Warsaw Business Journal May 2017

WARSAW

BUSINESS JOURNAL C o m m e n t a r y | Te c h

MAY 2017 ~ No. 04/05 (38)

N e ws | Re a l E s t a t e

For daily news visit us at wbj.pl

DEEP LEARNING IN BIG DATA POLANDâ&#x20AC;&#x2122;S LOGISTICS SUCCESS

HOME APPLIANCES EXPORTS

CEO OF THE ADECCO GROUP Alain Dehaze talks about the job market mismatch and youth unemployment

MAY

IN REVIEW News highlights from the previous month from wbj.pl

FEATURES Home appliances .................24 Logistics................................28 Facebook generation ...........32

TECH INSIGHTS Deep learning.......................37 Big data marketing...............42

LOKALE IMMOBILIA Vantage interview.................. 46 Real estate news................... 47 Shopping malls...................... 50 Tkalnia interview................... 54 Boardrooms............................ 56

COMMENTARY

Adecco’s CEO ALAIN DEHAZE explains the labor market mismatch, EU agricultural policy head CZESŁAW SIEKIERSKI discusses Europe’s food market challenges, Fujitsu’s JUAN MARIA PORCAR paints a picture of digital innovation, Deloitte’s MICHAŁ SIEKIERZYŃSKI shares his views on the growing uncertainty in taxing real estate deals, and WKB legal expert MACIEJ SZAMBELAŃCZYK chimes in on electromobility in Poland

Fashion.................................67 Getaways................................. 70 Cocktail bars.........................74

EVENTS CEEQA...................................76 Partner events......................80

MAY 2017 W B J

TOP, SHUTTERSTOCK, BOTTOM; COURTESY OF JLL

LIFE + STYLE

FROM OUR EDITOR

Facing The Future BY MORTEN LINDHOLM

TALENT. POLAND HAS IT, and far more than just a little. Having traveled a bit around Europe over the last couple of months, that’s something I’ve come to both realize and appreciate. Although it’s sometimes kept concealed, the mentality out here is something quite unique: mixing ambition and work ethic with creativity and entrepreneurial spirit, it sometimes feel that the Polish are one step ahead of many of their neighbors. But will this last – will the next generation be capable of carrying the torch that has been lit? Are the new generation of leaders and managers equipped to tackle the challenges and disruptions that the future may bring? To answer these questions, and a few more besides, we’ve sat down with Alain Dehaze, the CEO of Adecco to discuss the state of the labor market. This issue, we also take a closer look at Generation Facebook; the opportunities for marketers created by big data analytics; the export boom being enjoyed by the smart home appliance sector; and Poland’s growing appeal as a European logistics hub. Our real estate desk has been equally busy, bringing you the lowdown on the development potential of shopping center in Poland’s smaller cities. Last, but certainly not least, we’ve taken a voyeuristic prowl around the slinkiest boardrooms the country has to offer... Enjoy the read...

Meet the WBJ team ECONOMICS & MANAGEMENT EDITOR Sergiusz Prokurat is a PhD Economist and lecturer at universities in Poland and Spain (the Euroregional University of Economy in Poland, Lazarski University, Universidad de Granada, Universidad de Jaume I). Author of the best-selling book “Work 2.0: Nowhere to Hide.” He writes about economic science and practical management methods.

Morten Lindholm Editor-in-Chief/Publisher mlindholm@valkea.com

Beata Socha

Managing Editor

bsocha@wbj.pl

Adam Zdrodowski

Managing Editor, Lokale Immobillia

azdrodowski@wbj.pl

Michael Evans Copy Editor

Kevin Demaria Art Director

Contributors

Ewa Boniecka Magdalena Iwańska Karolina Papros Sergiusz Prokurat Michał Siekierzyński Dominka Tkaczyk Alex Webber Sales

Justyna Lund jlund@valkea.com Katarzyna Pomierna kpomierna@valkea.com A. Julita Pryzmont jpryzmont@valkea.com PR & Marketing

Agata Wolny awolny@valkea.com Magdalena Czopur Subscriptions

mczopur@valkea.com Krzysztof Wiliński Print & Distribution

dystrybucja@valkea.com Magda Gajewska Event Director, Valkea Events

mgajewska@valkea.com Contact: phone: +48 22 257 75 00 fax: +48 22 257 75 99 e-mail: wbj@wbj.pl

BUSINESS & MARKETS EDITOR Karolina Papros is an Associate at a leading HR consultancy firm. She specializes in Global Mobility. Karolina holds an MA in Applied Linguistics (University of Warsaw) and in Society and Politics (Center for Social Studies, IFiS PAN/Lancaster University). She writes about business, markets & industries, and human resources.

WBJ.pl

POLITICS EDITOR Ewa Boniecka is a veteran journalist with a degree in journalism from the University of Warsaw. Her career includes several stints as a foreign correspondent in London, New York and at the UN. She has published several books about living in English-speaking countries as well as a collection of interviews with politicians. She interviews top politicians, ambassadors and businesspeople.

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MAY 2017 W B J

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PORTRAIT BY KEVIN DEMARIA

TECHNOLOGY EDITOR Dominika Tkaczyk holds a PhD in Computer Sciences. She is an Assistant Professor at the Interdisciplinary Centre for Mathematical and Computational Modelling at the University of Warsaw (ICM UW). She writes about data science and artificial intelligence, new possibilities created by data-driven research and their role in modern business and society.

S&T offers IT services and 24/7/365 support for clients in the banking sector, public administration, public utility, retail, power and other industries. Its offices are located in 13 cities in Poland, while the service and sales network covers the whole country â&#x20AC;&#x201C; all the while maintain 4-hour SLA. S&T relies on the competence and achievements amassed over the 40+ years of cooperation with Polish companies, gained at demanding projects that implemented our partnersâ&#x20AC;&#x2122; and our own solutions.

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NEWS HIGHLIGHTS OF THE PAST MONTH FROM WBJ.PL

I said it was obsolete. It’s no longer obsolete,” said US President Donald Trump about NATO, adding that the Transatlantic alliance, which Poland joined in 1999, was adapting to the broader mission against Islamic militants that he had urged. Trump repeated his demand for other states to increase their military spending. “If other countries pay their fair share instead of relying on the United States to make up the difference, we will all be much more secure,” said the US president. - DONALD TRUMP

INSURANCE

SHUTTERSTOCK

Insurer PZU under PM supervision, reshuffles board Prime Minister Beata Szydło said that she took “direct control” over Poland’s biggest insurer PZU. “I will be in charge of supervising the firm,” Szydło said, adding that she believes it will be beneficial for the company. As a financial institution, PZU was previously supervised by the development ministry. But that seems to have changed, when the company’s former CEO Michał Krupiński, considered to be an ally of Deputy PM Mateusz Morawiecki, was dismissed back in March. He was replaced by Paweł Surówka, previously the CEO of PZU subsidiary, PZU Życie. Additionally, PZU appointed Aneta Fałek, Robert Śnitko

and Katarzyna Lewandowska to the supervisory board, and dismissed Jerzy Paluchniak and Paweł Kaczmarek, while another member Łukasz Świerżewski resigned.

levels will be calculated excluding the cost of the incentives program. The program needs to be approved by the company’s general meeting.

RETAIL

LEASING

WSE-listed footwear retailer CCC will seek EBITDA of at least PLN 550 million in 2017, PLN 650 million in 2018 and PLN 800 million in 2019, according to its managerial incentives program approved by the supervisory board, the company said in a market filing. “The program assumes the minimal thresholds for EBITDA that are conditions for launching tranches of the program,” the filing said. The EBITDA

Poland’s leasing market grew by 12.7 percent y/y to PLN 15 billion in Q1, leasing industry lobby Związek Polskiego Lesingu (ZPL) said. Light vehicles (up to 3.5 metric tons) accounted for 44.6 percent of the market, followed by heavy vehicles with 28.2 percent share, while machinery and IT accounted for 25.7 percent, ZPL data showed. “Results reported by the leasing sector in early 2017 are optimistic and bode well for the

CCC plans to reach PLN 800 mln EBITDA by 2019

Poland’s LEASING MARKET worth PLN 15 bln in Q1

W B J MAY 2017

In Review upcoming quarters,” ZPL President Andrzej Krzemiński said. In 2016 the market grew by 16.6 percent to PLN 58.1 billion and ZPL expects a 16.5 percent growth this year.

the ministry plans at least PLN 10 billion in increased tax revenue collection, but that figure, according to the recent statements from the ministry officials, should be higher.

ECONOMY

CURRENCIES

BANKRUPTCIES down in March The number of bankruptcies in February totaled 42, a decrease of 30 percent y/y, according to data from the Export Credit Insurance Corporation (KUKE). In month-to-month terms the figure remained unchanged. “If we assume a 3.7 percent GDP growth for this year, and the increase of net profit margin by 4.4 percent, we anticipate that some 600 companies will file for bankruptcy this year, similar to the levels recorded last year,” KUKE said in a statement. Over the past 12-month period, as many as 580 companies went bankrupt.

Polish companies lost PLN 2.1 bln on FOREX MARKET According to data released by Poland’s Supreme Audit Office, between 2012-2016, Polish companies lost PLN 2.1 billion on the forex market. To prevent such losses in the future, NIK recommends banning forex trading companies from advertising and putting currency exchange websites under the supervision of the financial authority (KNF). According to the audit office, Polish currency exchange websites had turnover of PLN 30 billion in 2015 alone. According to NIK audit, many forex users are not educated enough to know what risks such investments carry and are attracted to it by promises of quick gains. According to NIK, 80 percent of forex market investors have lost on their investments. TELECOMS

PLAY mulling IPO

THE HEART WARSAW launches HealthTech program The Heart Warsaw, a startup ecosystem located on the 38th floor of the Warsaw Spire office scheme in Warsaw, has launched a HealthTech Program to connect readyto-scale tech companies with the largest corporations. In its first year, the program will focus on Telemedicine, Healthcare Analytics and Healthcare IoT. One of the first companies to join the program is AbbVie. The Heart Warsaw, opened in January 2017, aims at building themed ecosystems of mature startups at later stages working in a specific tech area. Earlier this year, The Heart launched FinTech Program – dedicated to the financial industry and Omnichannel Program – for digital transformation of sales and marketing. ECONOMY

Poland seeks billions in TAX REVENUE The Ministry of Finance plans to increase tax revenue collection by PLN 8 billion in 2018, PLN 6 billion in 2019, and PLN 4 billion in 2020, according to the Deputy Finance Minister Leszek Skiba. For this year,

MAY 2017 W B J

Telecom operator P4, which owns the Play brand, is considering launching an IPO, the firm said in a statement sent to the Luxembourg Stock Exchange. “After 10 years of developing Play into a leading Polish cell phone operator, the shareholders and management of Play are reviewing the best options to set the company up for its next stage of growth. A possible option could take the form of an initial public offering,” the firm wrote. P4, which owns Play has tried to sell the operator a number of times, whether through direct sale or IPO. Until now, the company has been mostly financed through bonds issues, and recently conducted a major refinancing of high yielding FX debt. FMCG

Nestlé moves BLUE RIBAND production to Poland Food producer Nestlé announced that it will move its production of the popular Blue Riband wafers to Poland, from its Fawdon factory in Newcastle. As a result of this and other cuts, some 300 people in the UK will lose their jobs. The wafers will be manufactured in Kargowa, western Poland. “These proposals are being made by Nestlé UK to ensure that these sites operate more efficiently and remain competitive in a rapidly changing external environment. Our factory

TRENDING STATS

279

M&A deals closed in 2016, worth €11.2 bln in total

inflation in March (GUS)

4.5%

average employment growth in March (y/y, GUS)

5.2%

wage growth in March (y/y, GUS)

PLN

4,577

average salary in March (GUS)

5,981,700 total employment in March (GUS)

PLN

2.28 bln budget deficit in Q1

4.9%

industrial production growth in February (y/y, Eurostat)

COURTESY OF THE HEART WARSAW

WBJ

in Kargowa, Poland, is a center of excellence for this type of wafer-based product and is the logical place for us to propose Blue Riband production takes place in the future,” the company said. The switch in production will happen in 2019. The Blue Riband wafers were launched in 1936 in Switzerand, and re-launched in 2004. The product is currently not sold on the Polish market. START-UPS

PFR launches PLN 700 mln start-up fund State-owned development vehicle PFR has launched a PLN 700 million fund for financing start-ups, PFR Starter FIZ. The fund will be supplemented with private contributions, PFR CEO Paweł Borys said. According to Borys, several hundred start-ups could receive financing in the coming years. The fund is one of five funds to be launched in the frame of the biggest venture capital platform in CEE with capitalization of over PLN 3.7 billion, including PLN 2.2 billion state funds. Companies with Polish headquarters or local offices will get preferential treatment. They need to have an innovative idea and potential for international expansion, with 10 percent of

the fund earmarked for foreign companies from the CEE region. IT / M&A

Work Service sells IT KONTRAKT for PLN 147 million WSE-listed HR agency Work Service sold its 95 percent stake in IT Kontrakt to private equity fund Oaktree Capital Managenent for PLN 147 million, the company said in a market filing. Work Service acquired IT Kontrakt back in 2012, paying PLN 52 million for 75 percent of shares, later increasing its stake. “In our latest strategy update, Work Service decided to focus on our core business. That’s why we’ve decided to sell IT Kontrakt and use the funds to increase our growth in the temporary work segment, where we’ve just received the regulator approval to take over 25 percent in the Hungarian Pro Human temp agency,” Work Service CEO Maciej Witucki said. The deal needs to be approved by the antitrust watchdog UOKiK. IT / M&A

ASSECO bids to acquire Macrologic WSE-listed IT giant Asseco, through its sub-

sidiary Asseco Business Solutions has offered PLN 59 per share for the 100 percent stock of IT firm Macrologic. The offer values the target at PLN 111 million. The offer will go through only if at least 75 percent of Macrologic shares are sold. Subscription runs from May 8 to June 6. Shares of Macrologic traded at PLN 41.52 apiece on Tuesday. Macrologic specializes in ERP systems and BI analysis, it had PLN 7.1 million net profit last year. ECONOMY

MOODY’S upgrades Poland’s GDP forecast The rating agency Moody’s has upgraded Poland’s 2018 GDP forecast to 3.1 percent from 2.8 percent. According to the agency, stronger private consumption boosted by an improvement on the labor market and a pick-up in EU-funded investments will strengthen the Polish economy. In 2017, the value of EU subsidies to Poland will reach €6.9 billion according to Moody’s estimates, which will account for 1.5 percent of GDP. The agency predicts that the public finance sector deficit in both 2017 and 2018 would amount to 3 percent of GDP. Previous estimates put the figures at 3.2 and 2.8 percent respectively.

SOCIETY

25 mln of Poles use internet, spending 6 hours a day online Poland has 25 million active internet users, according to the report compiled by Deloitte consultancy, the average time they spend online amounts to 6 hours per day, with 4.4 hours on desktop computers and a further 1.3 hours using mobile devices. As many as 14 million Poles actively use social media (in comparison, 10 years ago, there were only 800k such users). According to the study, there are 58.8 million smartphones in Poland (population stands at 38.4 million).

W B J MAY 2017

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Commentary EXPERT VIEWS ON CURRENT BUSINESS AND SOCIAL TRENDS

Poland’s labor market is facing a talent shortage and youth unemployment at the same time. CEO of Adecco Alain Dehaze explains the mismatch

Taxing real estate deals is getting more unpredictable these days – Deloitte’s Michał Siekierzyński shares his views

Europe’s agricultural policy is facing serious challenges, particularly from the increasing protectionism – interview with Member of the European Parliament Czesław Siekierski

Fujitsu’s Juan Maria Porcar discusses digital innovation

Get a lawyer’s take on electromobility in Poland and the ramifications of EU regulations on providing charging services

W B J MAY 2017

WBJ COMMENTARY | ASK AN EXPERT

Bridging the skill gap

WBJ ASKED ALAIN DEHAZE, CEO OF THE ADECCO GROUP, ABOUT THE CAUSES OF YOUTH UNEMPLOYMENT IN POLAND, DESPITE THE RECORD LOW RATES AND THE CHALLENGES THE JOB MARKET WILL HAVE TO FACE IN THE FUTURE

MAY 2017 W B J

INTERVIEW BY BEATA SOCHA

“It would be wrong to assume that all young people are digitally savvy by virtue of their age. The digital divide also exists in younger generations

WBJ: Even though unemployment has fallen significantly

in most countries over the past five years, youth unemployment is still high. In Poland, it’s around 20 percent despite the country seeing an all-time low unemployment level of some 8 percent. How is that possible? Alain Dehaze, CEO of The Adecco Group: There are several causes of high youth unemployment. First, the economy. In good times, young people have no problem finding a job, whether part-time or full-time, as the labor market needs talented employees. Polish GDP is growing so this clearly isn’t an issue in Poland. The second indicator has to do with how good a match there is between the skills needed and those available. It is important that the education system and businesses are aligned, as this way we can ensure that students are well placed to enter the labor market once they graduate. I personally think Poland could do a better job in this regard, and may have to train, upskill and reskill young staff lacking the competences needed today.

MILLION the number of young unemployed people globally

tion in which employers can’t find skilled workers, while millions of young people are forced to spend the crucial first years of their careers fighting to gain, not just valuable, but any kind of work experience. Fortunately, we’re seeing companies that want to get involved and invest in young people but it’s not job done yet, we’ve still got a long way to go.

According to Adecco’s “Young People and Work: Dreams and High youth unemployment is Readiness” report, most of those somewhat difficult to reconcile polled claim to be optimistic with the war for talent and the about their future. They are conemployee’s market that most defident they will find a job upon veloped countries are experiencgraduation and that they are well ing: why aren’t employers willing equipped to do it. Does reality to invest in graduates and train support their optimism? Are they them so they have the necessary really well prepared and do they skills? What is the underlying usually find work easily? cause for this mismatch? It’s great that young people are lookThe world of work is changing fast ing to enter the workforce with such and that’s bringing both opportuniself-confidence, but the findings of ties and challenges. One of the bigthe research mask the fact that the gest challenges is, without a doubt, talent mismatch is one of the main youth unemployment. Young concerns for employers and recruitpeople have been hit worst by the ers today. Around 4 in 10 employers recession on the labor market. Globsay they cannot find the right skills, of children ally, more than 70 million young and it’s also something our recruitentering primary school people are unemployed. ers witness every day. today will end At the same time, a whole host of Many young people looking for a up doing jobs job are highly educated and possess new jobs are being created. It’s estimated that 65 percent of children en- that don’t yet skills and the attitude central to the exist tering primary school today will end modern workforce, from multilinup doing jobs that don’t yet exist. gualism to willingness to work in The real challenge is how we an international setting. Yet at the bridge that gap and avoid the situasame time, we are also seeing a lot

65%

of young people who have fallen through the cracks, outside the system, and it is here that particularly deep pockets of youth unemployment exist. The challenge is to match young people with employers and, if needs be, provide additional training to bridge the skill gap. What kind of skills are the most important? The youngest generation, sometimes referred to as “digital natives” is more acquainted with technology than any of the previous generations. Is that an advantage, or perhaps the excessive reliance on social media makes young people more alienated and socially withdrawn in the real world? Digital skills are in high demand. In fact, most jobs will require digital skills in the future. So-called digital natives will be well-placed to pursue positions where such skills are needed. But it would be wrong to assume that all young people are digitally savvy by virtue of their age. The digital divide also exists in younger generations. The most important skills going ahead will be soft skills. The shelf life of any given skill set is much shorter nowadays, and companies increasingly hire based on soft skills, such as the ability to adapt to different business conditions or the ability to manage conflict and influence peers, rather than hard competencies. So what’s increasingly important

W B J MAY 2017

WBJ COMMENTARY | ASK AN EXPERT

“Keeping the borders closed despite a low birth rate and high social security costs hardly seems like a sustainable strategy

is great uncertainty around Brexit in the UK, one of the biggest markets for Polish emigrants, so it is possible that coming back home may become an attractive option for many Polish people living abroad. What’s more, Poland has a dynamic IT market, with many fast-growing software houses – and skyrocketing wages in the sector. For some Polish specialists, it may be a better idea to be a coder in Warsaw or Kraków than in London, where there is greater competition for jobs and the cost of living is high.

Do you think Brexit will change the balance of power in Poland’s job market? is not so much the specific “hard” international brands. We’ve even In my opinion, Brexit is just the tip skills that one has but the soft skills snapped up some of them ourselves. of the iceberg. With all the buzz that allow us to adapt as the world around the UK, we can’t lose sight of work changes. For instance, Poland ranked 38th out of 109 of global politics, with more turmoil automation and robotics are freeing countries in Adecco’s latest Globaround the immigration crisis, the workers to focus on new tasks and al Talent Competitiveness Index. EU and elections in France. It is responsibilities. Studies also show What does it mean for the country tempting to seek some easy answers that soft skills drive the success of over the next 5-10 years? in this complex world, but it is out of 10 both workers and their employers. The answer is in demography. As unwise. employers say It’s a win-win situation. Polish society gets older and penThe best answer is – it depends. they cannot sions become a bigger burden on the Switzerland and Norway have How long has Adecco organized budget, immigration may be the only find the right shown that there is no need to be a skills on the the CEO for One Month competi- solution. It’s not really about politics full-scale member to cooperate with job market tion? How much can a graduate and societal factors. It’s the maththe EU. I can’t imagine there being learn over one month? ematics of ZUS and social security some sort of great economic and CEO for One Month is now in its that counts. In the end, someone has political wall dividing the English fourth year. Last year we had more to work while others rest. Channel, yet the EU might consider than 54,000 applications, and I exIn my opinion, Poland is becomshowing the rest of the member pect as many as 100,000 applications ing an increasingly attractive councountries that leaving the Union is a this year, as there’s never been this try and a great place to live. Wise bad idea. much interest from young people. immigration policy could further We plan to offer 49 ambitious candi- boost the Polish economy and social How important is internal migradates the opportunity to shadow The wellbeing. Keeping the borders tion within a country for the job Adecco Group leadership in their closed despite a low birth rate and market? Poles are not seen as particularly willing to move from country of residence. One of the high social security costs hardly one city to another for work. Do candidates will then be selected to seems like a sustainable strategy. you think that will change as the work for one month with me. out of 109 The program helps young people The brain drain can also bring countries was younger generation starts replacincrease their employability and ca- positive results to an economy if Poland’s rank ing the older ones? I am not really sure. According to reer prospects. The feedback we’ve the people who leave the country in Adecco’s the recent Home Broker report, less had from them has been very posieventually come back, bringing latest Global Talent Comthan 5 percent of Polish people rent tive, some saying they learned more back the skills they have learned petitiveness a house or a flat. Owning a property in one month than they did during abroad. But how many actually Index significantly reduces mobility. At their studies, and others stating it do come back? According to the the same time, it can also be hard to was like an MBA. report, Poland is a “net exporter” find a place to rent if you move to of talent. Will that ever change? another city. So to increase mobility How are they faring in the job I don’t think anyone can be sure. we need change in the real estate market? The latest GUS report indicated that market, it’s not only about generaOur alumni have fared extremely Polish wages are now above €1,000 tional changes. well, securing positions with leading per month. At the same time, there

38th

MAY 2017 W B J

COMMENTARY | OPINION

Electromobility – main legal dilemmas

• Member States shall ensure that the legal framework permits the electricity supply for a recharging point to be the subject of a contract with a supplier other than the entity supplying electricity to the household or premises where such a recharging point is located. The above AFI Directive provisions do not specify how the “recharging service” should be regulated at TO ENCOURAGE THE USE OF ELECTRIC CARS, EU COUNTRIES MUST PROVIDE national level. This might be challenging for national auTHEIR CITIZENS WITH RECHARGING SERVICES. HOWEVER, EU LEGISLATION thorities, as various factual and technical options should be taken into account. POSES SEVERAL CHALLENGES FOR NATIONAL GOVERNMENTS For example, sole “recharging” may involve not only a service of charging a given electric vehicle but also lectromobility has been by far one of the “hotexchanging a battery in such a vehicle. Both formulas test” topics in the energy and local governwould need a separate legal framework (the former ment sectors in the last few months. On one actually involves the sale of electricity, whereas the latter hand, this new trend is perceived by the Polish would mean an exchange of the battery). Government as one of the keys to the country’s Lawmakers should also distinguish between the situadevelopment in the next decade. On the other, tion in which recharging takes place at home (charging the huge smog problems experienced last win- in a garage directly “from a socket”) and when a service Maciej ter only reinforce the need to develop clean transport is provided at a recharging point accessible to the public. Szambelańczyk technologies. Recharging electric vehicles at home, in fact, could Currently, Poland has not yet introduced any comtake place under the same conditions as any purchase Legal counsel, prehensive regulations that would cover electromobility of electricity under current circumstances. However, partner at WKB issues. However, according to the Government, a draft of if separate measuring of vehicles should be allowed or Wierciński, separate tariffs for electricity should be introduced, curKwieciński, Baehr the electromobility bill should be announced for public consultations this spring. In the meantime, the key rent Energy Law would require significant amendments. goals for electromobility in Poland are presented in the In the case of recharging services at public recharging Electromobility Development Plan, as approved by the points, a new law should solve numerous legal dilemmas. Government on March 17, 2017. First of all, the notion of a “recharging service” should There is no doubt that Poland is obliged to implebe defined. As noted above, such a “service” involves the ment the Directive 2014/94/EU of the European trade of electricity (which currently requires an electricParliament and of the Council of October 22, 2014 on ity trading license issued by the President of the Energy the deployment of alternative fuel infrastructure (AFI Regulatory Office). Also, if we consider preferential Directive). Under this directive, Member States shall tariffs for such electricity, new legal tools should be ensure that an appropriate number of recharging points introduced. In particular, the new law should allow the accessible to the public are put in place by December customer to choose the seller of the electricity at the 31, 2020, in order to ensure that electric vehicles can recharging point. One could also imagine the purchase circulate at least in urban/suburban agglomerations and of electric vehicles with pre-paid electricity (the seller other densely populated areas, and, where appropriate, of the car covers the cost of electricity for the first two within networks determined by the Member States. It is years of use for example). Another issue is the position worth noting; however, that the AFI Directive does not of local distribution system operators in electromobildetermine in detail how the concept of electromobility ity projects. It should be noted that the draft of the new should be implemented in given Member States. In other Electroenergy Directive (as part of the planned “Winwords, the legal framework and (if any) support schemes ter Package”) assumes that Member States may allow for electromobility should be developed by Member distribution system operators to own, develop, manage States independently. A number of the AFI Directive or operate recharging points for electric vehicles only if requirements should be noted: some specific requirements are fulfilled (in particular, • Member States shall ensure that operators of rechargthat other parties following an open and transparent ing points accessible to the public are free to purchase tendering procedure, have not expressed their interest to electricity from any electricity supplier. own, develop, manage or operate recharging points for • All recharging points accessible to the public shall also electric vehicles). provide for the possibility for electric vehicle users Finally, it should be remembered that electromobility to recharge on an ad hoc basis without entering into is a rapidly developing area. As a consequence, even the a contract with the electricity supplier or operator AFI Directive emphasizes that national legislation needs concerned. to ensure that technological innovation is facilitated. The • Member States shall ensure that prices charged by the legal framework for electromobility development should operators of recharging points accessible to the public be flexible enough to take into account future standards are reasonable, easily and clearly comparable, transpar- for new technologies that may currently be beyond our ent and non-discriminatory. imagination.

W B J MAY 2017

SHUTTERSTOCK

WBJ COMMENTARY | AGRICULTURE

MAY 2017 W B J

INTERVIEW BY EWA BONIECKA

European Union – economy first

CZESŁAW SIEKIERSKI, A MEMBER OF THE EUROPEAN PARLIAMENT AND CHAIRMAN OF THE COMMITTEE ON AGRICULTURE AND RURAL DEVELOPMENT, TALKED WITH WBJ ABOUT THE ECONOMIC ASPECTS OF EUROPEAN INTEGRATION IN THIS TIME OF POLITICAL AND STRUCTURAL CRISIS IN THE EUROPEAN UNION

WBJ: Which policies should the EU focus on in order to

maintain its economic position in the world – currently it represents 25 percent of global GDP – and how can the process be made more dynamic? Czesław Siekierski: Firstly, the EU must focus on increasing efficiency, as currently it is not adequate in comparison with high labor costs in Europe. As a result, the economic viability of our economy is insufficient. Apart from that we must put even more effort into developing innovation to match the level of global leaders in this field such as South Korea, Israel or the US. The European economy still makes too little use of technological development and the level of digitalization is still low, but there are prospects for improvement in this field due to the implementation of the so-called Digital Union. These weaknesses of the European economy decrease our competitiveness in comparison with our major competitors. Globalization and the emergence of the global market make it a must for us to negotiate advantageous trade deals that guarantee that the European market is opened only for those products that meet our high standards in terms of environment, salaries, animal welfare and greenhouse gas emissions.

The main problem of the common EU market in recent years is growing state protectionism, especially in the countries of Western Europe

For years, at the European Parliament you have been dealing with

the topic of food production and agricultural policy – areas that are very important for our country. What are the current challenges faced by the Common Agricultural Policy and how do you see them from the perspective of Poland’s interests? I have been member of the Committee on Agriculture since 2004, and before that I also dealt with these issues back in Poland. It’s an important field as it is connected with food security, both in the case of access to food, as well as its quality. The importance of the security of supply is growing in this context, for example due to a dynamic growth in global population, the depletion of farmland and climate change that causes natural disasters, which then threaten agricultural production. No less important is the second aspect of this security – the awareness in society that nutrition impacts health. This results in an increased demand for good quality food, produced according to high standards. The Common Agricultural Policy was one of the first Community polices, set up in 1962. Currently it represents about 40 percent of the EU budget, but it used to be as high as 75 percent. Thanks to the CAP, the Community was able not only to eradicate food shortages that plagued the continent after the war, but also to make food its leading export. The main challenges for European agriculture, similarly to the entire

economy, are connected with the evolution of the global market. Our products must be competitive, efficiency must increase and our high production standards must be proliferated throughout the world in order to create a fair playing field for competitive play. Also, let us not forget that agriculture is not only production, but also environmental issues, the influence exerted over rural areas, the climate, landscapes, etc. Polish agriculture has made significant progress since the country’s accession to the EU, which is visible in the multiplication of our agri-food exports. However, in order to maintain this positive dynamic, we must continue to invest in our competitiveness on a European and global level. How do you perceive the condition of the European free market and the market for services and their functioning? What problems are Polish producers and exporters faced with? The main problem of the common EU market in recent years is growing state protectionism, especially in the countries of Western Europe. This is the case, for example, with agri-food trade. Our producers report growing obstacles in the form of non-tariff barriers that take on the form of requirements concerning additional certificates, labeling of products, increased and directed controls, etc. It is a serious problem

Czesław Siekierski A Polish politician and Member of the European Parliament (MEP) as part of the European People’s Party. He has been Chair of the European Parliament’s Committee on Agriculture and Rural Development since 2014. Siekierski holds a PhD in agricultural economics. His academic work is focused on rural area development and management, as well as EU integration. W B J MAY 2017

WBJ COMMENTARY | AGRICULTURE

that puts the common EU market in jeopardy. Barriers on the freedom to provide services are even more serious, and even the famous directive on services from 2006, partially liberalizing the market for services in Europe, was not able to change it. The countries of the so-called old Union are not capable of competing in term of process with Poland or other countries in the region, so they refer to social dumping and introduce additional requirements that are proclaimed to be in the interest of workers’ rights, but in reality raise the cost of our services and limit our competitiveness. Our transport services are particularly affected in this regard, and thanks to the common market managed to become one of the largest in Europe. Europe needs to open itself up to international trade. Can the current protectionist tendencies of the US and some other countries impede that process? If based on fair rules, international trade benefits all parties involved. Europe is one of the largest beneficiaries of the global exchange – in the EU around 30 million jobs (almost every seventh job) is connected with the export of our products. Lately, especially after the presidential elections in the US (“America first”) there is a growing global fear that protectionism could harm global economic growth. The US has unilaterally left the Transpacific Partnership (TPP), the future of the Transatlantic Agreement (TTIP) and some other bilateral and regional deals (for which negotiations have started after the failure of the WTO Doha Round) remains uncertain. It would appear that the Trump era in international trade will mean greater popularity of bilateral agreements, at the expense of regional ones. But the rebirth of the WTO cannot be excluded as well, and for which there are visible signs (the ratification of the Trade Facilitation Agreement in February 2017(TFA)). It is also worth noting that currently around 60 percent of global

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“In 2015-16 Poland experienced an

‘investment gap’ that has hampered our economic growth

trade exchange is carried out by international corporations and the role of global capital is still growing, while the significance of countries is decreasing.

60% of global trade exchange is carried out by international corporations

million

jobs in the EU are connected with the export of European products

40% of the EU budget is spent on the Common Agricultural Policy

How do the concepts of the Morawiecki plan and its emphasis on the role of public funds in investments resonate with the EU model and the Juncker Plan for reviving investments in the Union through the transfer of public funds from the Union to Member States? The weakest element of the economic growth of both Poland and Europe is inadequate means for investment. In order to stimulate investment, the Union has introduced the so-called Juncker Plan that envisaged the creation of the European Fund for Strategic Investments. It is a joint undertaking of the European Commission and the European Investment Bank (EB) that, in a three-year period, envisages leveraging investments amounting to €315 billion from the initial €21 billion (€16 billion guaranteed by the EU budget and €5 billion from the EIB). These activities, undertaken mainly by the introduction of financial instruments, caused an influx of investment projects that by the end of 2016 amounted to around €160 billion. As a result of this optimistic data, it has been decided to prolong the program for the next three years while doubling the funds for it. The Juncker Plan generates additional funding for the economy – financial instruments are based on small capital, and other such instruments are based on them, which may cause some distortion on the financial market in the future. In Poland, the main driver of investment is EU funds, which has been particularly visible in

2015-2016 when moving from the previous to the next EU financial perspective, and Poland experienced an “investment gap” that has hampered our economic growth. It would appear that the realization of the Morawiecki plan is largely dependent on EU funding, including after 2020. Some Polish economists and businesspeople are in favor of opening a broad discussion on the topic of adopting the euro in Poland and on our country’s future accession to the euro zone. How do you see this from the perspective of Polish political interests and our economic and financial capabilities? There are various opinions on the issue. Both being part of the euro zone, as well as keeping our own currency has its positive and negative aspects. Adopting the euro is, however, connected with reaching a certain level of development, and shortcomings in this regard were responsible, for example, for the trouble experienced by Greece. That is why one should not repeat simplified opinions saying that adopting the euro was the cause of the breakdown of the Greek economy. If that had been the case, Greece would no longer be in the euro zone, while at the same time the majority of society still wishes to remain part of it. Poland cannot compare itself with countries such as Estonia or Slovakia, since we are a larger country with a different economic structure. A decision as important as this one should be discussed. That is why, in my opinion, it was a mistake to dissolve the team at the Polish National Bank that was dealing with the analytical side of the process, as even if we are not willing to join the euro zone any time soon, we should still observe what is going on there.

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WBJ COMMENTARY | REAL ESTATE TRANSACTIONS

Tax office about-face

SUDDEN CHANGES IN POLISH TAX OFFICE INTERPRETATIONS OF PROPERTY SALES AS SUBJECT TO TCLT TAXATION INSTEAD OF VAT IS BREEDING UNCERTAINTY THAT IS SAPPING INVESTOR CONFIDENCE AND KILLING TRANSACTIONS BY MICHAŁ SIEKIERZYŃSKI 20

MAY 2017 W B J

olish tax authorities have started withholding VAT refunds on acquired assets such as shopping centers, office properties and warehouses. In such transactions it is imperative that the parties involved identify and precisely define the subject of the transaction to properly define the relevant tax impact. This minimizes risk and allows a deal to proceed without uncertainty; conversely, the inability to do so often sends investors fleeing for the exits. The Polish Tax Code subjects asset sales to VAT rather than the tax on civil law transactions (TCLT). Over the years, a body of Polish tax authority interpretations has consistently confirmed commercial property sales as sales of assets and therefore subject to VAT, which allows the purchaser to subsequently recover the VAT paid. In that time, tax authorities have raised no fundamental objections to this interpretation throughout the course of numerous VAT refund procedures we have handled as advisors for clients in the past, resulting in consistent, cohesive and stable interpretation and behavior among both the authorities and taxpayers. Meanwhile, although there have been no legislative or regulatory changes in this regard, our recent experiences have shown unexpected changes in tax authorities’ interpretations. The Treasury Control Office (TCO), which was initially only supposed to confirm the VAT refund amount, has begun challenging the underlying interpretation of these transactions as subject to VAT at all. The TCO now interprets sales of commercial properties, including shopping centers, as the sale of an enterprise – which is subject to the TCLT. Especially disturbing and problematic is the TCO taking this position subsequent to the buyer and seller having received an individual interpretation from the Minister of Finance that confirmed VAT is due in the specific case. This produces a situation in which tax authorities initially tell taxpayers that the transaction is subject to VAT while

presenting the exact opposite position in the course of the transaction’s tax audit. The TCO’s challenge of this interpretation has bred material problems for sellers and new investors. Such a transaction cannot be simply undone and the tax effects cannot be “reversed” easily and painlessly for the parties. The lack of certainty raises the serious question of how to assess this risk financially. Complicating the matter further is the 30 percent VAT penalty that may apply, or the subsequent liquidation or windingdown of companies, not to mention potential but unexpected changes in interpretation or the law. All of this breeds additional transaction costs and fees while spawning additional requirements from banks financing the investments. The tax proceedings are time-consuming while investors simply do not understand why the same Minister of Finance who endorsed a given interpretation has, in a sudden about-face, charged them with improperly taxing the transaction with VAT as opposed to TCLT. Simply put, some of them feel cheated. Significantly, an increasing number of administrative court decisions are siding with the plaintiffs against the tax authorities. It is particularly important to emphasize here that to investors it matters little whether they classify and tax their transaction with the neutral VAT as the sale of an asset or the relatively small TCLT as the sale of an enterprise. Investors want to tax their transactions in compliance with the law, which is precisely why they seek the services of professional tax advisors and request individual interpretations from the Ministry of Finance. There must be certainty as to a transaction’s final tax evaluation by authorities for it to be properly structured. Unfortunately, our professional practice in this realm indicates there are no guarantees. The effect of this situation has caused market skittishness for lack of security, certainty and protection of taxpayer rights. These are critical factors investors analyze when considering whether to invest in any market,

Poland included. Sudden changes, whether legislative or in practice, compounded by inadequate periods for businesses to adapt to a new environment, may lead to a degradation of trust and investors fleeing the country. Currently, our clients are informing us of their apprehension in this area, which is certainly a very worrisome development. Without citing specifics, we are aware of transactions that failed to materialize precisely due to the current tax environment in Poland. It is our feeling that all real property market stakeholders want the Minister of Finance to present a precise and uniform position as to taxation of real estate transactions. Whatever that position ultimately is, it is secondary to the certainty that such a stance will surely provide in current operations and future business decisions. This article was previously published in ReDI – CEE Retail Development & Investment.

“Especially disturbing and problematic is the TCO taking this position subsequent to the buyer and seller having received an individual interpretation from the Minister of Finance W B J MAY 2017

WBJ COMMENTARY | ASK AN EXPERT

The digital era

WBJ TALKS TO JUAN MARIA PORCAR, THE VP AND HEAD OF EASTERN EUROPE, RUSSIA & CIS AND AFRICA AT FUJITSU, ABOUT THE DIGITAL AGE 22

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INTERVIEW BY ALEX WEBBER

WBJ: The theme of this year’s Fujitsu World Tour is “Hu-

man Centric Innovation: Digital Co-Creation.” Could you explain what’s meant by that? Juan Maria Porcar: Human Centric Innovation is based on three pillars. First, we want to empower people to use their time more efficiently. To do this we need the second pillar, data, which is needed to drive innovation. The third pillar, infrastructure, connects the other two and brings them both together. Co-creation, meanwhile, is the process and methodology that joins the expertise of people with digital technology. Co-creation occurs when these two factors work together. Talk us through the process. It all begins with an idea from a so-called “visionary.” That’s followed by the proof of concept phase, then implementation and finally the roll-out of a product. The proof of concept stage is crucial because even visionaries need to perfect their idea. We still encounter a lot of resistance to digital: for instance, a company might have two visionaries with a great idea, but another 998 who are against it. Proof of concept is essential to show these people the benefits that an idea might bring, so if it’s done successfully then you might see a shift of balance: all of a sudden 500 people will be keen on the idea which would give a company enough power to then advance to the implementation stage. What are the challenges that your industry faces? The biggest challenge would be if we didn’t have any visionaries! The state of technology means that not all the ideas that a visionary comes up with can be implemented. However, the biggest overall problem I’d say is security. The digital transformation has left a lot of data potentially exposed: both business data and, even worse, personal data. We’ve all seen what happens when data is leaked, and such breaches have shown that they have the potential to ground a whole airline. It doesn’t make sense to open a company up to such a

disaster as it destroys any potential benefit to be gained, so making sure data is correctly secured is the largest general problem we face. As it stands, the GDPR (General Data Protection Regulation) will enter into force in May, 2018 and apply to all EU firms. Companies will have no choice but to conform and in this case I think the authorities have done the right thing. How fast has the transition towards Human Centric Innovation been? During the Fujitsu World Tour we asked our Polish audience what stage they’re at: whether they’re fully digital, at the proof of concept stage, thinking about it, etc. Exactly half said they were fully digital while another 12 or 15 percent said they were at the proof of concept stage. We don’t have a timeline to measure these things, but even so we were positively surprised by this response. It’s been brewing for a while and now the transition appears to have gone into an accelerated mode. You can see that people are thinking hard. Some are going for a partial adaption where they’re problem solving and looking to alleviate the biggest bottleneck in their business. Others, meanwhile, are choosing to go fully digital straight from the beginning. Could you give a specific example of a company that’s successfully implemented such digital technology? The Finnish ABC service station chain is a good one. They’ve decided to really compete in their field by producing an app that directs drivers to the nearest filling station and which then allows them to do pretty much everything at the push of a button. There’s no longer any need for customers to enter the station, wait in a queue to pay or listen to a member of staff talk about some chocolate promotion. The re-fueling experience has become a lot more convenient and the average time customers spend inside a station has been greatly reduced. But the punchline is this: although the app was only rolled-out eight months ago, it’s already been downloaded 600,000 times while ABC have reported transactions have increased 5-fold in 8 months.

“Ultimately, Artificial Intelligence is here to stay as it drives so much value for businesses.

95% That’s how accurate the system for detecting suicidal patients is.

Some sources are claiming that automation and excessive digitalization will have a disastrous impact on jobs across the world – what’s your opinion? The steam age was meant to lead to mass unemployment as well. In fact, every technological advance mankind has ever made was meant to have this side-effect, even computers. The transformation we’re seeing is just part of a natural progress. We’re not talking here about the realm of science fiction and super intelligence where robots do everything, we’re talking about narrow AI that does things that take humans a second to do. Ultimately, AI is here to stay as it drives so much value for businesses. Fujitsu stress that they put humans before technology and that any advances they make are directly connected to solving challenges. Isn’t that just PR talk? I tend to refer to the case of the San Carlos Clinical Hospital in Madrid. There we found a group of visionaries, specifically four doctors, who basically said, “look, humanity has a huge problem with suicide.” Whereas they already knew the signs to look for in a suicidal patient, a traditional assessment would take them 20 minutes. Put simply, they didn’t have the capacity to assess 200 patients each day. However, what they did have was plenty of data – over 36,000 patient records. Based on these we were able to develop a system that could make the analysis itself thereby allowing the doctors to do other things with their time. We’ve checked the accuracy over and over and it’s now reached the stage of being 95 percent accurate. While I would never dare be so arrogant as to say that this system has saved lives, it’s definitely helped the doctors. But the interesting thing here is that this didn’t take five years to reach this point, but 12 months. Other departments in the hospital have also noticed this, especially those working to tight time constraints such as the x-ray or pharmacy departments. They’ve seen this as something that can really support their work, not as something that will replace them.

W B J MAY 2017

FEATURE / HOME APPLIANCE EXPORTS

MAY 2017 W B J

MADE IN POLAND AND IN SOUTH KOREA

BUY SMART, GET SMART Poland is already producing a quarter of Europe’s household appliances, and the industry is going from strength to strength. There are challenges ahead, but with challenges come great opportunities. Can Poland become the “Silicon Valley” of home appliances? BY BEATA SOCHA

W B J MAY 2017

FEATURE / HOME APPLIANCE EXPORTS

“

Foreign capital is the main reason why Poland has become a leader in household appliance production in Poland

POLAND’S

household appliance production increased by 22 percent between 2013 and 2016, from a little over 18 million to over 22 million pieces, according to industry association CECED Polska. The total value of household appliances (washing machines, dishwashers, fridges etc.) manufactured in 2016 stood at PLN 16 billion (€3.8 billion). That’s nearly a quarter of the entire value of the European home appliance market, which stood at €15.5 billion in 2016, according to estimates by statistics portal Statista. The increase in production volumes can largely be attributed to the growing exports of Polish home appliances, as some 87 percent of the entire Polish production is exported (19.2 million pieces out of 22.1 million produced last year). In 2005, household appliances accounted for 1.82 percent of Polish exports, while ten years later they made up 2.52 percent of the country’s total export value.

NEED FOR DIVERSIFICATION

Poland’s top export markets for household appliances are Germany (21 percent), the UK (13 percent), France (12 percent), Italy (8 percent) and Russia (6 percent). Altogether, the top five destination markets account for 60 percent of total home appliance exports. Such strong concentration could be a reason for caution. Andrzej Szewczyk, deputy director of the Economic Promotion Department at Polish Information and Foreign Investment Agency (PAIiIZ) believes Poland needs to diversify its export markets and reach further. “This is where we are going to support the sector as best we can,” he said. Poland mainly exports washing machines (23 percent of the total household appliance export sum), fridges and freezers (19 percent), cooking appliances, dishwashers and small household appliances (14 percent each).

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FDI-FUELED

87%

OF THE ENTIRE POLISH HOME APPLIANCE PRODUCTION IS EXPORTED

22.1

MILLION THE NUMBER OF HOME APPLIANCES PRODUCED IN POLAND IN 2016

PLN 16 BILLION

THE VALUE OF POLAND’S HOME APPLIANCES MANUFACTURED IN 2016

Historically, some of the main factors behind Poland’s success as a home appliance powerhouse were its location and increasingly strong position in Europe, as well as significantly lower labor costs and good quality technical education. Over the years the country has attracted some of the world’s largest household appliance manufacturers to invest in Poland, including Ariston, Bosch, Beko, Candy, Electrolux, FagorMastercook, Gorenje, Indesit, Miele, Philips, Samsung Electronics and Whirlpool. “Foreign capital is the main reason why Poland has become a leader in household appliance production in Poland. Many investors have chosen Poland because of its excellent workforce and labor costs that are lower than in Western Europe. Poland also offers lower transportation and logistics costs. We are still very competitive compared to Asia, where a lot of home appliances are produced as well,” said Adam Cich, CECED Polska’s president of the management board, and General Manager CEE of Electrolux Major Appliances. There are 27 home appliance production plants in Poland, employing 22,000 people, according to CECED. Most of them are located in three main hubs: Wrocław, Łódź and Wronki near Poznań. These areas have some of the lowest unemployment rates in the country (Wrocław’s being approx. 4 percent) and soon employers will have to face employee shortages. “I believe the most

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COOKING & CLEANING

Poland’s main trade partners’ share in the total export volume of household appliances

Types of household appliances Poland exports (as % of the country’s total home appliance exports)

GERMANY 21% 13% UK 12% FRANCE ITALY 8% RUSSIA 6% OTHER MARKETS 40%

WASHING MACHINES 23% FRIDGES AND FREEZERS 19% COOKING APPLIANCES 14% DISHWASHERS 14% SMALL HOUSEHOLD APPLIANCES 14% OTHER 16%

Source: CECED

important challenge for the household appliance industry in Poland is human resources and securing the new generation of employees – constructors, engineers, programmers and electricians,” said Cich. Still, there are also several manufacturing plants located in eastern Poland, in the Podkarpackie and Podlaskie voivodships, which offer both lower production costs and more ample labor pools. These two factors may well offset longer transportation routes to Western Europe, particularly in conjunction with the recently completed east-west A4 highway connecting Podkarpackie with Germany, and the S8 expressway, currently under construction, that will soon bring Podlaskie “closer” to the West.

CHALLENGES AHEAD

There are also those who claim that turning Poland into an “assembly plant” is hardly a step forward for the country’s economy. Rather it places the country in the precarious position of having to compete on cost with Asian producers. Others disagree, saying that Poland may have started out with assembly plants but has since become a powerhouse in both advanced business processes as well as R&D. “The industry in Poland has made an enormous leap over the past 10 years. Our production plants are production complexes now, comprising R&D centers, laboratories, supply chain departments as well as a back office maintaining their operations. We want the industry

to be rooted in Poland, both in terms of production and all the aspects surrounding it,” said Cich. Wojciech Konecki, CEO of CECED Polska, claims that the bad PR the industry has been the target of is not only undeserved, but in most cases simply false. “The biggest challenge before the industry is, in my view, fighting stereotypes, such as calling Polish plants ‘assembly lines’ or talking about a shorter lifecycle of products. We will continue to debunk these stereotypes.” The shorter lifecycle of products may indeed be observed, but it is not due to the in-built obsolescence as some might suggest. The reason for it is consumers who chose to replace their current appliances with ones that feature more innovative functions as well as a new design, according to the survey carried out by TNS. Andrzej Arendarski, president of the Polish Chamber of Commerce, is convinced that it is technology and innovativeness that will help Poland further strengthen its position on the global home appliance market. “If we continue to have a firm grasp of technology, excellent staff, innovative technological thinking and customer-facing solutions, Poland stands a chance of becoming the ‘Silicon Valley’ of household appliances,” he stated.

GO DIGITAL

Poland has thus far kept abreast of the new tech trends in the home appliance business. “We are manufacturing a fridge

in our Wronki plant called Family Hub. It is the most cutting-edge fridge in the world,” said Jacek Łęgiewicz, director at Samsung Electronics Polska. Its functionalities go way beyond refrigeration. It helps you compile a shopping list and offers innerview cameras to aid you when you’re shopping. It also keeps a family calendar and can even be used for communication: if your child sends a picture from a summer camp, it can easily be displayed as a postcard on the fridge for the whole family to enjoy. “There are only two places in the world where this fridge is being manufactured: Poland and South Korea,” Łęgiewicz added. The Internet of Things is coming to the home appliances industry, for better or worse. Despite all the reservations some still have as to its security, there is definitely a growing demand for “smart” appliances. “We can see the need to make products that can communicate with one another, and at the same time are proofed against information leaks, such as when and how we utilize the appliance. It’s sensitive data that producers would be happy to use, but which could also be abused by hackers,” said Konecki. With the increasing labor costs, the household appliances industry has no other choice but to go “smart” in order to maintain its competitive edge and growth rate. And the way to do it is to keep an eye out for new opportunities, both through geographical diversification, attracting young, well-educated staff and through embracing cutting-edge technology.

W B J MAY 2017

WHERE ROADS MEET A few years have passed since Amazon opened its first logistics centers in Poland, which cost a whopping PLN 3 billion. The e-commerce giantâ&#x20AC;&#x2122;s decision was not a one-off deal but it seems to have put Poland permanently on Europeâ&#x20AC;&#x2122;s logistics map BY KAROLINA PAPROS

MAY 2017 W B J

W B J MAY 2017

Poland

seems to have it all: a geographical location at the crossroads of Western and Eastern Europe, Scandinavia and the Balkans, continued lower labor costs, the constantly improving quality of transport infrastructure and ever increasing warehouse stock. The country’s potential is impossible to resist, and it wasn’t that big of a surprise when Amazon decided to tap deeper into the logistics potential of Poland, announcing the opening of their fourth and fifth logistics centers in the second half of 2017. The two new centers are being built in Kołbaskowo near Szczecin and in Sosnowiec, Silesia, creating hundreds of new jobs and simultaneously, strengthening the position of Poland as a force to be reckoned with in the European logistics and transportation industry. In fact, Poland holds 33rd position in the latest World Bank International LPI (Logistics Performance Index) Global Ranking. Pretty good if you take into account that the ranking covers 160 countries. The index is calculated based on a few categories such as tracking and tracing, customs and infrastructure. The leader is Germany, Austria is runner-up and the United Kingdom holds third place. The index was designed to aid countries in identifying weaknesses and strengths in the trade logistics sector. Since the World Bank published its first International LPI Global Ranking in 2007, Poland’s main strength has been the timeliness of deliveries. However, its Achilles’ heel turned out to be the quality and availability of infrastructure. The 2016 International LPI Global Ranking confirms that not much has changed.

ROAD, RAIL OR AIR?

Despite having improved significantly over the past decade, infrastructure continues to be the most significant problem for

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Poland despite continuous financial investment and support from the European Union. The Ministry of Economic Development reports that Poland is currently the main beneficiary of EU Cohesion Funds and in the years 2014-2020 will receive €82.5 billion to support development in various areas. A significant part of these financial resources will be allocated, among other things, to road and rail infrastructure development. Following the report on the achievements of the Polish logistics sector in 2014/2015 published by the Institute of Logistics and Warehousing in Poznań, the importance of road transport is increasing due to the expansion of road networks and their improving quality. Michał Mazur, PwC’s head of Central and Eastern Europe logistics and transport team said: “In 2014 some 80 percent of the ton-kilometer volume was transported by road and this share will grow to 82 percent in 2020. Therefore, increasing road capacity remains a crucial challenge.” However, railway infrastructure seems to be going through a difficult time if we look at it from the perspective of the logistics and transportation industry – mostly because of never-ending maintenance work, low speed trains and poor quality service. Nevertheless, PKP PLK, Poland’s railway infrastructure operator, plans to carry on the modernization of the existing railway network and increase the maximum speed for passenger trains to 160 km/h and for freight trains to 120 km/h on main routes. Moreover, the report mentions that marine transport in Poland has been doing reasonably well. For example, the container terminal in Gdańsk will increase its capacity from 1.5 million to 4.5 million TEU (twenty-foot containers) in the years 2014-2020. However, aviation infrastructure still needs investment if it is to reach its full potential.

THIS PAGE PAP; OPPOSITE PAGE SHUTTERSTOCK

FEATURE / LOGISTICS

THE WAGE DILEMMA

Poland’s growing importance on the logistics map of Europe seems to pose a threat to the long-established European logistics centers. Many companies from Western Europe prefer to take advantage of much lower wages in Central and Eastern Europe and subcontract across borders. Therefore, a lot of controversy was caused by Germany introducing the national statutory minimum wage for international truck drivers to protect the transport market against competitors – mainly from Central and Eastern Europe. Normally, even though drivers operate across Europe, their minimum wage depends on the country in which they are employed. The latest KPMG report on minimum wages in Europe states that there are 22 countries with national minimum wages, but the amounts differ dramatically: Bulgaria, with €214 per month, has the lowest, while Luxembourg’s €1,923 per month is the highest minimum wage in Europe. Germany introduced a minimum wage of €8.50 per hour applicable to any employee operating on its territory regardless of the country in which they are hired. Polish international drivers receive higher wages than the national minimum wage anyway, but despite that, their average earnings still fall below the minimum wage of their western neighbor. In order to adhere to German law, employers would have to double the wages of those drivers who cross the German border. A similar case concerns France, which followed Germany’s footsteps and enforced a law according to which foreign drivers must be paid the French minimum wage (€9.67 per hour) and a representative must be appointed in France. The European Commission has responded to complaints from affected countries by saying that both France and Germany are posing obstacles in cross-border road transport and the freedom to provide services.

However, its final decision has not been made yet. The reason why logistics and transportation sector news has become such a hot topic is because the industry is largely driven by the fastest growing area in logistics – e-commerce, and Poland is one of the fastest developing e-commerce markets in Europe, growing steadily at a double-digit pace. This development highlights the importance of logistics companies (mostly couriers), boosts the demand for warehouse space, as well as the need for automatic package delivery points. In fact, last year was a huge success for the warehouse market. CBRE reported that in 2016 the supply for new warehouse space amounted to a record-breaking 1.12 million sqm, whereas the total warehouse space in Poland has already reached 11 million sqm. For the time being, Warsaw remains the most attractive and expensive location with the rent rates of €4.00-5.50 per sqm per month. The geopolitical scene adds yet another layer of uncertainty for logistics firms. Brexit seems to be particularly problematic for Polish logistics companies that operate in the UK and for customers based in both countries. The consequences of the UK leaving the European Union are looming over companies: higher operating costs, the introduction of trade tariffs, lower operating efficiency, as well as reduced attractiveness of Polish e-shops for customers living in the UK. The UK may soon become similar to the United States or China where shipping to and from the EU is already a complex process. All in all, the logistics and transportation industry in Poland seems to be booming despite the clouds on the horizon. Once the EU funding program finishes, the decision on German and French minimum wages is made and the consequences of Brexit become visible, the time will come to re-examine the costs and benefits.

W B J MAY 2017

The Facebook generation in Poland It is sometimes said that for a 30-year-old, going out without a smartphone is like going out without your wallet – you can get by, but it’s awkward not to be able to pay for yourself. For a 22-year-old it feels like going out without your shoes, you can’t stop feeling uncomfortable and wishing you could be back home as soon as possible. By that analogy, you could say that for a 15-year-old it’s like going out in your underwear – it feels like a nightmare you just want to wake up from BY SERGIUSZ PROKURAT

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FEATURE / SOCIETY

s much as 70 percent of Polish internet users visit Facebook every day. That is one of the highest scores worldwide, with Australians (75 percent) and Italians (74 percent) being the only two nationalities with a larger percentage of heavy Facebook users, a recently published report entitled “Digital in 2017 Global Overview” stated. Granted, the statistic only accounts for internet users, and the overall use of social media in the whole of Polish society is somewhat less spectacular. Poland ranked 26th in the world in terms of active social media users, with 39 percent of Poles having active accounts, a mere two points above the global average. The disparity between the two statistics can be explained with the relatively low number of internet users in Poland compared to other developed countries. For instance, as much as 93 percent of Japanese people use the internet, as do 96 percent of Norwegians and 98 percent of Icelanders. By comparison, “only” 80.4 percent of Poles have internet access, according to the most recent data from the central statistics agency (GUS). That is still twice as much as only 10 years ago. There is little doubt that the internet has introduced a giant change in Poles’ lives, particularly the young, who are in a position to take full advantages of the opportunities it offers. Today, 35 years of age serves as the conventional cutoff that splits the “digital” and the “analog” Poland. But the cutoff point for generation Facebook, people whose social lives are determined by their social media accounts, could be even lower. Nicholas Carr, a Harvard graduate, in his famous book “The Shallows: What the Internet Is Doing to Our Brains,” noted that the more we use the internet, the more difficult it is for us to concentrate when reading longer texts. It applies to both children and adults – including those who were brought up reading and for whom reading books was part of their lifestyle. “For some people, the very idea of reading a book has come to seem old-fashioned, maybe even a little silly – like sewing your own shirts or butchering your own meat,” he says and points out that internet customs affect the functioning of our brain even when our computer is turned off, because of the structure of our neural networks. And, in fact, Generation Facebook does not like newspapers and manual writing, because basically it is no longer an essential skill. The rate at which content is evolving on Facebook and social media in general can also be overwhelming for members of the older generations. Over the past decade or so it has moved from simple text-based posts to text + visual, to videos, to live video. Alarmed by the prevalence of video content on the internet and their children’s lack of exposure to the written word, many parents are taking a very proactive approach in order to increase readership among their kids. Apart from books and lavishly colorful magazines for children, technology can also be an ally. The range of tablet apps offering educational experiences for youngsters is soaring, as is the market for them.

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700,000 THE NUMBER OF SUBSCRIBERS TO THE YOUTUBE CHANNEL OF KAROL POZNAŃSKI’S, A 20-YEAR-OLD POLISH YOUTUBER WHO PLAYS GAMES ON HIS CHANNEL

80.4%

OF POLES HAVE INTERNET ACCESS

MY PHONE AND ME

Today’s Polish youth, born into the times of social media, are – just like their Western counterparts – the youth of the “selfie generation.” Every fourth child aged 12-18 takes a photo at least once a day – this includes 70 percent of girls and 38 percent of boys. This data was included in a report prepared by researchers from Gdańsk University, entitled “Compulsive use of mobile phones. A detailed description of the phenomenon of phonoholism in Poland,” which was based on the results of a nationwide study conducted among 22,086 young people. Elementary school students admitted that they began using mobile phones on a regular basis at the age of nine, junior high school students at the age of ten and a half, and high school students at the age of eleven and a half. This means that the initiation age of using mobile phones is decreasing and will probably become lower and lower. In Poland, the generation of mobile phones, the internet, tablets, online games – that is Generation Facebook – is becoming increasingly important. But who are these people? Statistically, every fifth Pole aged 20–24 has no work and isn’t studying. It is a worldwide trend. It is similar in Turkey (32.7 percent), Romania (24.1 percent), Spain (22.2 percent) and Ireland (19.7 percent). Young people have been branded with the term “Neet,” which stands for: “not in employment, education or training.” And they are far from being ashamed of it. In fact, they often boast about it, entering on their Facebook profile under profession: “Szlachta nie pracuje” [Gentry don’t work] or an equally vivid one: “Wyższa szkoła robienia hałasu” [Higher school of making noise].

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MARKETING TO GEN FB

What are the aspirations of Generation Facebook in Poland? A mobile phone has become the key to the world of communication. There is Skype. And there are also other applications such as Tinder, Badoo, Snapchat, Instagram, WhatsApp, Pure. Some of them are used for communicating with others, others to show off, research information, communicate through emotions, and boast about sexual conquests or are simply about being cool. We open up an account and get access to all people with whom we have something in common. Parents, and even 30-somethings, watch with incredulity and horror when they see how teenagers today share their lives and observe others 24/7 – without censorship, embarrassment or retouching. One of such people is Jessika Mercedes Kirschner, a fashion blogger who runs a social media empire on Snapchat in Poland. There you can see Jessika’s creations and the blogger herself. On the stairs, in the pool, at a table... Disappearing messages create the impression of momentariness and intimacy. Snapchat allows a streaming transmission from the user’s life, ensuring face-toface contact with friends. It is becoming increasingly popular in Poland. Especially in the generation called “TL;DR”(Too Long; Didn’t Read), who “do not read details” and seek content on Snapchat or Instagram, where the image is prevalent. An example of a present-day idol is Karol Poznański, called Kaiko, born

in 1996 – a YouTuber who plays games and talks about gaming on his channel. Half a million fans on Facebook, over 700,000 subscribers to his YouTube channel and 350,000 watching his Instagram. For comparison, the daily Polish tabloid with the highest circulation sells fewer than 300,000 copies, while the top broadsheet, a little over 100,000 copies daily. Although Polish marketers still do not fully understand this phenomenon, they increasingly establish cooperation with selected people online. “Generation Facebook, primarily, uses social media to seek authenticity. Having received the strength to influence brands, while watching only those that can successfully engage, providing attractive content, users themselves decide what kind of content will be consumed,” said Kamil Sabatowski, an expert at the Schumpeter Centre for Creative Destruction (SCCD), an innovation-oriented think-tank. He noted that the effectiveness of traditional brand marketing is gradually dropping, putting increasing stress on social media marketing as the primary channel to reach the youngest audiences. Marketers realized a while back that so-called influencer marketing (or branded content) was becoming more effective. Traditional marketing campaigns started to be replaced by e.g. product placement on social channels, particularly involving influencers – people watched by a high number of social media users.

How many friends can a single brain handle? Enhanced technology means an extension of interpersonal contact. However, according to evolutionary psychologists, our brain does not allow us to have hundreds or thousands of friends, for example, on Facebook. Robin Dunbar, an American anthropologist and evolutionary psychologist, became famous after conducting research on primates’ capacity to establish and maintain longlasting social links. This refers to situations in which people know each other and stay in some kind of relationship. In 1992 Dunbar raised the hypothesis that the number of social links, or “friendships,” among individuals is limited by the cognitive abilities of their brains. Evolutionary psychologists claim that our brains have not changed substantially since the Pleistocene era – that is, since we were “cavemen.” Our Neolithic ancestors are thought to have functioned best in groups of up to 148 members (where all members knew one another). According to Dunbar, our case is similar. If good old cavemen were moved from the Pleistocene era to the present day, they would lose their minds. The narcissistic culture accompanied by taking selfies, building self-esteem based on the number of Facebook “likes” or accepting strangers to our group of Facebook friends have resulted in the appearance of a new kind of social pressure which is becoming an addiction.

W B J MAY 2017

DIGITAL We design a complex brand presence on the internet. We specialize both in creative and technological solutions. We know how to realize web design so that it is impressive and effective. We create and optimize product sites, both for brand image and e-commerce purposes, as well as complex internet services. See our projects at www.valkea.com/projekty/digital

Section Partner

TECH i n s i g h t s

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BIG DATA GETTING DEEPER

Building a truly intelligent machine has been the holy grail of computer science since its very beginning. One of the first ideas of how to achieve this, born not long after the dawn of artificial intelligence itself, was to simulate a human brain. Modelling the network of brain neurons has led to as many disappointments as breakthroughs over its fascinating decades-long history. Today, with massive amounts of data and computational power easily available, this old idea, rebranded as â&#x20AC;&#x153;deep learning,â&#x20AC;? is once again seducing thinkers, visionaries and practitioners all over the world, promising real artificial intelligence BY DOMINIKA TKACZYK

rtificial neural networks (ANNs) are a comparatively old family of artificial intelligence techniques, dating back to the 1950s. They are in fact one of the very first attempts at constructing an intelligent algorithm, which would be able to learn from experience without being explicitly told how to make decisions. Some tasks intelligent algorithms typically perform are: automated language translation,

W B J MAY 2017

TECH

Machine learning vs. deep learning

Machine learning refers to the family of intelligent algorithms able to make informed, non-trivial decisions of a specific kind, such as converting an image of a handwritten letter into a sequence of words. Machine learning algorithms are able to learn from data without being explicitly told how to make these decisions. The result of the learning process is typically called “learned model” and contains various patterns observed in the learning data. The model is used later on to make similar decisions, but in new previously unseen circumstances. Deep learning is a subset of machine learning and refers to a family of approaches based on simulating the behavior of a human brain. Deep learning models loosely resemble a simplified structure of the brain, with connected artificial neurons organized in processing layers.

text understanding and generation, converting speech to text and automated recognition of objects depicted in images. Perhaps not surprisingly, one of the first ideas for how to make computers think was to artificially mimic the structure and behavior of a human brain. An artificial neural network is a collection of interconnected simple artificial neurons organized in layers, which is loosely analogous to the network of a biological brain’s axons. Individual neurons are basic processing units cooperating in order to achieve the final goal, such as a decision about which digit is represented by an image of a handwritten piece of text. More precisely, whenever we want the network to label an image with a digit, a typical preprocessing step would be to represent the image as color intensities of all its pixels. Such a color matrix is passed to the first layer of artificial neurons, which performs various mathematical operations and passes their results to the next layer. This process continues until the processing reaches the last layer, which is responsible for outputting the final decision, which in this case would be one of the ten digits. To be able to make such decisions with high accuracy, the network has to be exposed to a lot of training data in advance

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in order to tune its parameters to a specific task. This tuning process is called learning from examples. What really differentiates neural networks from other approaches is that they tend to work well even with very basic, raw representations of the objects (such as a simple matrix of pixel colors), while other learning algorithms typically require task-specific handcrafted features. Despite this unquestionable advantage, in the 1990s and 2000s ANNs were considered obsolete and not worthy of further research. The main reason for this was the computational cost of ANNs at the time: typically it could take weeks or months to train even a moderately large network. As a result, we were able to efficiently build only simple, small networks, which were outperformed in most tasks by simpler learning models.

times of weeks back to days and allowing the networks to grow bigger than ever, up to hundreds or thousands of layers. This new take on ANN ideas combined with complicated, multilayered architectures, is called “deep learning.” The term was introduced in 2000 and has been gaining popularity since. The real advantage of deep models composed of multiple layers is that they can learn features at various levels of abstraction. For example, if we carefully train a deep neural network to classify images, we will find out that the first layer trained itself to recognize very basic objects like edges, the next layer is able to recognize collections of edges such as shapes, the third layer trained itself to recognize collections of shapes like eyes or noses, and a further layer will learn even higher-order features like faces.

A GAME CHANGER This situation changed rapidly in the 2000s. Advances in specialized hardware, such as powerful graphics processing units (GPUs), new distributed computing paradigms, as well as improvements in the efficiency of the training algorithms all contributed to speeding up training process by orders of magnitude, bringing running

ELEMENTARY, WATSON Results? A substantial increase in the quality of the decisions made by stateof-the-art intelligent algorithms. Deep learning has quickly gained an advantage over older approaches, especially in typically hard tasks involving images, sound and written language. Analyzing pictures presents a great

AU TO M AT I O N

What can deep learning do better?

Once we realize the potential behind deep learning algorithms, the possibilities seem endless. Some have already been put into practice, others are still in the early stages of trial and error. Here are some of the most promising existing and possible uses of Deep Learning.

UNFAIR ADVANTAGE

Watson is a deep learning-based question answering system capable of answering questions posed in natural language, developed in IBM’s DeepQA project. The system was specifically tuned to answer questions on the quiz show Jeopardy! In 2011, Watson competed on Jeopardy! against former winners Brad Rutter and Ken Jennings and received the first place prize of USD1 million. During the game, the system had access to 200 million pages of structured and unstructured content, including the full text of Wikipedia. Apart from “reading” and “remembering” much more information than an average human is able to, Watson’s advantage was much faster reaction to the game’s signaling device: it takes a human tenths of a second to perceive a light signal, while Watson, notified by electronic signals, could react within eight milliseconds.

PRACTICE MAKES PERFECT

While humans are able to decide whether a picture shows a cat or a dog in an instant, this task used to be much harder for computers. In traditional machine learning algorithms, feature extraction, which means choosing the most powerful representation of something, is one of the biggest challenges. The programmer typically needs to “tell” the computer what kinds of patterns will be most helpful, so that the computer knows what to look for in the training data. For example, if you want to teach a program to read handwritten digits, a good place to start may be to explicitly instruct it to check how many “closed circles” are shown in the input image (“8” would typically have two, and “1” most likely will not contain any). Such manual feature extraction is challenging and places a huge burden on the programmer – who acts as the instructor. One of the promises of deep neural networks is that they can automatically learn features at various levels of abstraction, taking this burden off the programmer. Automated feature learning abilities have already increased the accuracy of state-of-the-art solutions to image recognition tasks.

LOST IN TRANSLATION

A decade ago nobody believed machines could become as effective at translating foreign languages as humans. Granted, automatic translators have been around for years and no one doubts they come in handy in translating simple phrases that every traveler needs.

However, a high-quality translation of a larger text filled with linguistic and cultural references and nuances seemed an impossible feat for a computer. But thanks to deep learning it seems they might be getting there. A deep learning-based approach to machine translation has made rapid progress in recent years, and is currently used by Google’s translation services, replacing its previous statistical methods. Bad news for translators and interpreters all over the world.

WHERE’S THE MONEY?

A 2011 movie called “Limitless” tells the story of a struggling writer who suddenly becomes the smartest person in the world by taking a pill that allows him to use 100 percent of his brain. Before long, he turns his attention to the stock market and becomes a financial wizard overnight. Given how adept deep learning-based algorithms already are at image recognition, and games such as Go and Jeopardy!, it is no stretch to believe they could one day learn all there is to know about the world of finance. Who knows, maybe the next Warren Buffet will be a bunch of ones and zeros?

WHAT’S WRONG WITH ME, DOC?

If you are a fan of House M.D. you know how difficult finding the right diagnosis can be and how much thought process it requires. Perhaps intelligent machines equipped with deep learning techniques will become the salvation for the already overburdened health service. Of course, there is a plethora of issues that need to be solved before anyone entrusts the wellbeing of a patient to a machine. Malpractice insurance, for instance, might get tricky. But having a highly trained specialist available 24/7 who knows your entire history and responds instantly could one day outweigh the cons.

THERE’S NOTHING WEIRD ABOUT US

In a 2013 movie called “Her,” people widely use automated personal assistants for handling communication with other humans and interactivity with the world in general. Those computer programs were so close to humans in their behavior that it was easy to develop a personal relationship with them and even fall in love. With deep learning’s advances in speech understanding and generation, as well as automated question answering, we might be getting closer to a scenario in which you pick up your phone to talk to your best friend without the need to dial out.

W B J MAY 2017

TECH

MAY 2017 W B J

ONE COULD ASK, WHAT WOULD A NEURAL NETWORK LOOK LIKE?

SHUTTERSTOCK

example of the power of deep learning. Within the past couple of years, we have observed a huge increase in the accuracy of automated object recognition in pictures. Thanks to deep learning, the error rates have decreased several times since 2011. In 2012, Google’s deep learning system that had been shown 10 million images from YouTube videos proved almost twice as good as any previous image recognition effort at identifying objects such as cats. Another example is automated game playing. IBM’s famous Watson computer was able to win Jeopardy! against human contestants using deep learning techniques and is now being trained to help doctors make better treatment decisions. AlphaGo is a computer program developed by Google’s DeepMind to play the board game Go. In 2015 it became the first program to beat a human professional Go player without handicaps on a full-sized board. Deep learning is heavily used by Google in its voice and image recognition algorithms, by Netflix and Amazon to decide what you want to watch or buy next, and by researchers at MIT to predict the future. In Poland, one of the first companies to use deep learning was Craftinity. They provide solutions for tasks such as sentiment analysis, which is aimed at providing insights into what customers are actually thinking, fraud identification and medical diagnoses analysis. In response to the promises given by deep learning, all the big players invest their resources in these exciting machine learning techniques. After all, the next artificial intelligence revolution might be just around the corner. And who wouldn’t want to be in the front seat when it comes?

Above is a 3D illustration of the neural network concept. Nothing particularly weird about it, right? There are cell bodies (the heads) and the axons (the tails) laid out in form of a regular grid. What is interesting, though, is the results you get when you do an image search for “similar art.” The search is often done by an algorithm that compares images and assigns them certain labels. On the right you can see the pictures that an image search algorithm has found as “similar to” the neural network image. Essentially, they do look a little alike, but the three suggestions on the right have nothing to do with neurons or their digital representation. Algorithms aren’t perfect, right? Perhaps in time, if deep learning tools are more refined and more commonly applied to commercial image recognition algorithms, search results they produce will be more accurate?

W B J MAY 2017

What is included in the package? JK: Viewell includes tools that, on the one hand, help our copywriters to create a post that, when published, gets a lot of engagement. And on the other hand, they will help identify the influencers – people who have the greatest impact on how posts spread through the social network. The main component of our solution is a predictive model that predicts whether a post intended for publication will engage users. The applied machine learning algorithms analyze both the content of the post and its other features, but also consider the planned date and time of publication.

Tomorrow’s marketing is ‘big data marketing’ A COMPLETELY NEW PLAYER HAS ENTERED THE LOCAL, FAST-GROWING BIG DATA AND WEB ANALYTICS MARKET. RECENTLY, VALKEA MEDIA INTRODUCED VIEWELL – INNOVATIVE SOFTWARE FOR OPTIMIZING AND REPORTING CONTENT ON SOCIAL MEDIA. WBJ ASKED ITS EXPERTS ABOUT MERGING BIG DATA WITH MARKETING AND NEW SERVICES FOR CLIENTS. HERE IS WHAT JACEK KRAWCZAK, CHIEF DATA SCIENTIST AT VALKEA MEDIA, ŁUKASZ TRĘBICKI, HEAD OF SOCIAL MEDIA ANALYTICS, AND FRANCISZEK RAKOWSKI, DATA SCIENCE CONSULTANT AT VALKEA MEDIA FROM THE INTERDISCIPLINARY CENTER FOR MATHEMATICAL AND COMPUTER MODELING AT THE UNIVERSITY OF WARSAW HAD TO SAY INTERVIEW BY BEATA SOCHA

MAY 2017 W B J

WBJ:

How long have you been developing the new big data tools? Jacek Krawczak: Our work on the entire tool set for social media analytics began nearly 18 months ago. We started with Facebook, because it is the most frequently used media channel by our customers and we have just finished this stage of our project. Perhaps not completely finished, because we are still fine-tuning the software, but we have reached a stage where we have achieved the planned functionality and implemented the tools for production use in our company.

You are not the first to offer software with similar functionality. There are programs that show users the dates and times when it is worth publishing, what punctuation and emoticons to use to get the most traction, etc. How is your product different? Łukasz Trębicki: Yes, fortunately today it is already quite an obvious solution for any marketer who even minimally supports his brand’s communication with web analytics tools, but we have not only expanded the features you’ve mentioned, but we have also enriched them with unique market-wide and previously unavailable solutions. The functionality we are most proud of is the module that predicts if the content you just wrote will effectively engage your audience before it is even published! This is an absolute game changer that brings the existing rules and models of copywriting work and social media analysts to a whole new level. It sets them on a whole new course of development, based on artificial intelligence and advanced prediction models. It allows marketers to support human creativity with the power of modern calculating machines. You don’t often use terms like “machine learning” and “predictive model” when talking about copywriting, which in essence is a

SHUTTERSTOCK

TECH

very creative and human-centered concept. What is machine learning and what does it look like from the user’s point of view? JK: Machine learning is about giving computers the ability to learn without being explicitly programmed. It applies in cases where there are a large number of variables and it is difficult or even impossible to prepare a set of rules on which we could base the algorithm of a “traditional” computer program. On the other hand, from the user’s point of view, it is quite straightforward. Just fill out the table with the calendar of posts – enter the planned text, the publication date and time, and some additional information, then run the program. Now the machine takes over. It takes a moment to calculate the results: the probability that the analyzed draft/post proposal is likely to generate good engagement result for fans/subscribers/followers. What is the effectiveness of this solution? JK: The results are really very good. Otherwise we wouldn’t be using it in our daily work. For the past four months we have been monitoring the predictive model for all of the Facebook profiles we hold for our clients. For most of them, the accuracy of prediction was in the range of 70-90 percent, and in some months the model flawlessly predicted, on several occasions, which posts would have the greatest interactivity. What about the other solutions you offer and their performance? ŁT: They are equally useful for a professional marketer. They allow us to find out at what time our post will gather the most engagement, and when it could have the largest range. It tells us what the optimal number of words per post is, which words we should use, and which of the words that we have used so far could potentially lower the appeal of our message. We can identify potential influencers. We have packed so many functions into the program that I can only name a handful of the most im-

portant ones. It’s better to just take the program out for a test run. Are the solutions currently offered on the market, including your program, user-friendly for a “nonanalytical” person? How can they be tested? ŁT: Generally they are. Developers of data analytics solutions realize that on the other end, you reach users accustomed to simple graphic interfaces. Google knows it and that’s how their Analytics functionality is designed. So does Facebook with its Insights panel. Finally, developers themselves know that too. Semi-professional users should reach the desired information in a just few clicks. Viewell is no different; it is one of the most intuitive analytical tools on the market. What exactly does that mean? ŁT: All data is returned in graphical form and in interactive graphs, which is still not standard on the market. Almost all visualized data is clickable, configurable and updated in real time. The interactivity of the tool and the feedback we received from our corporate clients made us decide to add an extra module for reporting brand presence in social media.

55%

of entrepreneurs plan to increase their spending on social media

2.79 BILLION

is the number of active social media users worldwide, which corresponds to 37% of the entire population

39%

of Poles are active social media users

70%

What does it do? ŁT: Our analysis of the market of Polish internet shows that the current analytical users visit Facetools available on the market cause book every day, many problems in the relationship the third-highest between the client and the marketresult in the ing agency. The biggest ones are: world, exceeded - results are reported with insuffionly by Australia cient frequency and with significant and Italy delays; - data is presented in such a way that makes it difficult to understand and digest, e.g. static PowerPoint presentations, PDFs or spreadsheets; of an average - the systems don’t offer enough customization and reports are often company’s revenue is earmarked overly generalized. for marketing Analytics has to evolve, and we believe that thanks to Viewell we have accelerated this process. Our solution eliminates all of these problems. A complete report

12%

summarizing the entire previous month is already made available to the client on the first calendar day of the new month. Over the next few days, we only send written recommendations for changes resulting from manual data analysis. What are your plans for analytics? JK: Further development and improvement of created tools. Social media platforms are still very young: Facebook is 13 years old, YouTube is 12 years old, Twitter is 11, and Snapchat is only six. The social media landscape is constantly changing and new platforms are being born. The tools to analyze them also need to change in order to maintain their usefulness in the daily work of the marketer. What are the benefits for a commercial company from collaboration with scientists? Franciszek Rakowski: Scientific work allows us to get an in-depth understanding of a wide range of analytical methods. Data science methods have been used successfully for years in important research areas such as genetics, proteomics, medicine, and also in an area that is close to my heart: cognitive neuroscience. It turns out that you can successfully transfer the knowledge gained from your research to the field of commercial activity. How is scientific work different from business practices in this matter? FR: First of all, what counts here is reliability, simplicity and efficiency. Researchers may develop their methods and algorithms in a direction that is interesting and valuable to them, but that may not be worth pursuing in business practice. Often, sophisticated solutions have to give way to the more effective ones as well as those that clearly translate into customer satisfaction and company profitability. These are, as the mathematicians say, the additional constraints imposed on the model. They can be practical, business and social in nature, which makes the work even more interesting.

W B J MAY 2017

EVENTS

We organize events which stay in the memories of participants for a long time. We involve ourselves in the complex strategy, conception and production of events, large and small, recurrent and one-off, for many recipient groups â&#x20AC;&#x201C; from big-city opinion makers to demanding business leaders. See more at www.events.valkea.com

Section Partner

Interview with Dariusz Pawlukowicz of Vantage

Latest news in the office, retail, logisitics and investment markets

Retail projects in small cities

Interview with Adrian Majsterek of A&A

A photo collection of our favorite boardrooms in Poland

F E AT U R E D

PROMENADY BUSINESS PARK

COURTESY OF VANTAGE

(Nadodrze, Wrocław)

• 90,000 sqm of modern office space • part of a new district of Wrocław • proximity to Odra City Canal and a revital ized waterfront • two phases complete, three to be developed • one of the fastestgrowing office markets in Poland

W B J MAY 2017

LOKALE IMMOBILIA | INTERVIEW/NEWS The first months of the year have shown that the strong demand for office space continues. The vacancy rate in Wrocław has remained at a stable level of 10%-12%. This shows that the market is balanced and that demand matches the supply or the other way round – that developer tailor the scale of their projects to the needs of the market. The BPO sector, which has been growing very fast in recent years, is the main driver of demand for office space in Wrocław. We have a large pool of highly qualified employees and wages remain competitive. Some sectors have been having problems with access to labor force but the universities of Wrocław have been reacting flexibly to the market needs and adapting their education profiles accordingly. We are also witnessing a reversal of the trend seen in previous years when young people moved to Warsaw in search of attractive job offers. The rise in Wrocław's attractiveness in recent years means that more and more young people are now going in the other direction.

THE STRONG DEMAND CONTINUES

WBJ talked to Dariusz Pawlukowicz, vice president of the management board at Vantage Development, about the office property market in Wrocław and the company's Promenady Business Park project in the city INTERVIEW BY ADAM ZDRODOWSKI

WBJ:

According to Savills data, the supply of new office space in Wrocław grew by 57% y/y in 2016. Is the increase justified by the market situation or can we perhaps already speak of an overheating of the market? Dariusz Pawlukowicz: Wrocław has been the fastest-growing regional office market in Poland for a few years now. We do not see any signs which would indicate that the market situation could deteriorate in the near future, especially since the newly completed space has not influenced the vacancy rate in any significant way. Of course, one needs to be aware of the increasingly fierce competition that buildings completed a few years ago now face from new developments. Tenants will be able to expect bigger incentives, especially from the owners of older buildings. The demand for office space in Wrocław hit a record level of 124,500 sqm last year. How do you view the prospects for the leasing market in the city in the coming months?

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Vantage has to date completed two phases of Promenady Business Park, its flagship office project in Wrocław. What is the current leasing level at these buildings? The Epsilon and ZITA buildings together comprise more than 29,000 sqm of space. Epsilon, which was completed in 2012, is currently fully leased out. The ZITA building that was completed in September last year is more than 70 percent leased out. In Q1 this year, we signed a lease agreement with Lindorff for over 5,000 sqm. More agreements are now being negotiated. We are not concerned about further tenant interest in the business park. When will the next phase of the project be launched? The next building in the Promenady Business Park complex, called Omega, is currently at the design stage. We plan to get a building permit for it by the end of this year. We are already receiving inquiries from potential tenants interested in leasing space in the building. Last year Vantage sold its Gamma Office project in Wrocław and decided to focus on the Promenady Business Park scheme only. Is it still a strategy that you want to follow in the near future? We are currently focusing on the development of Promenady Business Park. The site offers the potential for the development of an additional 60,000 sqm of office space. Are you considering entering other office markets in Poland, including Warsaw? The office property market in Warsaw is very competitive, at the moment we are not planning to launch any office projects outside Wrocław. We are successfully developing residential schemes in Warsaw.

Retail

Office

EXTENSIONS to drive European retail development in 2017-2018 Extensions to established shopping centers will be a significant driver of new retail space development across Europe in the next two years, according to the latest report by Cushman & Wakefield. The total amount of new retail area set to be delivered in the period is estimated at 6.8 million sqm. “Extensions to established centers will account for around a quarter of new space and there is good logic behind that. The planning process is shorter, they have existing public transport solutions and a ready-made customer base to tap into – all of which reduces risk. As schemes get larger they can also attract more visitors and become regional destinations in their own right, which can bring additional benefits to the host city or town as well as the wider region,” said Justin Taylor, head of EMEA retail at Cushman & Wakefield.

Investment Market EUROPA CAPITAL completes major Warsaw hotel acquisition Fund management group Europa Capital has finalized the acquisition of the Radisson Blu Centrum Hotel in downtown Warsaw. Boutique real estate advisory WX Management Services advised the buyer, co-invested in the transaction and will provide asset management services for the project. Located in the Warsaw CBD, the four-star Radisson Blu Centrum Hotel offers 311 rooms, as well as a number of restaurants and conference and leisure facilities.

EPP finalizes €53.3 mln retail park acquisition in Kraków Investor Echo Polska Properties (EPP) has finalized the acquisition of the Zakopianka retail park in Kraków from a fund managed by Tristan Capital Partners for €53.3 million. Savills advised the buyer on the transaction, which was preliminarily agreed in December last year and excludes the Carrefour hypermarket and the Castorama DIY store that are part of the complex. “This is a very good purchase for EPP due to the strategic location of Zakopianka in the southern part of Krakow,” said EPP president Hadley Dean. “This transaction is consistent with the EPP strategy, which assumes purchasing dominant retail projects with high footfall in the region,” he added. Zakopianka was opened for business in 1998. The part of the retail park that has been acquired by EPP comprises 27,500 sqm of retail space.

CITI leases 13,600 sqm in Generation Park in Warsaw Citi Service Center Poland and Skanska Property Poland have signed an agreement for the lease of 13,600 sqm of office space in building 'X' of the Generation Park complex in Warsaw. The tenant, who was represented by Cushman & Wakefield in the negotiations process, will move to its new offices in the final quarter of this year. The largest office project of Skanska in Central and Eastern Europe, Generation Park will comprise a total of 84,000 sqm of leasable space in three buildings. The 21,000-sqm building 'X' is scheduled to be completed in Q4.

197,000 sqm the amount of office space leased in Warsaw in Q1 Source: PORF

W B J MAY 2017

Luxury apartments

Luxury apartments right on the bank of the Vistula river are available now. The Tides is the most exclusive and innovative project developed in Poland in recent years.

The Tides on Wioślarska street is the only in Warsaw, state-of-the-art, architecturally unique project set right on the bank of the Vistula. Contrary to other luxury apartment buildings, it is located just several metres of the river edge, on a green embankment. It is undoubtedly one of the most unique properties in Warsaw. “The prospect inhabitants of the residential section, The Tides Apartments, and the tenants of the office section, The Tides Office, will enjoy some of the exclusive solutions available only in the highest-class buildings” says Paulina Mikołajczuk, Marketing Manager at The Tides Property Group S.A. “It should be stressed here that the location of the property is unique and offers superb privacy. The Tides offers just ten apartments with spacious terraces and 13,000 m2 of a cutting-edge office space.” As the only apartment building in Poland, it offers exclusive, private boat dock and an intelligent management system. The Tides offers flexible arrangement of the spaces, which is not always available in other buildings of a similar category.

with views of the Vistula

What are the main advantages of the building? The unforgettable views, excellent location, green setting, proximity of the river, sophisticated architecture and the highest quality finish. But there are more. Another, important advantage is the central location at the intersection of the Poniatowski Bridge and the WisĹ&#x201A;ostrada thoroughfare, where many bus, tram and fast city rail routes cross, near the Centrum Nauki Kopernik underground station. The Tides can be also reached by bike, as it is located on the main and the longest bike route in Warsaw, and even by boat, as it will soon have its own boat dock on the river. The top-class fitness&wellness club with a beauty salon will be open not only to the inhabitants and tenant of The Tides, but also to the general public. Moreover, The Tides will house restaurants, which, along with its riverside terraces, will be available to all residents of Warsaw. Scrumptious food, live music and special events for patrons form just a fraction of The Tides restaurantsâ&#x20AC;&#x2122; offer. The Tides are the most long-awaited, and one of the last designs of the late Stefan KuryĹ&#x201A;owicz, an outstanding Polish architect. The building won the Innowatory Wprost award for its innovative construction solutions in 2015, and has been recognised internationally, receiving a Very Good BREEAM rating, highly valued on the real estate market.

Contact:

tel.: +48 602 510 185

Apartaments:

www. thetides-apartaments.com

Offices:

www. thetides-office.com

LOKALE IMMOBILIA | RETAIL

FEWER AND FEWER GAPS TO FILL

Small cities in Poland still offer some room for new retail space development, but as markets across the country are becoming increasingly mature and saturated, gaps and opportunities are now closing fast BY ADAM ZDRODOWSKI

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s retail property markets in the largest cities in Poland become more and more saturated, developers continue to look for investment opportunities in the smaller urban centers across the country, some of which are still underserved in terms of the inhabitants’ access to modern retail space. While the number of white spots on the retail map of Poland has been shrinking, and finding the right location has become more challenging in recent years, small cities keep luring investors with their favorable purchasing power and market saturation indicators. According to Jarosław Fijałkowski, CEO at Real2B, proximity to buyers is the main asset of new projects in small cities whose inhabitants have had no easy access to modern shopping malls to date. Those inhabitants today often spend hours travelling to large cities to shop, he noted. His company has recently launched construction work on a shopping center in Oława and wants to start building projects in Olkusz, Kępno, Konstancin and Sulechów later

Real2B will develop a Quick Park-branded project in Konstancin

Anna Staniszewska, consulting and research director, CEE, at BNP Paribas Real Estate, pointed out that small cities have the lowest average retail market saturation level of all the groups of cities in Poland. In cities with fewer than 100,000 inhabitants, the figure stands at 457 sqm per 1,000 people. By comparison, the figure for the whole of Poland is 623 sqm. Cities with populations of between 100,000 and 200,000, between 200,000 and 400,000, and more than 400,000 have saturation levels of 842 sqm, 748 sqm and 635 sqm per 1,000 inhabitants respectively. Much as the comparison of market saturation levels is favorable for small cities in general, there are huge differences, in terms of both saturation and purchasing power, between the particular urban centers in this category, which makes identifying locations with retail development potential tricky. As the expectations of consumers grow, developers are becoming more selective while making their investment decisions. Experts note that the times when any new retail project would guarantee high turnover rates are long gone. Aleksander Walczak, management board president at Dekada, said that there is potential in small cities with a low market saturation level and a relatively high purchasing power, but this does not mean that each new project in such locations will be a success. The decision to launch a new investment needs to be preceded by careful analysis of the local market, which allows the developer to choose the right retail format. While in some cities there may be room for a small shopping center, others may need a strip mall or a mixed-use development.

PROJECTS GALORE

this year. It is by no means the only developer to be planning a major expansion into Poland’s small cities in the near future.

IMAGE COURTESY OF REAL2B

LOW SATURATION

There are nearly 900 cities across Poland that have fewer than 100,000 inhabitants. Approximately 120 of those cities feature modern retail projects sized more than 5,000 sqm, said Wioleta Wojtczak, associate, head of research, at Savills. This shows that there are still cities in this category where retail is either poorly developed or has a more traditional face – of units accommodated on the ground floors of centrally located buildings. However, many small cities also feature retail schemes sized less than 5,000 sqm, Wojtczak noted.

Small-city locations with room for new retail developments may be increasingly difficult to come by, but the large number of new projects launched by developers outside the largest urban centers in Poland in recent years seems to show that the effort put into identifying retail gaps still pays off. According to Savills data, almost 240,000 sqm of retail space was completed in cities with populations of below 100,000 last year. At the moment, approximately 110,000 sqm of retail area is under construction in such cities. Master Management Group, for one, which has recently closed the sale of the Galeria Młociny shopping center scheme in Warsaw, will soon be announcing plans for several new retail projects and investments in Poland’s smaller cities. Legionowo near the Polish capital is to be among the locations in question. “We have long-term experience of managing shopping centers and retail parks outside of the leading agglomerations and see that there is a lot of unmet cus-

W B J MAY 2017

LOKALE IMMOBILIA | RETAIL A Dekada-branded scheme is being planned for Mińsk Mazowiecki

tomer demand,” said CEO Paul Kusmierz. “Cities with populations of between 50,000 and 100,000 still have some room left for new developments. We are seeing a lot of growth in smaller retail projects, such as retail parks of a few thousand sqm located close to bigger shopping centers,” Kusmierz said. Several other developers also have ambitious investment plans for small city retail locations. Dekada, the developer of an eponymously branded chain of retail projects, is now planning new schemes in locations including Nysa, Konin and Mińsk Mazowiecki. The company is also going to expand some of its existing developments. This month, Dekada is set to start expanding Dekada Grójec, while next year extension projects are scheduled to launch in Skierniewice and Sieradz. For its part, KG Group is continuing to develop its chain of Atutbranded convenience shopping center projects across Poland. The investor, which has already opened schemes in locations such as Pruszków and Węgrzce, has bought a site in Sucha Beskidzka for a new Atut-branded development.

SMALL FORMATS

Relatively small retail formats, including retail parks and convenience shopping centers, have proved the most popular kinds of projects in small-city locations. Krzysztof Gaczorek, management board president at KG Group, noted that rents in such projects are lower than rents in regular malls. Generally speaking, the tenant mix in projects located in small cities is similar to the tenant mix in schemes located in larger urban centers, except that the size of the units is, of course, different. Both global retailers and local entrepreneurs are among the tenants of

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small-city retail schemes. Developers maintain that retailers are interested in leasing space in retail projects located in small cities and are increasing their presence in local markets. “We work closely with our tenants who share insights into their strategies with us,” Kusmierz said. “A lot of them have already opened multiple stores in Warsaw, Poznań or Wrocław and are now looking to expand into secondary cities. Other brands want to debut in Poland outside of the prime locations because their selection is aimed at a different target group,” he added.

CAUTIOUS BANKS? Cities with populations of between 50,000 and 100,000 still have some room left for new developments.

Are lenders willing to finance developments in small cities or do they tend to view projects located in large cities as safer bets? In Wojtczak’s opinion, it is difficult to speak of any general preferences here as the potential of each single project is assessed by banks on an individual basis. Gaczorek claimed it is the business plan that really counts. “Well designed shopping centers in small cities often prove better investments than poorly designed projects in large agglomerations with major retail potential,” he said. According to Kusmierz, banks are happy to finance retail projects in small cities, as long as the investor can provide substantial data regarding the purchasing power, catchment areas and demand on the local market. Of a very similar opinion was Staniszewska, who maintained that it all depends on the market indicators for a particular location and the parameters of a particular retail project. “Banks are excellent at assessing investment risks and extend loans to safe schemes,” Staniszewska said.

LOKALE IMMOBILIA | RETAIL develop, and to analyze what is really needed in those cities. This is exactly what we did in Pabianice – of course, we did analyze the purchasing power and the shopping habits of the people living there, but what really made us decide to develop the Tkalnia project was the fact that the city lacks a proper center, a place which could serve as a meeting place for the inhabitants. In terms of retail, what is still needed in Pabianice? There is certainly room for more fashion brands in Pabianice, as well as for new restaurants and a multiscreen cinema. Admittedly, there is one old cinema in the city, but it is definitely not enough. Although some retail developers argue that there is only room for multi-screen cinemas in shopping centers with at least 30,000 sqm of leasable space, we believe this is not always true. What I can reveal is that the most important cinema operators present in Poland are now interested in opening a multi-screen cinema in Tkalnia.

WBJ talked to Adrian Majsterek, co-owner of real estate investment and development company A&A, about the retail property market in small cities and the company’s Tkalnia shopping center project in Pabianice near Łódź INTERVIEW BY ADAM ZDRODOWSKI WBJ: Retail space developers have increasingly been venturing into smaller cities across Poland in recent years. Is there still room for new projects in urban centers with populations of below 100,000? Adrian Majsterek: I think there are two different perspectives from which you can view the retail property market in small cities. Of course, there are the numbers – data regarding the ongoing expansion of retail chains in Poland, the size of the particular catchment areas, market saturation levels in various locations, and so on. What I prefer to do though, is to look at the particular cities as living organisms that continue to

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How do banks view projects in small cities compared to those in large agglomerations? Banks perceive Warsaw and other large cities in Poland as safer retail locations compared to small cities, but I would point out that in large cities there are also new retail projects that have not proved to be success stories. And as long as a developer is able to convince a bank that the project is a high-quality project, the bank will finance it, irrespective of whether it is located in a large or a small city. We are currently in talks with a number of banks that are interested in financing our development. We will probably only need one bank to provide the financing. Larger investments usually require a more complex financing transaction involving a consortium of banks, rather than a single lender, which makes things more difficult for the developer.

PHOTOGRAPHS COURTESY OF A&A

THINK LOCAL

Are there many small cities in Poland that are underserved in a similar way as Pabianice? I think that we should not generalize here. Each city is different and has its own specific needs. There are certainly still many gaps on the retail map of Poland, but the situation of each particular city needs to be analyzed separately and very carefully. While preparing the Tkalnia scheme, we held many talks with the municipal authorities and the inhabitants of Pabianice. We conducted surveys among the inhabitants to find out what they need and what they would like us to deliver in the location. I would say that it all depends on the nature of the particular shopping center, rather than on the size of the particular city. In today’s market, tenants want to be in shopping centers that have their own distinctive identity, their own distinctive nature. In our case, the project is unique in that it will involve the revitalization of historic post-industrial buildings located in the very center of Pabianice and will thus initiate an urban revival process. Tenants appreciate this, which is reflected in their current interest in the Tkalnia project.

Tkalnia shopping center project in Pabianice near Ĺ ĂłdĹş

Are you considering investment in any other retail projects in small Polish cities in the future? We are currently focused on Tkalnia, but we may also look at other development opportunities in the future. The first phase of the project in Pabianice will comprise approximately 14,000 sqm of leasable space, but there is also room for a second phase in the location, which would probably deliver around 10,000 sqm of GLA. We are thinking of developing space for DIY retailers within the second phase of Tkalnia, and are already talking to potential tenants interested in leasing space there. How advanced is the preparatory work on the Tkalnia scheme? We are now applying for administrative permits for demolition work on the site, and will apply for a building permit for the development in June. We expect bank financing to be in place by autumn. As soon as we have secured a bank loan for the project, we will go ahead with the construction work. We are currently preparing to start the process of selecting a general

contractor for the scheme.

Tenants want to be in shopping centers that have their own distinctive identity, their own distinctive nature

What is the current leasing level of the project? We are currently negotiating with tenants interested in renting more than 80 percent of the space in Tkalnia. We will reveal the names of the first tenants in the next few weeks. This is a good leasing level at this stage of the development process. We would like Tkalnia to be approximately 60 percent commercialized when construction works starts. The scheme will accommodate around 40 tenants and we are yet to sign final lease agreements with the largest of them, including a cinema operator, a consumer electronics and household appliances retailer, a drugstore and a shoe shop. Do you plan to sell Tkalnia once it has been completed? At the moment, we are not planning to sell Tkalnia, but of course I cannot rule out a potential sale in the future. We are not a typical developer, but rather a family business. Our business model involves developing properties and keeping them in our portfolio.

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LOKALE IMMOBILIA | OFFICE

BOARDROOM ROUNDUP

Itâ&#x20AC;&#x2122;s a fact that even when youâ&#x20AC;&#x2122;re hard at work, your mind wanders every ten minutes or so. Research suggests that zoning out is not only a natural process of the human mind but also a very productive one: it rejuvenates your brain, improving concentration and increasing overall performance. Even in a meeting, individuals need a few seconds of repose every now and again to be able to absorb all the information thrown at them. And what better way to seek this valued "me" time than by letting your eyes rove around a slinky office. This issue the WBJ casts an eye over the top offices and boardrooms across the nation.

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GHELAMCO

Warsaw Spire, Warsaw Ghelamco’s new futuristic office in the developer’s flagship investment was designed by Przemysław Mac Stopa and the Massive Design team. The office features a number of highly customized conference rooms, including one themed around the legendary Irish rock band, U2. The use of mirrors and 3D elements on the walls and ceilings, as well as the hi-tech furniture make you feel more like you’re inside a spaceship than in an office, particularly when combined with the wide open skies outside the window – definitely an upgrade on traditional wooden tables and rectangular paneled ceilings.

Design: Massive Design

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LOKALE IMMOBILIA | OFFICE GRUPA PRACUJ

Proximo I, Warsaw Grupa Pracuj’s offices are a direct result of collaboration between the architect’s, the design team and the employees themselves: by working together the concept has been developed across different stages with the final effect seeing a dominant loft-style complemented by snug home elements and funky twists.

Contractor/Fit-out: TB.INVEST Design: Colliers International Poland

JLL

Warsaw Spire, Warsaw JLL’s offices mix national motifs with modern architecture. The design is a journey through Polish nature, history and culture: such is exemplified by a thousandyear-old tree sunk inside amber resin and by a model of the Solar System.

Contractor: Tétris Design: Tétris

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CBRE

Rondo 1, Warsaw Designed to encourage collaboration, information flow and teamwork, CBREâ&#x20AC;&#x2122;s Warsaw operations are conducted inside an inviting space thatâ&#x20AC;&#x2122;s both efficient and highly functional yet at the same time visually enticing and conducive to creative thinking.

Design: CBRE Workplace Consultancy

W B J MAY 2017

LOKALE IMMOBILIA | OFFICE

MAY 2017 W B J

OPERA SOFTWARE WROCŁAW

Centrum Biznesowe Hieronimus, Wrocław Designed by mode:lina™, Opera Software’s office draws on the early 19th century history of the buildings it occupies. An industrial, loft style has been preserved and pursued throughout, as have themes that relate to Wrocław’s reputation as “the city of a hundred bridges.” Meeting rooms, however, refer to the company’s IT roots in Norway with interiors fitted with furnishings composed of over 1,000 floppy disks and 200 keyboards.

Design: mode:lina™

W B J MAY 2017

LOKALE IMMOBILIA | OFFICE

DELOITTE

Q22, Warsaw Set inside the landmark Q22 building, Deloitteâ&#x20AC;&#x2122;s Warsaw office has been adjusted to meet the lifestyle and expectations of its workforce, approximately 80 percent of which are under 35. Reflecting this, the design is dynamic and imaginative, with the environment organized so as not to stifle its employees.

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Rondo 1, Warsaw Sophistication, prestige and harmony define EY's new offices. The design is dominated by open space, natural light and soft colors. The principal idea was to understand how EY work and to then create a space which would allow their philosophy to flourish.

Contractor: Tétris Design: Massive Design

SAGE

Eurocentrum, Warsaw The aim of the Polish Sage team was to create a space which, in many aspects, would resemble a home and attract visitors with its lightness and intimacy. The glazed meeting rooms are decorated with realistic photographic wallpaper reminiscent of travel postcards. They depict the countries in which Sage has its offices, such as Portugal, US, India and China.

Contractor: Tétris Design: Tétris Building: Eurocentrum

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LOKALE IMMOBILIA | OFFICE

WYBOROWA PERNOD RICARD Lumen, Warsaw

The new Wyborowa Pernod Ricard offices are a masterpiece of brand imaging. The arrangement of the conference rooms is representative of a purposeful clash between straightforward messages and distant associations: British rum in an underground station, gin on a beach next to a hammock, or whiskey in a stylish cellar.

Contractor: TĂŠtris Design: Massive Design

MAY 2017 W B J

W B J MAY 2017

SOCIAL MEDIA

We know that a social media presence is a must nowadays. We utilize various platforms to bring the best results, which translate into brand awareness and sales results. We know what kind of content engages customers. We know how to speak their language and initiate discussions. We stay up to date with trends. We react instantly. We offer a valuable opportunity to communicate with customers in real time. See more at www.sm.valkea.com

Life + Style URBAN TWILIGHT Every year sees the return of the safari style: however, this spring it's more elegant and subtle than ever before. Ethnic motifs, floral prints, and claw jewelery have been softened by fine beige, cream or bronze in the background, making safariinspired costumes ideal for less formal business functions or weekend breaks outside the city.

Dress,Weekend by Max Mara, PLN 1,949. Bag, Weekend by Max Mara, from PLN 1,055

W B J MAY 2017

Life+Style 01

Magdalena IwaĹ&#x201E;ska Fashion editor, stylist, trendsetter.

Magda creates fashion and lifestyle magazines for Valkea Media and is often involved in Poland's biggest fashion events, co-operating with and helping style showbiz celebrities.

03 1.

1. Solar, PLN 289 2. W.Kruk, PLN 189 3. Furla, PLN 1 285 4. Michael Kors, PLN 1,050 5. Liu Jo, PLN 356 6. Weekend by Max Mara, PLN 949 7. Celebrity, PLN 1,399 8. Omega/W.Kruk, PLN 29,300 9. Ray-Ban/Perfect Vision, PLN 640 10. Tous, PLN 419 11. Vistula, PLN 99 12. Apia, PLN 599 13. Emanuel Berg, PLN 459

(All brands can be found at Dom Mody Klif) 68

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Stenstrรถms/Campione

09 10

HIGH QUALITY, TIMELESS LEATHER ACCESSORIES ARE ESSENTIAL FOR SAFARI STYLING. MORE THAN ANYTHING ELSE THEY COMPLEMENT SEASONAL TRENDS, HOWEVER, DON'T FORGET THAT EARTH-SUNBURST, BEIGE, AND KHAKI SHADES ARE CAPABLE OF ADDING SPICE, NONCHALANCE AND CLASS... 12 11 13

W B J MAY 2017

Life+Style

Spring Break

Off-grid or a boutique break? These are questions that have become valid now that spring has punched its way through the bleak winter skies. Eschew the touristy options this May, and head instead into the back of beyond to discover a true taste of Poland...

Alex Webber Journalist

Based in the Polish capital since 2000, for the past six years Alex has served as the editor-in-chief of the Warsaw Insider lifestyle magazine. He regularly contributes to both domestic and international titles specializing in subjects ranging from business and real estate to culture and travel.

SPA NO NAME LUXURY HOTEL & SPA Tucked into the rolling meadows of the deep south, anticipate a series of pretty log lodges cleverly connected by a series of glass walkways. Modern but homely, rooms are heavy on natural stone, glass and wood, though it’s the spa that’s the standout: there’s a saltwater pool with a mirrored mosaic floor, milk bath treatments, innovative wine therapy and a salt cave – though that’s just the start. (Łapsze Niżne, nonameluxuryhotelspa.com)

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COAST

SECRET CITY

CISOWY ZAKĄTEK Ideal for a break with family or

BRISTOL The city of Rzeszów is a bundle of surprises: quirky

NATURE

CASTLE

W DRZEWACH Offering a slinky Scandinavian look, these

KRASICKI Inside a 15th century red brick castle once known

ALL PHOTOGRAPHS PRESS MATERIAL, EXCEPT THIS PAGE TOP RIGHT AND BOTTOM LEFT BY ED WIGHT

friends, Cisowy consists of 14 sizeable, bow-roofed bungalows that have each been highly personalized and creatively-styled: you imagine it’s a matter of time until the interiors are showcased by Wallpaper* or Dwell. Fields and forests and blustery beaches are within easy reach, as is the award-winning local restaurant, Ewa Zaprasza. (Sasino, cisowyzakatek.pl)

three wooden tree houses are modern yet womb-like in warmth. Just about the worst thing you can do is bring your phone here: with no TV or other such distractions, time passes in a detached daydream: the silence is broken only by the whispers and whistles of the forest down below. A tree-top sauna and thermal bath are recent additions. (Nałęczów, wdrzewach.pl)

museums (inc. one dedicated to ‘Bedtime Stories’), underground tunnels and a small, pleasing Old Town that's all cobbles and alleyways. In the centre, the five-star Bristol is a place where high modernity fuses with regional styles – colourful peasant patterns and vibrant fabrics and ceramics. It’s one of the top hotels in Poland and even has its own brewery! (Rzeszów, bristol-rzeszow.pl)

as “the Wawel of the North,” find luxurious suites named after former guests, among them Napoleon and King Zygmunt III. Ringed by a swan-filled moat, the castle complex has it all, including a cellar space holding a hi-tech spa, a nightclub popular with visiting Russians and a creaky tower-top library filled with scrolls and globes. (Lidzabark Warmiński, hotelkrasicki.pl)

W B J MAY 2017

Life+Style

COUNTRYSIDE

FOREST

KIERMUSY Cast out in the backwaters of eastern Poland, Kiermusy is a classic rural break: big blue skies and the sense of total isolation. Lodgings are inside traditional chalets, or in an ivy-clad lodge that’s all squeaks and wobbles. After a day spent spying bison in their own private reserve or looking around the nearby historic town of Tykocin, head to Taverna Rzym for regional recipes and jugs of wine. (Kiermusy, kiermusy.com.pl)

CARSKA Set inside the Białowieża national park, Carska revives the era of Tolstoy and the Tsar: once a favored hunting ground for Russian royalty, a private train station built for Nicholas II has since been turned into luxury accommodation. Guests stay in saloon wagons revamped as wood-paneled digs or in a nearby water tower filled with voluptuous decorations and paintings of monocled aristocracy. (Białowieża, carska.pl)

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WINE

LOCAL TASTE

KANIA LODGE Originally conceived as a retirement project

KWAŚNE JABŁKO Famed for producing Poland’s best farmhouse cider, this Warmian retreat is the final word when it comes to lazy country breaks. Rustic yet contemporary, this place offers the full-on agro-touristic experience. The food, meanwhile, is the very definition of farm-to-table. It’s places like this that have people dreaming of giving up the rat race once and for all. (Włodowo, kwasnejablko.pl)

by a former New Zealand war correspondent, Kania has been an open secret among expats for quite some time. Located up north amid the lush scenery of Kashubia, this lakeside lodge offers a boutique style and some of the best wine and vodka you’ll come across: the elite Vestal vodka brand is a side-arm of the business, as is the acclaimed Wine Express service. (Sytna Góra, kanialodge.com.pl)

W B J MAY 2017

Life+Style

The Age of the Cocktail

Still in its relative infancy â&#x20AC;&#x201C; at least when compared to other capitals â&#x20AC;&#x201C; the Warsaw cocktail scene has grown fast in a short space of time. In that period, distinct schisms have appeared between bars that peddle neon-colored, jungle-style drinks to rich kids who wear sunglasses at night, and those that take the cocktail craft substantially more seriously. Though competition is growing, it's the following bars that particularly stand out when it comes to the latter.

INFO BOX Bar & Books ul. Waski Dunaj 20, barandbooks.pl Charlie ul. Mokotowska 39, charliebar.pl The Roots ul. Wierzbowa 11, therootsbar.com Weles ul. Nowogrodzka 11, welesbar.pl

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THE ROOTS Some places get 'it', most others don't. The Roots belongs to the former category, and that much is clear on entry. Beset with shiny props and pieces salvaged from the early days of bar tending, The Roots could almost pass for a Victorian curiosity shop: festooned with antique bar paraphernalia, it looks and feels like a cocktail bar in which you want to linger. As for the bar tending itself, then that's completely unimpeachable. Having headhunted a crew of some of the most accomplished staff in the city, drinks here are divided into seasonally slanted local specialties and more familiar international classics. Each are fixed with a meticulous attention to detail and take into account fussy individual preferences. The results achieve perfection the majority of the time.

BAR & BOOKS We live in an era in which cocktail bars have been dumbed down to suit the needs of 20-something's angling to get smashed on buckets of alcoholic fruit. Fortunately, an old guard exists that honours concepts of class and grace, and no-one represents this better than Bar & Books, an immaculate gatehouse reprised as a colonial-style cocktail bar. Ringing the buzzer for entry, guests ushered inside by a flawless host who is a throwback to the time bar staff were dapper gentlemen as opposed to hipster bozos with DJ aspirations. A place of twinkling candles and spooling Bond films, this is a venue with the wood-panelled refinement of a private Mayfair club. Naturally, the high-end cocktails are a reflection of the genial, upmarket atmosphere.

PHOTOGRAPH OPPOSITE PAGE COURTESY OF THE ROOTS, THIS PAGE TOP KEVIN DEMARIA, BOTTOM COURTESY OF WELES

CHARLIE Without fail, when it comes to cocktail bars Charlie was the boldest, most audacious project to open in 2016. Mimicking the grand decadence of the Gatsby epoch, this bar announces itself by way of a grand fountain, high ceilings and potted palms: you want to order a pyramid of champagne and then dance on the bar. Mixed and muddled by smartly attired staff, cocktails utilize pretty much the very best products about, resulting in stunning creations that feel classic yet contemporary at right the same time. Being rich and pretty isn't mandatory, but it certainly helps if you're one or the other.

WELES Were it not for the flickering column of fire signposting the doorway, you'd mistake the entrance for a janitor's secret cupboard: the kind filled with buckets, mops and mucky magazines. Instead, a swing of the door leads visitors to step down an inky black stairwell that emerges out to a dark room lit by a gleaming chandelier. Set with posh leather sofas and elegant wooden trimmings, there's a sophistication at work here that feels just right for the clientele: immediately you realize that this here is a venue for adults with refined tastes. That much is reflected by a cocktail list based on the finest ingredients available. There are no shortcuts here, just a commitment to craftsmanship and creativity in its purest known form.

W B J MAY 2017

EVENTS

Warsaw Business Journal relives the most important recent business and industry events

CEEQA 2017

Nearly 850 real estate sector leaders gather at 14th CEEQA Gala

THE 14TH ANNUAL CEEQA GALA & INDUSTRY AWARDS raised the roof with its unique blend of elite business and world-class entertainment thrilling a crowd of nearly 850 sector leaders from more than 50 countries. The sector’s big annual get-together and flagship industry awards took place at SOHO Factory in Warsaw on Wednesday night, and included an unforgettable live concert by music legend Macy Gray. The CEEQA awards are the sector’s most respected industry prizes, organized each year in association with the Financial Times to reward excellence and to showcase the achievements and opportunities of the New Europe real estate sector to the international investment arena. At the center of the evening’s proceedings was the garland award for Lifetime Achievement in Real Estate to local Czech veteran developer, founder and chairman of Passerinvest Group, Radim Passer, for his significant and enduring contribution to the sector. In one of the surprises of the night, another individual award went to Agata Sekula, regional head of retail investment for JLL. Dentons, Skanska and JLL continued their runs of total domination in the legal & financial, green building and capital markets advisory spheres respectively, while relative newcomers Rockcastle Global Real Estate rubberstamped the recent South African investment invasion. Slovakia-based HB Reavis continued their rise to regional development pre-eminence and the Warsaw Spire, Q22, Hala Koszyki and ParkLake projects came out on top in this year’s battle of the giants at the 2017 edition of the CEEQA Gala. In perhaps the biggest of numerous battles on the night, Echo Investment’s Q22 building in Warsaw beat Ghelamco’s Warsaw Spire to the regional Office Development of the Year award but Warsaw Spire fought back with the awards for overall Building of the Year CEE and Green Leadership Building of the Year. The Building of the Year SEE award went to ParkLake in Bucharest by Sonae Sierra and Caelum Development in one of the sector’s great success stories, while Griffin Real Estate’s revitalization of Hala Koszyki was named Retail Development of the Year and Al Habtoor Group’s outstanding renovation of the historic Ritz Carlton Budapest scooped Hotel, Leisure & Residential Development of the Year. In the Company Awards section, in the year of the South African CEE big game safari, it was no surprise to see a number of South African funds in the mix, with Rockcastle Global Real Estate eventually winning through as Rising Star on the night. Established market player Invesco Real Estate was named Investor of the Year for the first time and later in the evening picked up the award for overall Company of the Year. Bratislava-based developer HB Reavis Group saw a spectacular year of completions and sales rewarded with the Developer of the Year award, with Panattoni Europe taking Industrial Developer of the Year, while Helaba (Lender of the Year), Gleeds (Development Services Company of the Year) and Skanska SA (Construction Company of the Year) were all victorious.

MAY 2017 W B J

W B J MAY 2017

EVENTS

Warsaw Business Journal relives the most important recent business and industry events

SLOVAKIA-BASED HB REAVIS CONTINUED THEIR RISE TO REGIONAL DEVELOPMENT PRE-EMINENCE AND THE WARSAW SPIRE, Q22, HALA KOSZYKI AND PARKLAKE PROJECTS CAME OUT ON TOP IN THIS YEAR’S BATTLE OF THE GIANTS AT THE 2017 EDITION OF THE CEEQA GALA

But there was no stealing the limelight of two of the sector’s super heavyweights as Skanska Commercial Development Europe was once again named overall Green Leadership Company of the Year, an award it has held since its inception in 2011. Law firm Denton’s made it five in a row as the region’s Legal & Financial Consulting Firm of the Year as well as eight successive wins for the team in total since 2010, including a previous three under the banner of Salans. A big cheer rang out as Cushman & Wakefield were named Property Management Company of the Year for the first time, and also picked up the Retail Agent of the Year award. While JLL took Office Agency and Capital Markets Agency once again, an award they’ve held onto since its inception six years ago, Colliers International continued to make the Industrial Agency of the Year award their own. During the sumptuous gala dinner catered by Belvedere with wines by Mielżynski and Perinet, the evening’s awards ceremony was compered for the ninth year running by leading Polish broadcaster Monika Zamachowska and was serenaded as always by Wrocław-based brass orchestra Dziubek Band, a memorable highlight of which was a solo rendition of “Delilah” by 14-year-old “Poland’s Got Talent” contestant Adam Kaczmarek during the awards ceremony. But it was the traditional no-limits CEEQA after-party that will live long in the memory with an unforgettable live performance by music legend Macy Gray. The party continued late into the night with a kaleidoscope of local and international hospitality, production and entertainment highlights including a stunning video mapping show, a live graffiti show by street artist Why Duck? celebrating TriGranit’s 20th anniversary, award winning “beatboxer” Dharni, Milan-based DJ/producer Gioli Lipari and renowned street musicians from Saint Tropez, Hat Trick. CEEQA [Central & Eastern European Real Estate Quality Awards] is the main industry awards and flagship annual event for the New Europe property sector spanning 18 countries across Central & Eastern Europe and Southeast Europe, organized in association with the Financial Times and in partnership with Deloitte. Since 2003, CEEQA has played a vital role working with market leading regional and international institutions, organizations and commercial real estate professionals to showcase the achievements and opportunities of the sector to the international investment arena.

MAY 2017 W B J

EVENTS

Warsaw Business Journal relives the most important recent business and industry events

3RD EUROPEAN CONGRESS OF LOCAL GOVERNMENTS On March 27 and 28, Kraków became the self-government capital of Europe for two days. Nearly 1,800 guests, including regional leaders, representatives from state administration, scientific and business institutions, cultural and non-governmental organizations from over 40 countries participated in the 3rd European Congress of Local Governments. The theme of this year's meeting was “Local governments in the face of the challenges of the twenty-first century.” This Congress is one of the most significant international conferences in Europe devoted to the issues of regional politics, cooperation between local governments, and representatives of state administration, science and business. The two-day Congress consisted of over 80 different discussions divided into several thematic groups. According to Zygmunt Berdychowski, President of the Programme Council of the Economic Forum, “Management, healthcare, culture or self-government’s economic activity – these were the topics that dominated the side meetings. I believe that many of them decided to attend the Congress to get to know how other local politicians are solving those problems they have to face as well.”

10TH INVESTMENT FORUM IN TARNÓW Financial Technologies (FinTech), new technologies in the energy industry and healthcare, new management systems in enterprises, as well as practical implementation of innovative solutions in business were all discussed during the 10th Investment Forum in Tarnów which took place between 24 and 25 April. 400 participants from a number of European and Asian countries attended the conference – representatives of the business sector, politicians and scientists, startup founders, representatives of the largest consulting companies, IT sector and industrial conglomerates. Dozens of events took place as part of the 10th anniversary of the Forum – thematic blocks, discussion panels, lectures, presentations and reports. As usual, the Investment Forum also became a place where startup founders were given the opportunity to present their innovative ideas in front of investors and major business representatives from Poland and other countries, gain resources for development of their project and find the investor to carry them out. The chairman of the Economic Forum Program Council - the organizer of Forum in Tarnów - Zygmunt Berdychowski pointed out that this year’s event is record-breaking. The Investment Forum was held by the Institute for Eastern Studies, the organiser of the Economic Forum in Krynica. The Main Partner of the Investment Forum was the Małopolska Region and the Host City - Tarnów.

MAY 2017 W B J

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