development, for one, sold 2,383 homes last year, which marked a 23 percent increase upon the figures for 2014. The company hopes to improve the result this year. For its part, another large Warsaw Stock Exchange-listed developer, Robyg, offloaded 2,333 housing units in 2015, which was 10 percent more than in the previous year. The company plans to sell approximately 2,500 apartments this year. In the opinion of REAS experts, the availability of government-provided financial support for first-home buyers, granted within the Mieszkanie dla Młodych (Apartments for the Young – MdM) program, was among the key drivers of demand for new apartments in 2015. Buyer interest in the program increased considerably in the final few months of last year – in most of the six cities analyzed by Reas, the number of applications for the subsidies grew by more than 40 percent q/q in Q4 – and that translated into better sales results in those markets. Additionally, the relatively low interest rates helped drive demand – on the one hand, they encouraged buyers to take out mortgages, on the other hand, they made investors allocate their capital in rental apartments, rather than keep their money in banks. The REAS report also pointed to psychological factors, which have boosted sales of late. With the labor market situation improving and escrow accounts ensuring safe transactions, Poles are making purchase decisions more readily than before, the study said.

REAS report. Indeed, in response to the excellent sales results, many developers have already stepped up their development activity in order to take full advantage of the current market boom. Many homebuilders hope to be able to offload even more housing units this year than in 2015. Last year, in Warsaw, Kraków, Wrocław, the Tri-city, Poznań and Łódź developers put a combined total of 51,900 new apartments up for sale, compared with the 47,500 apartments made available for purchase in 2014, the REAS report indicated. Central Statistical Office of Poland (GUS) data shows that the number of apartments on which developers began construction in 2015 rose by 24.1 percent y/y to 86,498. When it comes to building permits, the y/y increase was 25.5 percent (97,248 apartments last year).

IN 2015, THE LARGEST RESIDENTIAL DEVELOPERS SPENT PLN 200-250 MILLION ON THE ACQUISITION OF SITES FOR FUTURE PROJECTS

Developers remain optimistic, which is evidenced both by the record number of new construction initiations and building permits granted, and the developer activity with regard to the purchase of new sites, said Bartosz Jankowski, director, new homes market, at Home Broker. Practically all the developers that Home Broker cooperates with are now targeting annual apartment sales levels in excess of ten percent higher than last year, Jankowski said. “The record apartment sales results recorded by residential developers in 2015 and the positive market prospects for 2016 will allow for the launch of many new investments,” said Radosław Bieliński, spokesperson at Dom Development. One can expect that developers will remain active when it comes to the starting of new schemes. Dom Development itself plans to increase its offer by a total of approximately 2,800 apartments in 13 locations this year, around 400 more than in 2015, Bieliński said. The impressive volume of purchase transactions recorded in the building land market in Poland last year perhaps best reflects the ambitious development plans of residential developers for the

Ambitious development plans

Provided that the Polish economy continues on its current positive trajectory and avoids major turbulence this year, the supply of new apartments in the near future should stay at a level similar to that seen last year, according to the

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / RESIDENTIAL

coming months. Homebuilders were the most active land buyers in 2015. The combined value of building land transactions last year amounted to over PLN 2.25 billion – the best result since 2006 – with the housing sector having accounted for as much as 70 percent of that figure, according to Colliers International data. In 2015, the largest residential developers spent PLN 200-250 million on the acquisition of sites for future projects. The trend is forecast to continue this year, with many new transactions expected in Warsaw, Wrocław, the Tri-city and Kraków. “There are no signs at the moment that would indicate a decrease in demand for and investor interest in building land zoned for residential schemes,” said Emil Domeracki, senior associate, investment services/land, at Colliers International. However, could the residential market in Poland repeat its excellent performance this year? According to housing sector experts, the market will definitely continue to grow, but the record apartment sales and supply levels seen last year will be difficult to achieve again. The growth prospects for the coming months generally remain very positive. Nevertheless, a number of new regulations will likely have some negative impact on the availability of bank financing and could thus, reduce buyer and developer activity. “There is no macroeconomic rationale to believe that fundamental market factors will change drastically in the next couple of months,” said Maximilian Mendel, partner, transaction advisory, at Reas. However, lending will decrease somewhat, Mendel added. Last year, the banking industry strongly supported growth in the residential market, and this should continue to be the case, but banks will certainly increase margins on mortgages and development finance as a reaction to the new bank tax and increased regulatory costs. The potential costs of the conversion of CHF-denominated loans into PLN will likely add to this once they come into effect. Meanwhile, the higher equity requirements applicable since the beginning of January will decrease the number of households eligible for mortgages. “The question is to what extent,” Mendel said. On the other hand, the

MARCH 2016 • WBJ OBSERVER

“THERE ARE NO SIGNS AT THE MOMENT THAT WOULD INDICATE A DECREASE IN DEMAND FOR AND INVESTOR INTEREST IN BUILDING LAND ZONED FOR RESIDENTIAL SCHEMES. MdM program should continue to support the housing sector in 2016, both in terms of apartment sales and developer activity, according to Mendel. “Interest rates are likely to remain at a low level. Most Polish and international institutions predict robust growth of the Polish economy, based on strong domestic demand, improvements in the labor market and public investments,” Mendel argued. Developers should be able to adjust part of their offer to the demand of institutional investors, interested in rented apartments and alternative products such as student accommodation and senior housing. A major risk for the residential industry seems unlikely in 2016, Mendel said.

Also, Sławomir Horbaczewski, a real estate market expert and former vice president of the management board at Warsaw Stock Exchange-listed developer Marvipol, was of the opinion that the housing sector in Poland is in for a period of stable growth in the coming years. According to Horbaczewski, neither the imposition of the new bank tax, nor the introduction of higher owner equity requirements (currently 15 percent of the total property value) has, to date, had any significant negative impact on the decisions of new apartment buyers. The balanced macroeconomic situation and the stable building land market allow developers to plan projects with apartments that are priced at stable and predictable levels. Crucially, the demand for new homes is, to a large extent, generated by natural economic and social factors. This is why even the planned phasing out of the MdM program in the next few years will not perturb the market. 2016 should see the further strengthening of demand in the new homes market, especially in Warsaw and other large cities, Horbaczewski added. u

Image: Shutterstock

Positive growth prospects

WBJ Observer presents

LIVING IN THE CLOUDS – 5 QUESTIONS ABOUT THE APARTMENT TOWER MARKET The dynamic growth of the residential tower sector is no surprise. Living in the clouds not only means breathtaking views, but also a five-star hotel comfort level of living and a profitable investment – says Charles Weston Baker, Director of International Property at Savills International

How does Warsaw compare to other capital cities in the world in terms of price? In Warsaw, a luxury apartment, finished to a top world-class standard, costs much less than in other metropolises in the world. Prices here are three times lower than in Paris or Moscow and four times lower than in New York. In addition, gross rental yield in Warsaw is 8.5 percent, significantly outperforming achievable yields in many other large European cities, such as London (2–5.5 percent), Paris (3–4 percent), Berlin (3–4 percent), or Budapest (6–7 percent). That is why flagship Polish projects, such as ZŁOTA 44 – which is now one of the tallest and most luxurious residential towers in Europe – are attracting the interest of investors from all around the globe.

CHARLES WESTON BAKER, DIRECTOR OF INTERNATIONAL PROPERTY AT SAVILLS INTERNATIONAL

Does the profile of a luxury property buyer differ depending on the country where a given property is located, and what is it like in Poland? The profile of a luxury goods market consumer is similar, regardless of their country of origin. Clients of this type have precisely defined expectations and are accustomed to a specific style and quality of life, which must be guaranteed by a property, regardless of its location. This is why, in an increasingly globalized marketplace, we see that people buying luxury property in Poland demand the same high standards offered in other major capitals of the world. What factors influence decisions when purchasing luxury property? The primary influences are the quality of the location, which guarantees communication links and the proximity to the best shops, restaurants, and cultural facilities. It is equally important to have the highest standards of apartment fitouts, designed by the best architectural studios. But today, it’s not enough. Nowadays, clients look for unlimited access to amenities available on their doorstep such as, a swimming pool, fully equipped gym, massage rooms, saunas, or even a cinema. Only this combination guarantees interest from even the most demanding clients. Do you think that a property can play a significant role in promoting a city, or even an entire country? Of course. It is, to a large extent, architecture that makes cities popular among tourists and promotes them on a global scale. Such examples are numerous. One of them is certainly provided by ZŁOTA 44 – designed by the worldrenowned architect Daniel Libeskind, the skyscraper has undoubtedly enhanced the standing of Warsaw on the global map of the most recognizable, prestigious properties. It has granted Poles access to a comfort and lifestyle that has been on offer in other European metropolises for a long time. WBJ OBSERVER • MARCH 2016

BROUGHT TO YOU BY SAVILLS INTERNATIONAL

March is an important month in the real estate sector because of the MIPIM trade show. This year, the residential market will play a special role as, for the first time in many years, it has been selected as the leading theme of the exhibition. A narrow, but dynamically growing portion of the entire residential property market is comprised of skyscrapers – very challenging and complex investments. Why, despite the great scale of these projects, is the number of apartment towers in the world increasing? CHWB: The primary driver for skyscraper development is the limited space and rising value of land in cities, which makes high-rise development very attractive. Equally, the renaissance of urban living is boosting demand for skyscrapers in central locations. People who have achieved high-level economic status want to make maximum use of the opportunities connected with living in a metropolis. Given their professional activities, good transport connections are certainly essential, but access to the city’s cultural and entertainment facilities matters as well. Equally, the five-star hotel standard, which is ensured in skyscrapers by the concierge services, or the availability of amenities and recreational facilities, such as a swimming pool, private cinema, or gym are highly valued. Today, such standards are offered all around the world by residential towers, so their development is beneficial not only to the development companies, but also to more and more demanding and conscious customers.

LOKALE IMMOBILIA / INTERVIEW

THE BIGGER PICTURE I N T E R V I E W B Y B E ATA S O C H A

POLAND, AND OTHER CEE COUNTRIES HAD A REMARKABLY GOOD YEAR. THIS YEAR IS ALSO LOOKING GOOD, EVEN THOUGH SOME AREAS AND ASSET CLASSES MAY FACE RE-PRICING. WBJ OBSERVER ASKED PATRICK DELCOL, CEO OF BNP PARIBAS REAL ESTATE FOR CENTRAL AND EASTERN EUROPE, ABOUT THE SHORT AND LONG-TERM PERSPECTIVES FOR POLAND AND THE REGION

How did CEE countries perform compared to the rest of Europe? This has been a tremendously active year for the whole of Europe. The total investment volume reached €259 billion, surpassing even the previous record, achieved in 2007. Germany in particular had an increase in deal volume by 40 percent compared to 2007. Last year was also exceptional because, for the first time, Warsaw attracted less than 20 percent of the entire volume, meaning investment was much more evenly spread around the country. That was not the case in Hungary or Romania, where investment was concentrated predominantly in Budapest and Bucharest. Where is the capital for CEE countries coming from? Europe and the US principally, but Asian and South African investors also poured

MARCH 2016 • WBJ OBSERVER

money into the European real estate markets. The reason why Europe is attracting so much interest from across the world is the current historically high differential between real estate yields and interest rates, in a relatively safe and stable environment. In the CEE region, the lowest prime yields

have not been lower than 5.5 percent, with some exceptions (Prague high streets). Secondly, a lot of financial products are very unstable at the moment. The stock exchange is yo-yoing. Investing in real estate offers much better mid-term stability to investors. As for opportunistic and value-add

“THE INDUSTRIAL MARKET STILL ATTRACTS A LOT OF ATTENTION. IT IS A NICHE MARKET. IT IS DRIVEN BY THE GROWTH IN INTERNET SHOPPING. THIS APPETITE FOR INDUSTRIAL PROPERTIES IS GOING TO CONTINUE FOR THE NEXT TWO TO THREE YEARS.

Image: Raiffeisen Polbank

WBJ Observer: What was last year like on the real estate market in Poland and CEE? Patrick Delcol: The statistics speak for themselves: this was one of the best years in history for CEE. Poland recorded investment volumes of €4.1 billion. It was also a great year for the Czech Republic, which saw €2.65 billion of real estate change hands. In many cases, buyers concentrated on buying platforms, meaning not only assets, but entire platforms of assets, plus in some cases, shares of companies owning assets. Such was the case with the deal concerning the acquisition of Michał Sołowow's shares in Echo Investments.

LOKALE IMMOBILIA / INTERVIEW

investors, they are in search of high yields, such as what the Romanian and Hungarian real estate markets have to offer, for instance. CEE markets therefore offer a wide menu to various investors in terms of yield levels and asset classes. As for the origin of capital, there is a dichotomy between Poland and the rest of CEE. Indeed, the Polish commercial real estate market is more than 95 percent dominated by foreign capital, while the Czech Republic and Hungarian markets are much more balanced and find investment from more domestic funds. Why is it so? My personal explanation for this goes back to the way these economies were privatized in the post-communist period. In the Czech Republic, Slovakia and Hungary privatization took the form of the distribution of vouchers to the population. These vouchers then started being collected by local groups, which accordingly built up conglomerates operating in various sectors (telecoms, construction, real estate, finance). Some of them expanded massively, built up portfolios and accumulated real estate assets. They even grew beyond their original territory borders. In Poland, public companies were privatized by tenders, sold to foreign investors, listed on the stock exchange. Nowadays, we lack Polish domestic investors that are more active on the Polish commercial real estate market.

Image: Jan Malinowski/WBJ

Which asset classes are attracting the most attention now? The industrial market still attracts a lot of attention. It is a niche market. It is driven by the growth in internet shopping. This appetite for industrial properties is going to continue for the next two to three years. Still, it has to be priced correctly, and sometimes the segment is viewed as a little too hot, which makes investors turn to other destinations. This had an impact on the Polish volume of industrial investment last year, relative to other asset classes and contrary to Romania for example, which is attracting more and more attention in that logistics/ industrial niche. How is Warsaw seen by investors? Is it still an attractive destination? We are currently closing transactions on the Warsaw market. But interest has been mitigated by the oversupply. On the other hand, it has been influenced by such factors as in-

frastructure – the second metro line opening, the ring road and various other transportation connections. This is the reason, among others, why the Mokotów office district is being re-priced – investors are less interested in increasing their concentration factor in that zone, or if they do, they want the accessibility issue to be resolved when setting the price. Meanwhile, other areas of Warsaw have been taking off, such as the Al. Jerozolimskie corridor and the western side of the city center. You can see the CBD moving westwards. The current oversupply will continue to push rents down for the next 18 months. Office rents are the lowest they have ever been. Another influential aspect is the aging of the Warsaw office market: over 20 percent of office buildings are more than 15 years old. They are to be refurbished, remodeled or demolished. The way some offices were designed in the 1990s no longer fits clients’ requirements: wide and costly peripheral HVAC systems, low ceiling heights, lack of natural light. That rejuvenation process has already started. Moreover, please note that Warsaw, unlike other CEE capitals is still characterized by large zones of empty plots of land. Plenty of such opportunities are not likely to create any upward pressure on rents. What about Poland’s regional cities? They seem to be on everyone’s radar these days. Which cities have the best perspective? Clearly Kraków, Wrocław and the Tri-City area, mainly thanks to the BPO/SSC industry. Kraków has even been ranked the number one outsourcing destination in Europe. Have the recent political changes in Poland had any impact on investor sentiment towards Poland? The problem so far has been the uncertainty, and also the manner in which changes/ new bills are being introduced: signed overnight, in a hurry, denying any constructive criticism. Some of the changes have already had an impact on the real estate business, such as the recently introduced bank tax, which will increase mortgage and commercial loan costs and, thus affect the residential market. What about the impact of the tax on commercial developers? The bank tax may change the way develop-

ers obtain resources. The tax may affect the competitiveness of domestic-based banks versus foreign-based ones. The government is now deliberating on what shape the retail tax should take. If it does implement this tax, will it affect the real estate business? The retail tax may also have an impact. Not only in real terms: creating inflationary effects and possible interest rate upward pressure. At the same time, we know that the retail tax has been set up to allow for the 500+ child benefit project, which should counterbalance, in consumption terms, what retailers may lose in tax terms. It will however, give buying investors an argument, even if not fully materialized, for the re-pricing of assets. This is partially what occurred in Hungary. How have investors perceived the lowering of Poland’s S&P rating then? Financial institutions are raising eyebrows. Thus far, investors still see Poland in a very positive way, but they are looking at the country more carefully. Still, the policies of QE (quantitative easing) adopted by the Fed and the ECB, among others, have poured a lot of money onto the markets, which in turn are now looking for placement. Real estate yield differentials and CEE markets in Europe are offering them one of the best opportunities for that purpose. What is the long term perspective for Poland and the CEE region? CEE countries are attractive: they offer three-four times higher growth rates than Germany in the long run. What will happen if the support stops after 2020? That will be a major challenge for Poland. The country is devoting a lot of money to infrastructure and R&D. But, the more you increase the debt now, the more difficult it will be after 2020. In a few years, Poland may have to contribute more to the EU budget than it receives. And it will need reserves for that. Another challenge is deciding whether or not Poland should join the euro zone. Putting it simply, there may not be the means for that. Moreover, with what is currently going on in the EU – Brexit – they may lose their voice in the EU if they do not become a member of the euro zone soon. u

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / REGIONAL OFFICE MARKETS

B Y A L E X H AY E S

Escaping the capital

Is a capital city representative of the entire country? The answer is clearly no, yet many investors who come to Poland rarely ever manage to escape the environs of Warsaw. When it comes to the office market, the question still remains, what have regional cities in Poland got to offer?

Alchemia, GdaĹ&#x201E;sk

LOKALE IMMOBILIA / REGIONAL OFFICE MARKETS

Images: Cushman&Wakefield, Skanska

2015, 643,000 sqm of office space was completed in Poland, 366,000 sqm of which was in the top eight regional markets. In the years 2016-2017, modern office stock will continue to grow and “unless external factors, such as the macroeconomic situation, slow this trend, we can expect another record-breaking year on the modern office space market,” said Kamila Wykrota, head of Consulting & Research at Cushman & Wakefield. Take-up increased by as much as 44 percent in these cities, reaching 580,000 sqm. A new record as well. “Global corporations have more and more confidence in the Polish market, and the general outlook for the coming years is more than optimistic,” said Krzysztof Misiak, partner and Regional Cities Director at Cushman & Wakefield. As per usual, business services, HR, IT and financial companies played the biggest role in creating demand for offices in regional markets, accounting for 70 percent of the total take-up, according to Knight Frank. “As a result, despite high developer activity and against earlier forecasts, vacancies remained stable with a slight downward trend,” said Agata Holak, consultant at Knight Frank’s Market Research department. Kraków Kraków currently has 672,000 sqm of class A office stock with 258,700 sqm under construction, 60 percent of which is scheduled for delivery by the end of 2016, according to Colliers International. The city has boasted the lowest vacancy rate for years (around 4 percent). It also features an international airport and the second highest student population in the country. Currently, the BPO sector occupies 52 percent of the office space. One of the developers in the city is Buma. When asked why the company had chosen Kraków for projects such as Quattro Business Park and DOT the company replied, “Kraków has been the permanent base of our company for 25 years. It is here we took our first steps, and contributed

to creating standards that match the region’s specific character.” But who wants to set up in a regional city like Kraków? According to Buma, the answer is clear. “Just like in the majority of regional cities, the main sector that leases office space is that of business service companies, such as BPO, SCC, IT, and R&D businesses.” Wrocław In 2015, Wrocław’s office stock increased by 78,000 sqm, which was the highest new supply among all regional cities. Currently, the southern city has some 600,000 sqm of class A office space, but this represents less than half of the total stock. There is currently a further 186,000 sqm under construction, which makes Wrocław the second fastest developing regional city, after Kraków. Thanks to the high volume of leases (112,100 sqm over the course of 2015), the vacancy rate in Wrocław fell to 8.8 percent from 11.1 percent a year earlier, according to Colliers International. According to Arkadiusz Rudzki, the managing director of Skanska Property Poland, “Wrocław has always been important for us. This is illustrated by the fact that we have developed more office projects there than in any other regional market in Poland.” The company’s Green 2Day project should be completed by December 2017 and will offer a total of 17,000 sqm. Again, it’s the business

Investor’s perspective Last year’s investment figures clearly show that regional markets are gaining traction. “Until recently, the proportion between Warsaw and regional cities in investment volumes was more balanced. Last year, deals in regional markets amounted to 80 percent of the entire volume of €4.1 billion. It’s an amazing result which shows investor confidence in these markets,” commented Piotr Mirowski, head of Investment at Colliers. Developers are well aware of what makes their projects a valuable product for investment funds looking for good yields and low risk. “Investors looking for opportunities in regional markets look at well-commercialized office schemes, offering stable rents, long leases, low vacancies and high quality tenants. Both the growing R&D sector and BPO play an important role in these markets,” said Michał Obara, investment director at Echo Investment.

services sector that the company is targeting, which Rudzki described as, “the biggest motor engine for the development of office markets in cities outside Warsaw.” Tri-City The Tri-City (comprising Gdańsk, Gdynia and Sopot) is the fourth largest agglomeration in Poland with its own international airport. Moreover, despite the poor connections with cities such as Kraków and Wrocław, the infrastructural situation is still improving, with most of the A1 north-south highway already

Green 2Day, Wrocław

WBJ OBSERVER • MARCH 2016

LOKALE IMMOBILIA / REGIONAL OFFICE MARKETS

completed. Current modern office stock stands at 463,800 sqm, with a further 112,300 sqm currently under construction. The vacancy rate stands at 14.1 percent, as per Colliers data. In 2014 the BPO sector took up 28 percent of the available space. Torus, one of the local developers active on the market, has chosen to concentrate on the BPO sector. “From the very beginning we targeted BPO/SSC and IT companies as our key customers. We were observing the Kraków and Wrocław office markets and we were absolutely sure that some of the companies present there, as well as new investors, would come to Gdańsk to expand their operations,” Maciej Brożek, head of business development at Torus explained. The company’s flagship Alchemia project in Gdańsk will offer 80,000 sqm, with the final stage to be completed in October 2017.

Poznań Poznań is another city that boasts a large student population, and also one that has a good knowledge of the German language. The vacancy rate stands at 16.9 percent with an existing stock of 341,400 sqm and 57,100 sqm under construction. This is another market where Skanska is currently active. “Poznań is listed among the best regional locations for investments in Poland. The city plays a very important role in our strategy. We are already building Maraton, our second office project here, and we are at the procurement stage for the next strategic plots of land for new schemes,” explained Rudzki. Maraton will offer 25,000 sqm and should be completed in November this year. For him, the strength of Poznań as a regional business city is almost self-evident. “Poznań is a city with the lowest unemployment

Largest lease transactions in 2015 Tenant

mBank Shell Business Operations Samsung IBM PZU mBank Capgemini Polska State Street EY CH2M

Area (sqm) 24,000 22,000 21,000 20,000 17,500 17,500 17,100 15,000 13,500 13,400

Quattro Business Park, Kraków

Location

Przystanek mBank, Łódź Dot Office, Kraków Warsaw Spire, Warsaw Wojdyła Business Park, Wrocław Konstruktorska Business Center, Warsaw Pałac Jabłonowskich, Warsaw Quattro Business Park, Kraków Alchemia, Gdańsk Rondo 1, Warsaw CH2M Center, Kraków

Maraton, Poznań

Images: Skanska, Buma, Kuryłowicz&Associates, Echo Investment

Source: Colliers International

LOKALE IMMOBILIA / REGIONAL OFFICE MARKETS

What are BPO/SSC tenants interested in? How do you attract the best of the best?

Silesia Star, Katowice

Images: Skanska, Buma, Kuryłowicz&Associates, Echo Investment

rate in Poland and the highest living standard among the regional cities,” he explained. Katowice Katowice, along with its surrounding cities, is the second largest agglomeration and the third largest academic hub in Poland. It has 298,000 sqm of existing office stock, with 48,000 sqm in the pipeline. The vacancy rate currently stands at 15.4 percent. One of the biggest projects under development in the city is Silesia Star, which is being developed by LC Corp. On completion of its second stage, which is scheduled for the third quarter of the year, the twin buildings will offer over 25,000 sqm of office space. Łódź Łódź is yet another city to boast an international airport. Currently, however, the average low wages and the city’s proximity to Warsaw has resulted in a situation where young workers would often prefer to try

BPO/SSC tenants put a lot of weight on the location of the scheme and transport links in the area. An ideal location is not only easily accessible, but also features places that attract young people, such as cafes. Business services companies also want their buildings to offer multipurpose rooms, including chill-out rooms, quiet work areas, spacious and modern kitchens etc. Outside infrastructure also factors into the equation. A canteen, bank or at least an ATM, recreational

space and bike routes all play a role in selecting a building. The standard of the office space is always important. Most companies in the BPO industry allocate some 8 sqm per workstation. This puts more emphasis on HVAC installations, which translated into improving the working environment for everybody. An effective installation must comply with specific energy consumption. Most companies, especially those dealing in new technologies, also put a lot

their luck in the capital instead. City authorities have been trying to stop the exodus by refurbishing large chunks of the city’s post-industrial red-brick real estate. The vacancy rate in Łódź stands at 8.1 percent with an office stock of 261,800 sqm. At present, 94,300 sqm is under construction. Echo Investment, one of the developers active in the city, is currently developing the 19,000-sqm Symetris Business Park project, which is scheduled for completion in October 2017. “Łódź is beginning to stand out more and more as an interesting place for investors. It doesn’t yet have such a big office market, but relatively speaking, a very large amount of space is under construction. This reflects the positive attitude and belief of investors in this aspiring market,” said Bianka Kuchcińska, a senior associate in the office agency division of Colliers International. Szczecin and Lublin Szczecin is planning to become a major BPO hub, but suffers from poor connections to the capital. It has over 110,000 sqm of modern office stock with a vacancy rate of 10.6 percent. Currently, there is only 7,500 sqm under construction in the northwestern city. Another market that has only recently joined the “100,000+” club is Lublin, in eastern Poland. In 2015,

of emphasis on protecting their know-how and data. Ensuring data security requires uninterrupted power, which involves installing power generators, as well as well-equipped server rooms, cables and other installations. However, all this mustn’t increase service charges too much. Office flexibility is also important. The tenant may wish to join two rooms together or divide one bigger room into two, depending on what projects its teams are currently working on.

Symetris Business Park, Łódź the city’s office stock increased by a mere 3,000 sqm. However, with 66,200 sqm in the pipeline, the city’s stock of 101,300 sqm will soon increase by over 50 percent. At the end of 2015 the vacancy rate in the city fell to 10.6 percent. The office market across Poland appears to be booming, and the importance of regional cities seems certain to increase. At the end of 2015, the total amount of office space in the nine major Polish markets reached 7.5 million sqm, with regional cities accounting for nearly 40 percent of the entire stock. “The so-called yield gap between Warsaw and regional cities is expected to decrease substantially within the next few years,” explained Kuchcińska. In her opinion the markets that you should be keeping your eye on are Kraków, Wrocław and the Tri-City. u

WBJ OBSERVER • MARCH 2016

WBJ Observer presents

WE ARE NOT SLOWING DOWN

Last year, Warsaw saw over 800,000 sqm of office space leased. The result is over 30 percent higher than the figure for 2014. Do you expect that success to be repeated this year? In the coming months we will continue to see positive trends in leasing. However, a large number of office complexes, which are scheduled to be delivered soon, will certainly lead to an increased vacancy rate. We will continue to cope with the tenant's market, while developers will outdo each other in the race to provide increasingly innovative services and top-of-the-range solutions. Therefore, the coming months will be especially difficult for the owners and landlords of older buildings of inferior quality and location. Businesses will be moving to modern developments that outperform the older ones in terms of the quality of the offered space, cost effectiveness, etc. Does it mean that high quality investments won’t have any problems with finding new tenants? It will definitely be easier for modern offices to attract tenants. Companies understand that moving to a new building is not only a matter of prestige, but it can also yield tangible savings, for example in electricity consumption. Besides, more and more companies appreciate the strong HR potential of a modern office and treat a potential relocation as an excellent opportunity to review and update the company’s policy and internal procedures. So, what will be the major challenges developers could face in the coming months? The large supply of new office space in Warsaw and the growing requirements of tenants will certainly be a major

MARCH 2016 • WBJ OBSERVER

challenge. Tenants are no longer impressed by just any modern office complex. Today, in order to attract occupier interest, developers must not only differentiate their property in the market, but also offer a number of additional incentives, including rent-free periods and fit-out contributions. What’s the difference between the Polish real estate market and other markets in the region? With up to 4.5 million sqm of stock, Warsaw remains the biggest, and at the same time, the most competitive and challenging market in the region. Compared with other CEE countries, Poland stands out in terms of volume of new investments coming on-stream and attractiveness for investors. Which Warsaw locations are the hottest right now? Depending on their character, some organizations prefer to be located in downtown Warsaw, while others choose alternative locations. One of the most attractive business areas are those located close to the city center, in northern Warsaw, including the vicinity of Gdański railway station, where we are developing our Gdański Business Center project. Another interesting part of Warsaw is the Wola district and the surroundings of Rondo Daszyńskiego. However, it is important to remember that several large projects are currently being constructed in this zone, which could become a problem in terms of securing tenants. Despite widespread belief to the contrary, Mokotów still remains one of the most attractive business locations, both for developers and tenants – with the number of companies headquartered in this area and numerous sites for new investments. And what is the situation in the Warsaw building land market when it comes to office sites? Although Warsaw is one of the most dynamically developing cities in the whole CEE region, there is still a lot of room for new investments, with new plots being put up for sale by entities including both private owners and state-owned companies such as Poczta Polska or PKP S.A. At HB Reavis, we are constantly looking for sites for our future office projects. We have some particular locations we are interested in but I’d rather not reveal them at this stage. Since entering the Polish market in 2008, HB Reavis has established itself as one of the leading developers in Warsaw, with over 155,000 sqm of office space delivered. What are your plans for the coming months? That’s true. In less than eight years of operations in Poland we have managed to become a key player, with a great impact on

BROUGHT TO YOU BY HB REAVIS

In January 2016, Standard & Poor’s cut its rating for Poland, citing the radical policies implemented by its new government, and sending the country’s currency tumbling. Do you think it might threaten the investment potential of Warsaw and Poland? Every political turmoil and economic turbulence has an impact on the perception and attractiveness of a country among investors. The changes announced by the new government have raised some fears, but I think such reservations are temporary. In my opinion, there are no concerns about a long-term suspension of investment projects, or the outflow of foreign capital. Poland is still considered one of the top European countries worth investing in. The driving force for the office property market in Poland is the modern business services sector, which according to a report published by ABSL, is likely to employ 250,000 people in shared service centers around the country by 2020.

WBJ Observer presents

STANISLAV FRNKA, CEO OF HB REAVIS POLAND

the growth of the Warsaw commercial property market. 2016, just like the previous years, will be extremely busy for us and, I’m sure, very fruitful. In the coming months we are going to deliver the first of two buildings of the West Station complex in the immediate neighborhood of the Warszawa Zachodnia railway station, as well as the second stage of the Gdański Business Center project.

When are you going to launch construction on the Chmielna project? How is work on the scheme going? We are finalizing all formalities and our plan is to launch construction this year. There is interest in the project. We have already had preliminary talks with a number of potential tenants who highly appreciate the project’s excellent location, design and the “all-in-one” business environment we are offering.

WBJ OBSERVER • MARCH 2016

OBSERVER RANKING

OBSERVER TOP 15

Investment Fund Management Companies RANKED BY TOTAL NET ASSETS IN PLN

1 IPOPEMA TFI

5 SKARBIEC TFI

www.ipopematfi.pl

www.skarbiec.pl

47,853,476,376.95

TOTAL NET ASSETS: Number of managed assets: 105 Chairman of the board: Jarosław Wikaliński Shareholders: 100 % - Ipopema Securities

2 TFI PZU

28,303,271,401.64

6 FORUM TFI

13,877,617,518.74

TOTAL NET ASSETS: Number of managed assets: 26 Chairman of the board: Tomasz Stadnik Shareholders: 100 % - PZU

TOTAL NET ASSETS: Number of managed assets: 71 Chairman of the board: Mateusz Sarapata Shareholders: 100 % - Forum International Holdings

www.pzu.pl

www.forumtfi.pl

3 PKO TFI

7 NN INVESTMENT PARTNERS TFI

www.pkotfi.pl

www.nntfi.pl

18,425,757,073.23

TOTAL NET ASSETS: Number of managed assets: 40 Chairman of the board: Piotr Żochowski Shareholders: 100 % - PKO BP

4 PIONEER PTFI

16,702,459,516.04

14,307,103,825.48

TOTAL NET ASSETS: Number of managed assets: 48 Chairman of the board: Marek Rybiec Shareholders: 100 % - SKARBIEC Holding

13,376,993,091.32

TOTAL NET ASSETS: Number of managed assets: 36 Chairman of the board: Małgorzata Barska Shareholders: 100 % - NN Investment Partners International Holdings

8 AVIVA INVESTORS POLAND TFI 12,617,689,070.77

TOTAL NET ASSETS: Number of managed assets: 44 Chairman of the board: Krzysztof Lewandowski Shareholders: 100 % - Pioneer Pekao Investment Management

TOTAL NET ASSETS: Number of managed assets: 22 Chairman of the board: Marek Przybylski Shareholders: 100 % - Aviva Towarzystwo Ubezpieczeń na Życie S.A.

www.pioneer.com.pl

www.aviva.pl

MARCH 2016 • WBJ OBSERVER

OBSERVER RANKING

9 BZ WBK TFI

12,515,305,615.81

TOTAL NET ASSETS: Number of managed assets: 25 Chairman of the board: Jacek Marcinowski Shareholders: 100 % - BZ WBK Asset Management www.arka.pl

10 UNION INVESTMENT TFI 9,746,352,477.26

TOTAL NET ASSETS: Number of managed assets: 33 Chairman of the board: Małgorzata Góra-Dubiela Shareholders: 100 % - Union Asset Management Holding AG www.union-investment.pl

11 COPERNICUS CAPITAL TFI 8,268,644,357.81

TOTAL NET ASSETS: Number of managed assets: 86 Chairman of the board: Marcin Billewicz Shareholders: 92.52 % - Copernicus Securities, 7.48 % - MCF Accounting Services

www.copernicustfi.pl

12 ALTUS TFI

7,495,197,452.62

TOTAL NET ASSETS: Number of managed assets: 69 Chairman of the board: Piotr Osiecki Shareholders: 39.44 % - Piotr Osiecki, 5.83 % - Andrzej Zydorowicz, 7.06 % - ING OFE, 5.89 % - Europejski Bank Odbudowy i Rozwoju, 5.71 % - Quercus TFI

13 AGIOFUNDS TFI

5,382,278,599.16

TOTAL NET ASSETS: Number of managed assets: 38 Chairman of the board: Adam Dakowicz Shareholders: 31.03 % - Tomasz Kona, 15 % - Jacek Jastrzębski, 15 % Mariusz Skwaroń, 9.99 % - Adam Dakowicz, 9.48 % - Spółdzielczy Bank Rozwoju, 6.5 % - Marcin Chadaj, 9.48 % - IT CARD Centrum Technologii Płatniczych, 3.5 % - Decimus www.agiofunds.pl

14 OPEN FINANCE TFI 4,054,912,242.49

TOTAL NET ASSETS: Number of managed assets: 19 Chairman of the board: Marek Mikuć Shareholders: 76.25 % - Open Finance, 6 % - Krzysztof Rosiński, 6 % LC Corp, 5.25 % - Marek Mikuć www.opentfi.pl

15 MILLENNIUM TFI

3,905,312,246.27

TOTAL NET ASSETS: Number of managed assets: 12 Chairman of the board: Robert Borecki Shareholders: 100 % - Millennium Dom Maklerski www.millenniumtfi.pl

DATA PROVIDED BY

Image: Shutterstock

www.altustfi.pl

WBJ OBSERVER •MARCH 2016

E V E N T S / IPNO FL RI SA H S TI RNUF CR TAUS RT ER UDCI T AU M RO EN D S

POLISH INFRASTRUCTURE DIAMONDS AWARDED

Warsaw’s second subway line and Łazienkowski bridge among the Polish Infrastructure winners The seventh “Polish Infrastructure” conference and formal award gala for the greatest representatives of the infrastructure and construction industries took place on February 23, 2016, at the Sheraton hotel in Warsaw

Polish road infrastructure This subject was initiated by special guest, Włodzimierz Szymczak, President of the ECCE. The upcoming challenges related to Polish roads were discussed in Panel two, with regard to innovation and the lowest price criterion. Contractors and investors agreed that Polish roads should be safe and of top quality, regardless of the material used. Innovation was also discussed by Piotr Chełkowski, Managing Director and Board Member of DOKA Polska, who emphasized that the harmful effects of the lowest price criterion have been discussed for years, but the most expensive projects are still implemented.

MARCH 2016 • WBJ OBSERVER

CMY

Positive opinions on Polish rail and Warsaw subway Libor Lochman, Executive Director of CER, and Jerzy Lejk, President of the Management Board of Metro Warszawskie, opened the last panel. The discussion focused on the future and priorities of Polish rail infrastructure and the optimum conditions for Pendolino. Michał Olszewski, Deputy Mayor of Warsaw, announced a new fleet of buses, sewer system expansion, bike connections between cities, and a new project: car Veturilo. The “Polish Infrastructure Diamonds” gala The second awards gala for the most distinguished representatives of the infrastructure industry was opened by Bogdan Rzońca, Deputy Head of the Parliamentary Infrastructure Committee. Winners included: Clifford Chance (Legal Advisor of the Year), Zarząd Morskiego Portu Gdańsk and Torpol (Efficiency in Management), Budimex (CSR Leader), Faurecia Polska (CSR Distribution), Orlen Asfalt (Innovation Leader), Doka Polska (Innovation of the Year), Olsztyn (Investment of the Year, Zarząd Dróg Miejskich and PORR Polska Infrastructure (Investment of the Year), Transprojekt Warszawa (Project of the Year), Federico Tonetti at Lafarge and Artur Watzl at Strabag (Top Executive).

Images: Executibe Club

anel one focused on the fundamental issues of Polish infrastructure, including changes in public procurement and public-private partnership law. The new financial perspective, which was considered positive, and the necessary changes in public procurement criteria were also discussed. The participants agreed that the industry needs more public-private partnerships and more simplified legislation.

CMY

WBJ OBSERVER • NOVEMBER 2015

GADGETS TECHNOLOGY TO MAKE YOUR LIFE EASIER

WE LIVE IN AN AGE OF GADGETS: some are useful, but most are just a waste of time and money. We sift through the latest available tech to pick those that we believe will help you live your life more comfortably and confidently.

Activeon Solar X

Embrace traditional activities with a modern twist with the help of this solarpowered stove. Its unique cylindrical design allows the sun’s rays to heat the model to over 280°C in around 10 minutes, also accounting for the sun’s movement across the sky as the day passes. A bit of cloud cover or colder weather won’t disrupt the stove’s operations – the top-end model will even use the stove’s heat to recharge your electronics while your food is cooking. Price: $279- $759 depending on model

Gosunstove.com

MARCH 2016 • WBJ OBSERVER

Price: $430

Activeon.com

Price: PLN 4,499

irobot.pl

Images: GoSun Stove, Activeon, Sensorwake, Fitbit, Misfit, Hello, irobot

GoSun Stove

Roomba 980

Roomba 980 is another remote vacuum cleaner, which are currently all the rage. This model can be controlled through a special app. It builds a map of its surroundings so it knows which obstacles to avoid and which area has already been cleaned. You can schedule its cleanings, set up modes and much more. It can also detect high concentrations of dirt and debris with its sensors.

More solar power – this action cam will recharge on its own outside in the sun, allowing you to quickly get it back up and running after a long session. Sporting an f2.4 wide-angle lens, this gem will capture all your outdoor exploits in crisp 4K definition. With the built-in Wi-Fi functionality, you’ll be able to view the video live on your smartphone and adjust settings on the fly.

Fitbit Blaze

It may officially be a fitness watch, but you wouldn’t know it just by looking at it. With its style rivaling that of regular watches, the Blaze monitors your heart rate, steps and daily calories burned, it also tracks your workouts as you’re doing them. You can also use it to adjust your music volume and view messages from your phone. A bevy of different-colored bands and frames allows you to personalize your watch and make it stand out from the rest. Price: £160

Fitbit.com

Hello Sense

A more scientific approach to a long-standing problem. Sense is an alarm clock that analyzes your circadian rhythm, and uses that data to wake you up during the lightest part of your sleep cycle, allowing you to get up with no grogginess or fatigue. It retains all the sleep data it records, allowing you to analyze your sleep cycles over time and search for patterns. Price: $130

Hello.is

>> Sensorwake

Getting out of bed tough in the morning? Does the mere sound of your alarm make you want to hurl it out of the window? Maybe this will help. Sensorwake drops sounds in favor of smells, using a variety of pleasant fragrances to wake you up. From espresso to freshly mown grass to baked croissants, stimulate your olfactory senses to get you out of bed feeling fresh.

Sensorwake.com

Misfit Ray

Price: $89

Fitness trackers are all the rage nowadays, but here is one that combines the tools of its competitors with everyday style. Misfit Ray is a simple aluminum cylinder that can be at attached to a bracelet or necklace. You can use its accelerometer to monitor your sleep and motion, track your calorie intake, or even get vibration alerts for incoming calls or texts. A whole lot of power in a little thing. Price: $100

Misfit.com

WBJ OBSERVER • MARCH 2016

LIFESTYLE / LATIN RESTAURANTS

LATIN AMERICAN RESTAURANTS IN WARSAW CEVICHE BAR

As Warsaw’s food scene flourishes, so does its representation of multicultural cuisine. Thirty years ago, the very concept of Latin American cuisine was as distant as the continent itself. Today, a good fajita is more than within the realms of possibility. If you’re craving a meal built upon a South American heritage- be it traditional, or a little less so, here are a couple of places to satisfy your appetite.

Aleja Lotników 1

ul. Twarda 4

SUEÑO TAPASBAR AND RESTAURANT

SUEÑO wouldn’t necessarily fit under the category of Latin American restaurants (it offers a range of fusion style tapas- which is actually a Spanish concept), but I couldn’t do a write up without its inclusion. There are definitely some Latino influences, and their variation of chorizo cooked in cider is possibly one of the best I’ve had in Warsaw. In addition, SUEÑO does offer an easy, breezy ambiance, a general highlight of Latin American restaurants. Great for drinks and appetizers. ul. Oboźna 9

EL CARIBE

Cuban cuisine with a Caribbean twist, El Caribe has definitely wowed more than just myself, evident by the flood of positive reviews listed on TripAdvisor. That is to be expected: the place is inviting, the food enticing. The menu is authentic, offering more than that stereotypical variation of Latin American dishes. Their Ropa Vieja (a traditional Cuban dish made of succulent shredded beef) is a winner. If you enjoy a good homemade drink, then chances are you will more than enjoy El Caribe. But, what I appreciated most was how efficient the service was. The waiting staff are pleasant and helpful - that really does wonders to the overall experience. ul. Mickiewicza 9

Images: Shutterstock, Vedika Luthra

EL CZORI

Okay. So, El Czori may not be the most highend Latin American restaurant in Warsaw, nor would it be the place to go for a killer ambiance (it is located within a flea market). But if you’re looking for authentic Chilean and Argentinian food, there’s no place that can serve you better. Owners Cristian Rubin and Gonzalo Munoz clearly have a passion for food, which is evident through the quality of cuisine. Although this restaurant is known for the Choripan (a kind of sandwich made from chorizo and crusty bread- great portion size for only PLN 12) they make great empanadas as well. Prices? Good. Food? Excellent.

Martin Gimenez Castro was heavily lauded for his work at Salto. The chef has recently embarked upon a second venture, Ceviche Bar, offering a more casual atmosphere to its high-end counterpart. Although the concept Ceviche (fresh fish cured in lemon or lime, peppers and spices) is not new and belongs to the cultural heritage of many Latin American countries, it has only recently taken Europe by storm, and is a fairly new addition to the Warsaw food scene. While Ceviche Bar is, essentially a bar, it does offer a variety of appetizers, not to mention a pretty decent lunch menu.

MARCH 2016 • WBJ OBSERVER

reklam

LIFESTYLE / MEXICAN RESTAURANTS

WBJ OBSERVER • MARCH 2016

reklama_OBSERWER_10-2015_v1_krzywe.indd 1

2015-10-28 10:39:48

LIFESTYLE / LATIN RESTAURANTS

SALTO

If it is fine dining you seek, Argentinianinspired restaurant Salto is the place to go. The food is art. Each dish is meticulously arranged, exuding sophistication. The combination of carefully selected ingredients create a multitude of delectable flavors. Few items make up the menu- but this is expected from a restaurant that chooses its items carefully, guaranteeing great food. The wine menu is also painstakingly written to complement the food. As Salto is known for its steak, the Ojo de Bife (seasoned rib eye steak) is definitely a must. ul. Wilcza 73

DOS TACOS

Bright mosaic-like patterns tossed with jungle-themed walls makes up the décor of Dos Tacos- funky, no doubt, but oddly, it works. The menu includes Churros with chocolate sauce and Flan: I’m all about the sweets, so naturally, Dos Tacos is a firm favorite. Apart from desserts, the bar/grill offers a range of Mexican food, from Tostadas to Alambres. There’s something to order for everyone (including the kids). If it is hearty Mexican comfort food you crave, head out to Dos Tacos. And in case you’re up for an evening in, they do deliveries. ul. Jasna 22

GRINGO BAR

If you’ve been following the development of Tex-Mex cuisine in Warsaw, you’ve most likely heard of Gringo Bar, most famous for their burritos, amongst various other items. Mexican cuisine is all about using fresh ingredients, a quality that Gringo executes well. At a time where frozen meals are out and slow-cooked food is in, Gringo caters for its audience. ul. Odolańska 15

YEYE

Yeye opened its doors in the Wilanów district early this year. Soft music plays in the background, and the whimsical, Mexican themed walls play on those warm Latino vibes. The kitchen is open, which means you can glance over to see the chefs work their magic. Fresh tortillas, tart limejuice and sizzling meat merge into a soft taco. And while those were great, my favorite dish was their chili kissed molten chocolate cake paired with mango mousse and a hint of vanilla. The food is not bad, but the ambiance is reason enough to seek out Yeye. ul. Franciszka Klimczaka 1

ul. Senatorska 27

MARCH 2016 • WBJ OBSERVER

Images: Dos Tacos, Yeye, El Caribe

EL POPO

One of my Mexican friends recommended El Popo- when a native approves, that means it’s good. So does the fact that the restaurant has been a favorite in Warsaw for over two decades. In a city where a restaurant’s life is more often than not, fleeting, that means something. The atmosphere is inviting. Warm, bright colors make up the décor, and you can often find a live band performing. The chefs know how to make a killer Tres Leches (Three Milk) cake – and of course, they throw together a great guacamole, freshly made, of course.