Warsaw Business Journal August/September 2019 #53

WARSAW

BUSINESS JOURNAL Independently covering

Po l i s h b u s i n e s s f o r 2 5 ye a rs

AUGUST/SEPTEMBER 2019 ~ No. 08/09 (53)

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SOARING HIGH

Poland’s economy maintains momentum amidst global uncertainty

PLN 28.50 (VAT 8% included) ISSN 2543-9529 INDEX-RUCH-332-127

CATCHING UP WITH GERMANY

500+ FOR ALL

LABOR MARKET RIDDLES

GHELAMCO’S Jarosław Zagórski on the new office hub in Warsaw’s Wola

DRONE MARKET | POLISH -US RELATIONS | VINTAGE CARS | GREEN RESIDENTIAL

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IN REVIEW

News highlights from the previous month from wbj.pl

OPINION

Business intelligence becoming greener...15 Reverse takeovers ..........................................16 Poland in 30 years’ time ................................18 Interview: Longin Pastusiak .........................20

FEATURE

Poland catching up to Germany ...................26 The 500+ program ..........................................30 The job market conundrum ..........................34 Retail market reshuffle .................................38

Feature: Will Poland ever catch up to Germany? 26

TECH INSIGHTS

Tech News ........................................................43 Feature: Drones ..............................................46 Drones: market overview..............................50

LOKALE IMMOBILIA – REAL ESTATE

Real estate news ............................................55 Investment market .........................................62 Green residential projects ............................66 Interview: 19. Dzielnica .................................70

73 80

LIFE + STYLE

Vintage cars .....................................................73

LAST WORD

The crunch culture .........................................80

Tech: Drones 46 W B J AUGUST/SEPTEMBER 2019

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

Beata Socha

WELCOME to the first edition of our fall publications – enjoy the lean back experience. We live in a busy and disrupted time when our attention span is decreasing as we get text messages, what’s app and messengers notifications, direct messages on Instagram, alerts from subscriptions of on-demand programs and services we buy, we get news (are they really important news we need to be interrupted by?) in our pockets or on our wrists in real time and we get emails that demand immediate focus and action, urgent or important – or none of it? We have prepared for you a selection of relevant and timely insights to Polish economical and business relevant issues, that will give you important updates and know-how to form opinions about what to prepare for in the months and the year to come. So lean back, take a 30-minute break from the world of speed news and tweets, indulge in a read and concentrate on important issues in our and your surroundings – Poland. Other reflections (rant and raves, or maybe just commentaries) as summertime is fading: Where would Poland have been without the inflow of all the workers from east? I wonder would the Polish economy have been disrupted if the million extra workers that have joined the markets the last year(s) hadn’t been allowed to enter? Having had the chance to sit down with people at the Polish countryside and listen to their point of view about how we were saved by the leading political party stopping the flood of foreigners that would have destroyed the country, if Poland had taken its fair share of the European poll of refugees. No one mentioned that Poland was getting more than a fair share of the money from the European Union to improve life quality and infrastructure here. The 500 plus program for every child is now a reality in Poland. For you like I still wondering: what’s actually the real purpose of the program? What effects have been achieved? What are the short- and long-term benefits for Poland’s economy and demography? My colleagues have prepared an analysis of the program in our “The 500+ miracle that had an unexpected effect” piece. I helped a Danish business leader get settled in Warsaw three years ago, plus Valkea participated in the process of making his start-up R&D a great success, growing to over 200 employees in Warsaw in three years. As he was going back to Denmark this summer, having achieved the goals and delegated leadership to his Polish colleagues, we discussed Poland vs. Denmark experiences. One of our journalists is making a similar comparison between Poland and Germany in his article. I ask myself: is the economic freedom that societies of the Western and Northern Europe enjoy really an incentive for people to continue to strive for perfection and improvement in the same way as I see the Polish people do it? These are my humble thoughts for the beginning of the fall season. I wish you a nice read and remember, take your time, shut the phone off for a moment and enjoy an undisrupted break with our insights. - Morten Lindholm

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Managing Editor

bsocha@wbj.pl

Adam Zdrodowski

Managing Editor, Lokale Immobillia

azdrodowski@wbj.pl

Krzysztof Maciejewski Editor

kmaciejewski@wbj.pl

Kevin Demaria Art Director

kdemaria@valkea.com

Michael Evans Copy Editor

Contributors

Ewa Boniecka Sergiusz Prokurat Anna Rzhevkina Kamila Wajszczuk Alex Webber Sales

Magdalena Klimiuk mklimiuk@valkea.com Monika Makarczyk mmakarczyk@valkea.com Katarzyna Pomierna kpomierna@valkea.com PR & Marketing

Justyna Żelazińska jzelazinska@valkea.com Book of Lists

Dominik Grudziński dgrudzinski@valkea.com Monika Rozner mrozner@valkea.com Subscriptions

Magdalena Czopur mczopur@valkea.com Print & Distribution

Krzysztof Wiliński kwilinski@valkea.com Events

Magda Gajewska

Event Director, Valkea Events

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NEWS HIGHLIGHTS OF THE PAST MONTH FROM WBJ.PL

TOMAHAWK MISSILE SYSTEMS in Poland and Romania a threat to Russia – Putin The ground-launched Tomahawk missile test that the US military carried out in August is a new threat to Russia, one that will be addressed, Russia’s President Vladimir Putin said at a conference in Helsinki. The missiles can be launched from a system already located in Romania and another which is set to be constructed in Poland. All it takes for the US to launch their missiles from Romania and Poland is software change, Putin stated and added that, “I’m not convinced that our American friends will inform our European partners what software is installed in their systems.”

GERMAN EXPORTS decline to affect Poland – PIE The decline in German exports will definitely impact Poland’s exports to Germany, the Polish Economic Institute (PIE) stated. “The first signs are already visible in Poland. According to PIE’s calculations based on GUS data, the value of Polish exports to Germany dropped 12.3 percent (in PLN) in June compared to the corresponding period of last year,” PIE wrote in its weekly report. Germany’s GDP declined by 0.1 percent q/q in Q2 (and grew by 0.4 percent y/y). The weakening of the German economy is attributed to, among other thing, the decline in exports, which fell by 8 percent in June y/y. German exports outside the EU

AUGUST/SEPTEMBER 2019 W B J

decreased by 10.7 percent y/y, particularly to China and Mexico, and to the US, as a “result of the escalation in the US-China trade war,” the analysts stated.

enterprises totaled PLN 65.3 billion and was nominally 4.6 percent higher than a year ago. The revenues of companies increased by 7.1 percent with an increase in costs of 7.2 percent.

ECONOMY

MPiT expects ECONOMIC SLOWDOWN to be mild The Ministry of Enterprise and Technology (MPiT) expects a slowdown in the Polish economy to be soft as companies’ revenues keep growing and the decline in profitability decelerates. The anticipated slowdown will not threaten the sustainability of high economic growth, MPiT said, referring to Central Statistical Data (GUS) data for the first half of 2019. The net financial result of non-financial

ECONOMY

Number of UKRAINIAN WORKERS may fall by 20-25% in 4 years The number of Ukrainians working in Poland could fall by 20-25 percent in connection with the opening of the labor market in Germany, Katarzyna Saczuk and Robert Wyszyński from the Department of Economic Analysis in National Bank of Poland estimated. “It is rather the maximum value, and probably less will leave,” they specified. The experts say the scale of the outflow of

>>>

SHUTTERSTOCK, PAP

ECONOMY

eko-park

WBJ

In Review Ukrainian employees from Poland to Germany will mainly depend on the condition of the German economy. ECONOMY

Poland will WITHSTAND SLOWDOWN thanks to social programs Social programs and investments will effectively shield Poland from an economic slowdown, Minister of Investment and Development Jerzy Kwieciński told Radio Station 1. He added that according to the OECD, Poland will be the fourth-fastest growing economy in the world in 2019, after India, China and Indonesia. Kwieciński stated that GDP growth in Q2 amounted to 4.4 percent, which is four times larger than economic growth in the euro area and three times the average EU growth. Similar to Q1, consumption and investment have remained the main economic drivers in the second quarter. “I expect that [investment] growth will be at 8-10 percent y/y,” he said. FUEL AND ENERGY

FUEL CONSUMPTION up 3% y/y in H1 Consumption of three main fuel types (petrol, diesel and LPG) in Poland increased by 3 percent y/y in H1 2019 to a total of 15.6 million cubic meters, the Polish oil industry chamber (POPiHN) stated. The share of imports in the three main fuel types is at 32 percent. Petrol recorded the highest increase of 4 percent to 3.1 million cubic meters, while diesel and LPG consumption grew by 3 percent each (to 10.1 million and 2.5 million cubic meters respectively).

TRENDING STATS

Karolina Topolova, CEO of Aures Holding. RETAIL

Sales in SMALL STORE up 6.2% y/y – report The average value of a single purchase in small-format stores (up to 300 sqm) stood at PLN 14.9 in July, marking a 1.4 percent increase m/m and 7 percent increase y/y, according to the Center for Market Monitoring (CMR) and the Polish Chamber of Commerce (PIH). The total value of sales in small stores was 6.2 percent higher y/y; however, the number of transactions decreased slightly. “The growth was largely due to higher prices than last year,” the report stated. Compared to last month, both the revenue and the number of transactions decreased (by 3.1 percent and 4.5 percent respectively).

5.2%

Unemployment rate in July

(Ministry of Family, Labor and Social Policy)

+7.4%

Average salary increase in the business sector in July (y/y, GUS)

RETAIL

POLES SPENT PLN 10 BLN on sports in 2018

PLN

The Polish sports industry was worth PLN 10 billion in 2018, and budget investment in the industry came in at PLN 1.8 billion, according to Polish Economic Institute (PIE). Meanwhile, the global sports market was valued at over $0.5 trillion last year. Poles’ spending on sports and recreation places them in eighth spot in the EU. “We spend more than the Belgians, Finns and Danes, but less than the French, Germans and Italians,” the report stated. The average household’s monthly expenditure on sports amounted to PLN 458, which is PLN 40 more than four years ago. “The largest increases were recorded in sports clothing, and the lowest in equipment purchases, maintenance and rentals,” the report also said.

(GUS)

2.2%

Base inflation (excluding food and fuel) in July (NBP)

2.9%

CPI inflation in July (GUS)

-5.6%

AUTOMOTIVE

Used HYBRID MARKET booms in H1 2019

RETAIL

The market for used hybrid cars offered for sale in the first half of 2019 consisted of 3,035 vehicles, which is almost the same as the number for the whole of 2018, when 3,110 hybrids were offered, according to AAA Auto, part of Aures Holding. Toyota is the unquestionable leader, with an 85 percent market share in the used hybrid segment. Over the past two years, the median priced grew by 17 percent to PLN 95,900 (in 2017 it stood at PLN 81,900), while median mileage fell to 17,000 km (it was 18,395 km in 2017). “We can see an increasing interest in purchasing used hybrids, which are almost new, and with a low mileage, but cheaper that new ones,” said

As much as 40 percent of Poles are interested in green products, not only foodstuffs but also cosmetics and cleaning products, according to a study by research firm Nielsen reported by daily Rzeczpospolita. Food is the most popular product category, with PLN 1 billion to PLN 1.1 billion spent each year on eco foods. By comparison, Germans spend €10 billion (approx. PLN 44 billion) on bio-foods a year. “The trend for natural cosmetics or eco-detergents is in its infancy. Even for categories where it is the most visible the share of ecological or natural products in total sales for the past 12 months did not exceed 6

AUGUST/SEPTEMBER 2019 W B J

5,182.43

Average gross salary in the business sector in July

Decrease in new company registrations in Q2

ECO-PRODUCTS more popular, but still niche – Nielsen

(y/y, GUS)

>>>

-7.73%

Decline in electric energy consumption in July (y/y, PSE)

+5.3%

Sold industrial production growth in July (y/y, GUS)

In Review percent,” Nielsen stated. The interest in eco products would increase if products were more varied and cheaper, the study concluded. LOGISTICS

Volume of PARCELS SENT to collection points soars 230% y/y in H1 2019 The number of parcels delivered to collection points run by the Polish Post Office increased by 230 percent y/y in the first six months of the year, Polish Post Office reported. In July alone, the growth was by as much as 240 percent y/y. The list of collection points includes post offices, Żabka and Freshmarket convenience stores, Orlen petrol stations and RUCH press kiosks. Every fourth parcel sent through the Polish Post Office is delivered to one of these points. “The volume of parcels shipped to the collection points (OwP) network in the first half of 2019 reached almost the same number as the total volume shipped in the whole of 2018,” the Post Office stated. The volume of parcels sent each month to collection points reached “seven-figure numbers in each month this year,” the operator added. BUSINESS

POLAND IN 21ST spot in business environment complexity worldwide Poland has the tenth most complicated business environment of any European country, according to a new report by TMF Group, a leading provider of international administrative services. The firm’s Global Business Complexity Index, which compares key administrative and compliance demands across 76 jurisdictions worldwide, also found that Poland was the 21st most complex country globally. This makes Poland a simpler place to do business than neighbors Slovakia (6th in the index) and Germany (7th), but more complicated than the Czech Republic (48th) and Russia (44th). Poland’s relatively high complexity is

QUOTE OF THE MONTH

FUEL AND ENERGY

European Commission: PKN ORLEN AND LOTOS MERGER may lead to higher prices The European Commission has opened an in-depth investigation to assess the proposed acquisition of Lotos by PKN Orlen as it is concerned that the merger may reduce competition and cause price increases. “The proposed acquisition of Lotos by PKN Orlen would affect several strategically important energy markets,” said Commissioner Margrethe Vestager, who is in charge of competition policy. “The Commission will investigate whether the proposed acquisition would reduce competition and lead to higher prices or less choice of fuels and related products for business customers and end consumers in Poland and the other member states.” The initial investigation showed that the transaction would lead to the creation of a quasi-monopoly at an ex-refinery level in Poland since it would combine the only two companies that own a refinery in the country. In addition, considering the volumes of fuels held by PKN Orlen and Lotos, the Commission is concerned that the merged entity would have the ability and incentive to stop supplying its downstream rivals, thus shutting them out of the markets.

driven by frequently changing legislation; the relative difficulty of incorporating companies and unusually onerous corporate secretarial reporting requirements. Dagmara Witt-Kuczynska, Operations Director, Poland at TMF Group, said: “Foreign companies seeking to do business in Poland face a challenge. All company documents must be completed in Polish and incorporations can be slow for companies whose parent companies are based abroad.

Requirements such as these mean that an important European market has a high barrier to entry, making it crucial for businesspeople to work with local partners.” AGRICULTURE

Poland becoming BLUEBERRY WORLD LEADER Blueberry consumption is growing every year, and Poland is benefiting from it. Poland is already the second exporter in the

“This idea is our way of increasing employment opportunities in Poland. I hope that many young people will have the courage to take advantage of the new business model,” said President Andrzej Duda upon signing the law introducing Simple Joint Stock Company into the Polish law. The new legal form has been touted as a flexible model of business activities aimed at reinforcing the development of start-ups and increasing their competitiveness. The Act comes into force on March 1, 2020.

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SHUTTERSTOCK

WBJ

EU and the sixth in the world, informed Economic Weekly of the Polish Economic Institute (PIE). In 2018, Poland was the second-largest exporter of blueberries in the EU and the sixth in the world. In the EU, only Spain is ahead of us. The US is still the world leader. A great boom for blueberries took place in 2014-2018 when the production in Poland more than doubled. Last year it amounted to 25,500 metric tonnes, of which 6,700 tonnes went to export, which was worth almost PLN 178 million. FASHION INDUSTRY

APART opens first store in Spain

Apart on the investment in Madrid since October last year. The experts helped to establish business contacts and choose the location of the store. POLITICS

‘PENSION +’ to be paid out annually – PM The government intends for the extra, “thirteenth” pension to be paid out regularly each year, Prime Minister Mateusz Morawiecki said. “We want to guarantee ‘Pension +’ payouts by putting it in the form of a legal bill,” the PM stated. At the end of April, President Andrzej Duda signed a law of a lump sum monetary benefit to pensioners in 2019, dubbed “Pension +”, amounting to PLN 1,100 gross (PLN 888.25 net). There were 9.8 million beneficiaries to the extra pension in 2019. The total cost came in at PLN 10.8 billion.

Apart has opened its first jewelry store in Spain with the support of Polish Investment and Trade Agency (PAIH). “The Spanish jewelry sector is extremely competitive and dominated by domestic companies,” said the manager of the PAIH sales office in MaPOLITICS drid Wojciech Łopatkiewicz. “On the other UNITED RIGHT with 38% support, Civic hand, it is very fragmented, the three largest Coalition at 26% – poll brands have a 20 percent share,” he added. Among Poles who declared they would Apart President Piotr Rączyński said vote in the upcoming parliamentary electhis is the first investment of the company tions, 38 percent would cast their vote for in Spain. PAIH has been cooperation with WBJ reklama 174x114 ver1.pdf 1 2019-08-09 02:39:47 the United Right (Zjednoczona Prawica),

26 percent for Civic Coalition (comprising Civic Platform, Nowoczesna, Polish Initiative and the Green Party), while the Left (Spring – Wiosna, Democratic Left Alliance and Together – Razem) would receive 10 percent of the ballot, pollster Kantar Public stated. Twelve percent of those polled were undecided. “There have been some changes on the political scene due to the formation of electoral committees before the parliamentary election, set to take place on October 13,” Kantar said. The survey was conducted on August 9-14 on a representative sample of 997 Poles. DOMESTIC

Teachers to receive HIGHER SALARIES Minister of Education, Dariusz Piontkowski, has said that teachers will receive salary increases and that a resolution introducing a minimum salary for teachers is “being published in the Journal of Laws.” He added that salary increases will be permanent and not just for the September-December 2019 period. The government has managed to set aside an additional PLN 1 billion for the purpose, the minister stated.

14. EDYCJA C

CMY

8-9 PAŹDZIERNIKA 2019 MS MERMAID – THE TIDES, WARSZAWA WWW.ECOMMERCESTANDARD.PL

W B J AUGUST/SEPTEMBER 2019

WBJ

In Review

Białystok, July 20 An LGBT Equality March organized in the northeastern city of Białystok met with a violent ultra-conservative counter-march. Football ultra-fans and far-right nationalist organizations took to the streets to attack the peaceful Pride march. Police were dispatched to protect the LGBT marchers from glass bottles, rocks and firecrackers thrown at them. Photograph by Bartosz Staszewski / East News

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W B J AUGUST/SEPTEMBER 2019

A boutique apartment building in the heart of Warsaw’s Powiśle Luxury property – what does it actually mean?

What is luxury property today? What is luxury nowadays anyway? It is said that in the 21st century having free time is a luxury. At a time when everyone keeps rushing somewhere, we often do not have time to relax or even time to think. This is why free time, a break from one’s duties and the race to get more and more, as well as the ability to rest and spend time with oneself are what is getting more and more precious and in short supply. In the same vein, in the real estate market luxury is no longer about the proverbial golden door handles or a reception with concierge services. In this rushing world, silence and calmness are a luxury. Coziness and intimacy, especially in the center of the city. This is the offer that developer Powiśle BJK, which is now building a boutique apartment building – Apartamenty Dobra 32 – in Warsaw’s Powiśle, has for its residents. When one looks at the building’s offer, one can definitely say that this is a luxury property matching the 21st century definition of the word. “I’ve been living in Powiśle for several years and I like this part of Warsaw a lot. I’m glad that it is developing quickly. However, I have noticed that there is a shortage of boutique buildings in the center of the city, which would appeal to demanding clients who want to be part of a local community of neighbors, a community that brings together people who have something in common, who value quality and intimacy. This is why Apartamenty Dobra 32 comprises only 18 housing units, the majority of which are sized more than 100 sqm,” says Bartosz Kuźma, management board president at Powiśle BJK.

Apartamenty Dobra 32 is a new investment in Warsaw’s Powiśle, located at the intersection of ul. Dobra and ul. Zajęcza, close to the Vistula Boulevards, the Świętokrzyski bridge, the new Elektrownia Powiśle complex, numerous restaurants, cafes, green areas and the Centrum Nauki Kopernik subway stop. The building was designed by APA Wojciechowski, one of the most acclaimed and much-awarded architectural studios in Warsaw, which has also designed such projects in the city as Elektrownia Powiśle, Port Praski and Skyliner. The architects made sure that both the exterior and the interior of Apartamenty Dobra 32 are unique. The structure of a crystal was the main inspiration for them. “We wanted the corner of the building to be sculpted like a gem. We wanted it to bring about associations with the nature-formed simple

and multi-dimensional structure of a crystal and achieve the result of a clear geometry of the walls. Large glazed parts of the façade facing the street are set back behind the balconies, which has created an additional external layer made of immovable and movable openwork panels that protect against too much sunlight and overheating,” say architects from the APA Wojciechowski studio. The common areas in the building feature natural wood, stone, brass and veneer. The investor personally supervises the progress on the construction site and makes sure the used materials are of the highest quality. Additionally, his hobbies include painting and sculpture, and pieces of art will be used to decorate the building’s interior. The Apartamenty Dobra 32 project stands out due the glazed areas on the building’s southern wall, a fast and silent lift that

has been tailor-made according to a design provided by APA Wojciechowski, tall apartments (over 2.9 meters), a central air conditioning system in each apartment, electronic door locks and an intelligent building management system. Apartamenty Dobra 32 is the most luxurious investment in Powiśle and will welcome first residents in the spring of 2020.

Powiśle BJK Europejski Offices ul. Krakowskie Przedmieście 13 00-071 Warszawa T. 733 208 103 www.dobra32.pl

Powiśle BJK is a special-purpose vehicle established to develop the investment in Warsaw’s Powiśle. It is part of the BJK group – a family company that has been active in the real estate market for almost 20 years now. BJK group companies invest in Warsaw and in Silesia, primarily in commercial units located in major streets and housing bank outlets, stores of retail chains and well-known restaurants. Currently, the BJK group is the owner of more than ten properties (including plots of land) in Warsaw and Gliwice. The company’s flagship project is the renovation of a 19th century tenement house and its transformation into a prime office building. The building, which BJK has owned for over ten years, offers almost 4,000 sqm GLA and is occupied by international companies. BJK group companies develop their investments using their own funds, which ensures stability irrespectively of the situation in the market and the shape of the financial sector. The company works on no more than one investment at a time, due to which its management can focus all its attention on the particular project and take care of even the smallest details. Each of the schemes completed to date, irrespectively of its scale, has been unique and has been appreciated by its tenants and new owners, as well as by industry magazines and architectural publications.

SHUTTERSTOCK

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Opinion EXPERT VIEWS ON CURRENT BUSINESS AND SOCIAL TRENDS

Business intelligence becoming greener

SHUTTERSTOCK

conomic development and environmental sustainability are often treated – especially in Poland – as divergent concepts. Meanwhile, sustainable development, which is a kind of compromise between these two stances, is increasingly becoming the focus of business intelligence around the world. The greatest simplification is to pursue economic goals in a way that meets the needs of humanity today, as well as securing the resources necessary to meet the needs of future generations. But what does that look like in practice? Companies are increasingly checking not only the financial credibility of potential contractors, but also their approach to the green economy. Most often, such an audit is carried out by internal CSR departments in companies, but such procedures are also outsourced to external companies specializing in business interviews. This means expanding the teams of analysts with people with completely different skills. Increasingly, companies also include their environmentally friendly achievements in financial statements. However, to read these messages correctly, superficial knowledge is not enough. As with purely financial aspects, you often have to uncover the underlying meaning hidden behind marketing slogans. We are probably still at the early stages of sustainable development in Poland. Although environmental awareness is growing every year, it has not yet resulted in specialized reports commissioned to examine how a competitor or potential contractor treats environmental challenges.

Monika Leszko-Cichowlas Sales Director, Detective Creditreform

W B J AUGUST/SEPTEMBER 2019

Opinion BUSINESS

Reverse takeovers

In a typical merger deal, the bidding company acquires the target company and the bidder’s existing shareholders obtain the majority in the combined entity. In a reverse takeover (RTO), the inverse occurs: the target firm’s shareholders become the majority shareholders of a merged public company. “Reverse” refers to the fact that the initiator of the merger is the private target, which ultimately takes control over the public combined entity

n RTO can help private shareholders avoid much of the time, expense and tedium of an Initial Public Offering (IPO). Hence, the process is sometimes referred to as a “backdoor IPO” or a “backdoor listing.” Quite often, the publicly traded company involved in a reverse is an inactive “shell” corporation. A merger of the public and private entities allows the private company to shift its assets and operations

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into a public entity with relative ease. The first part of this article will compare the pros and cons of an IPO versus an RTO; then we will provide some statistics on the prevalence of RTOs in Europe and North America; finally, we will finish with a few recent examples. PROS AND CONS OF IPO VS RTO An RTO can typically be accomplished for a fraction of the cost of an IPO. The process of listing a company and taking it public requires hiring an underwriter,

SHUTTERSTOCK

WBJ

Les Nemethy CEO of EuroPhoenix, a Central European corporate finance firm, and author of Business Exit Planning

While a traditional IPO may require months or years to complete, an RTO may be completed within weeks.

extensive disclosure, a due diligence process undertaken by an underwriter, filings with the stock exchange and fees paid to stock exchange. The underwriting process usually provides some level of comfort to investors that securities purchased are of a certain quality. Given that an RTO is something of a shortened process – without an underwriter – investors have less comfort as to the quality of securities purchased. This may result in securities trading at a discount. While a traditional IPO may require months or years to complete, an RTO may be completed within weeks. PREVALENCE OF RTOS Reverse mergers initially gained popularity in the US over-the-counter (OTC) markets in the 1980s. Despite more publicity given to US RTOs, back-door listings are a global phenomenon. In Australia RTOs are frequent in the mining industry. In Hong Kong, RTOs are popular in the real estate development sector. RTOs are a popular mechanism for going public in Europe as well, especially in the UK and Sweden. According to a study which examined 224 reverse takeovers in Europe between 1996 and 2015, there were 167 private and 154 public companies involved in RTO transactions, with 12 percent of the 224 firms merging with a foreign entity. A reverse takeover might be considered an option for a company that has already decided that it would like to do an IPO, as an accelerated and cheaper route to a public vehicle. However, for those owners of private companies that have decided against an IPO for reasons of expense, delays, risks and effort, an RTO might warrant a fresh look.

EUROPEAN RTOS 1996-2015: DISTRIBUTION BY COUNTRY

Country

Private firms

Public firms

Belgium

Czech Republic

Sergey Glekov Associate Director at Euro-Phoenix, advises on M&A activities across industries including oil, gas and transportation

EUROPEAN RTOS 1996-2015: DISTRIBUTION BY INDUSTRY Industry

No. of firms

Percentage

High technology

20.54%

Financials

15.63%

Denmark

10.71%

Finland

Consumer prod- 24 ucts and services

France

Media and entertainment

10.71%

Germany

Healthcare

Ireland

Isle of Man

Telecommunications

Italy

Industrials

6.25%

Netherlands

Materials

5.36%

Norway

Energy and power

Poland

Real estate

Russia

Spain

Consumer staples

Sweden

Retail

2.23%

Switzerland

0.45%

167

154

Government and agencies

Total

224

Total

224

100%

Source: A comparative analysis between IPOs and reverse takeovers: Evidence from Europe by Vasileios G. Oikonomou, Antonios I. Tsianakidis

7.59% 6.70%

4.91% 4.91% 4.02%

Source: A comparative analysis between IPOs and reverse takeovers: Evidence from Europe by Vasileios G. Oikonomou, Antonios I. Tsianakidis

W B J AUGUST/SEPTEMBER 2019

Opinion POLITICS

Poland in 30 years’ time

Shifting alliances, changing borderlines, dissolution of international institutions – that’s what we may expect in the next 30 years. Where is Poland in all of this?

f we use our imagination and fastforward to the 2050s, we will see an image shaped by six phenomena of critical importance, some of which we can already see and experience now

1) There will be an irreversible change in the ethnic make-up of most of the “Old Europe” countries. The population of this territory will comprise unassimilated but well-settled and established minorities (although they may no longer be minorities) of immigrants, in the continuing South-to-North migration. 2) The countries of “New Europe,” Poland in particular, will be populated at a fast pace by migrants from the East, particularly from the declining and dismembered Ukraine.

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3) The states that were united in the 19th century – especially those that formed Italy and Germany – will be subject to a gradual decomposition: social atomism will be seen as a means of partly preserving their identities and welfare. 4) Twentieth-century supranational formations designed to bring about economic, political and military integration will become a thing of the past or will remain a facade only, as the UN is today. 5) China-dominated eastern Africa will become the world’s largest economic organism. 6) The US, dominated internally and externally by the Latino communities of the Americas, will limit its interest in Europe – both “Old” and “New” alike – to a minimum, strengthening instead

the anti-China alliance with Russia. Russia, for its part, will reduce its interest in Central and Eastern Europe, once it restores its influence over its “historic lands” that it lost in the last decade of the 20th century. Now, let us take a brief look at each of these factors. Factor number one is critical to the future of Old Europe. In 30-odd years’ time, a new generation of the descendants of African immigrants will have grown up, considering the region their own, with no need to assimilate with the indigenous people. Partly taking over the local languages, they will speak German, French, English, or Italian, but the language will no more cement them within the rest of the society. Some immigrants and their

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Poland will never again be the axis of any international dispute, and the country’s location will become an asset

children will continue to use their own languages and adhere to their cultures – their diaspora to be bound, primarily, by a common religion and the will to take revenge for past and current humiliations. Attempts at assimilation by intellectual elites of immigrant circles will lead to the formation of an internal opposition (a long-recognized phenomenon), which will, in turn, form a leadership class in the immigrant circles. Their victory will be based on – a particularly banal thing – the still-functioning democratic procedures, and the inclination for compromise in order to keep social peace. “New” Europe countries will resist immigration from Africa and Asia, but will supplement the dwindling labor force with mass immigration from the territory of what is today Ukraine (within the borderlines inherited after the Soviet Union). The Baltic countries will be re-Slavised, the largest “absorber” of immigrants being Poland – a country which is capable of peacefully, though shallowly, assimilating newcomers, not only from Ukraine but also from Belarus and Lithuania. Factors three and four, described as a gradual decomposition of 19th-century European unifications, will come as a defensive reaction aimed at preserving the existing cultural and ethnic identities. Germany and the UK will see the process happening the soonest, turning them into very loose federations of small nationstates. New independent states such as Bavaria, Catalonia, Piedmont, or Scotland will reappear on the map of Europe, which will be considered the only reasonable solution. The design for a new, “pro-

European” Eastern Europe once involved splitting the existing states into smaller areas which were expected to “regain their independence.” This is how Yugoslavia, Czechoslovakia, and the Soviet Union were destroyed. At the same time, countries of Western Europe were unified and formations such as a united Germany emerged; there was an idea to turn the West of Europe, in its entirety, into a single federative state under Germany’s protectorate. These projects will not survive until the middle of this century; perhaps they will be even more short-lived, not even capable of surviving into the very next decade. Why? The answer is quite simple: political integration forms organisms that are incapable of solving even the problems they have themselves created. The only chance for the military alliance to persist – which is true for NATO in particular – is the belief in a threat from Russia, which is not believed even by those who adopt it as part of their political agenda. Again, the age-old truth is at work: if a country is ruled by people who believe their neighbor is a threat, the country will either gradually slip into a confrontation – or even an unwanted war – or replace the people in power with those who are able to eliminate the threat. For disarmed – and indeed defenseless – countries with prevalent patriotic attitudes, the choice is more than obvious. China will finally win its cold war against the US and will form the biggest integrated economic area in the east of Africa, which will by then have become the world’s largest factory. Increased internal consumption and demographic growth

will deepen the autonomy of the Chinese economic area, which will take the upper hand over the European nook. The area may house a population of some three billion people, whose consumer demands will be satisfied by China itself. Before it happens, though, China will economically dominate Europe as well, through recreating a new version of the Silk Route. Poland will never again be the axis of any international dispute, and the country’s location will become an asset. Polish politicians will be able to strike a balance between Berlin and Moscow: the former will be economically weakened, and the latter will be akin to Alexander Dugin’s vision, with nobody bearing in mind antiAmerican resentments anymore. To sum up, the vision of Poland in 30-plus years is rather optimistic. With 100 years of peaceful existence behind us, the debilitation of potential enemies or opponents – who will have to focus on their own problems – will, as always, be the best bonus from destiny. The must, in this context, is to support – as covertly as is practicable – any process that would take us far away enough from the conflicts of tomorrow.

Witold Modzelewski Professor, University of Warsaw Tax Studies Institute (Instytut Studiów Podatkowych)

W B J AUGUST/SEPTEMBER 2019

Opinion POLITICS

A high-stakes game

Poland has always been close to the US, and regardless of whether or not the Polish-American relationship is onesided, it continues to seek to guarantee its security by tightening ties with the global super power. WBJ sat down with Professor Longin Pastusiak, a political scientist specializing in American studies, to talk about Polish-US history and future relations

WBJ:

In your latest book, World and Poland, you wrote: “1989 was a year of an actual breakthrough not only in the history of Poland but also in PolishAmerican relations. The systemic transformation in Poland led in effect to changes in the nature of PolishAmerican relations from co-existence to a political and military alliance. This breakthrough was also supported by the fact that Polish society has traditionally

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approached the US with great affection.” Years have passed since then, the governments in Poland and the US have changed many times and there have been significant changes in international relations, but the fundamentals of the friendly relations between Poland and the US seem solid. How do you view the relationship at the moment? Longin Pastusiak: Let me start with some references to history. Poland’s

relationship with the US dates back to the beginning of US independence. In my research, I identified 123 Poles who fought during the American Revolution, the most well-known being Tadeusz Kościuszko and Kazimierz Puławski. And US President Woodrow Wilson played an important role in Poland gaining independence after World War I. In 1920, Poland and the US established diplomatic relations for the first time,

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INTERVIEW BY EWA BONIECKA

which were maintained in spite of the political system in Poland. Even when Poland was a member of the Soviet Bloc, it had the best relations with the US among all the members of the Bloc. Coming to the present bilateral relations between Poland and the US, we have to look at them from many different aspects. Which of those aspects are important? The US and Poland are countries of different political and economic potential in all aspects and have a very different roles in the current international environment. The US is still the world’s super power and leader of the West, but it is not omnipotent; it cannot impose its own way of resolving international problems. Washington has to deal with the growing potential of China, it is involved in new local conflicts, it is searching for alliances in south-east Asia and the Middle East, it is pressing its own approach to international climate agreements, it has withdrawn from some international agreements, it interferes in trade relations with other countries, and it is also trying to weaken the EU. What role can Poland play here? Polish diplomacy should be aimed at advising the US and the EU to reach a compromise and resolve the tension that exists. But Poland, as a member of the EU – in contrast to many Western members – has not been critical of US foreign policy in certain matters. The Polish government wants to convey to Washington the idea that Poland is its closest European ally, regardless of whether or not the US government treats Poland as a special partner. We are friends, but we do not have the status of the main partner in US political games. Poland regards the US as the main guarantee of our security and is doing everything to increase the presence of US soldiers in our country. Poland is developing meaningful trade and investment ties with the US, celebrating the import of gas from the US to Poland as part of a 24-year contract. So bilateral relations between our countries are active. What do you think about the US visa policy towards Poland? The US continues to go about conducting its global policy and wants to impose its position in all areas, fighting strongly

Even when Poland was a member of the Soviet Bloc, it had the best relations with the US among all the members of the Bloc

for its own interests. In December 2002, as the Speaker of Polish Senate, I asked the Vice President of the US to abolish the obligation for Polish citizens to have visas to enter the US. That request has not yet been granted. What is your view of the internal situation in the US and Donald Trump’s policies and actions. There is a lot of criticism about him and his internal and foreign policy from the media and politicians in both the US and Europe. I am aware of the criticism, but as a political scientist I must remain emotionless in my assessment of President Trump’s personality and his actions. President Trump inherited a good economic situation in the US and he is maintaining it. The unemployment rate is at 3.7 percent and the pace of growth of the US economy is 3 percent. But social and economic inequity is worsening. President Trump’s lack of foreign policy experience has contributed to a weakening of the US’s prestige and position on the international stage. By creating tension in the relations between the US and the EU, he has weakened commercial relations with many countries. He is also contributing to the rising tensions in the Middle East by supporting Israeli policy. Do you think that our relationship with the US is somewhat one-sided? Despite the Polish government’s flattery of Trump and his policies, the Trump administration is not treating our country in any special way. Although

Trump praises the PiS government, the state department in his reports has a critical approach to the state of lawfulness in Poland, and the US media is not constrained in their critical evaluation of certain steps taken by Poland’s government. Still, PiS has refused to criticize Trump’s actions and has attempted to flatter him. An example of this is the proposal to name a military base in Poland after Trump, which is unprecedented, as it is not a US custom to name a military site in honor of a living president. By supporting the Trump administration the Polish government is neglecting relations with members of the Democratic Party, which could put Poland in a difficult position should the democrats win the next presidential elections. But, regardless of the current political situation in Poland and the US, Poles’ affection for Americans and their trust in them and Americans’ sympathy for poles runs deep, so Polish-US bilateral relations are close and friendly in all fields, including military ties. But the relationship could become strained as local conflicts and global political, economic and military tensions increase. So, our relations with the US should contribute to strengthening international democratic order. We are playing a high stakes game.

Longin Pastusiak Professor Longin Pastusiak is a historian and political scientist specializing in the US, author of 100 books and recipient of numerous awards. He was the Speaker of the Senate’s fifth term between 2001 and 2005, and he is currently the Director of the Institute of International Relations at the Vistula Academy of Finance and Business in Warsaw. W B J AUGUST/SEPTEMBER 2019

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FEATURES 26 Achilles and the tortoise – Will Poland ever catch up to Germany? 30 500 for all – Is

the extended social program going to save Poland from a demographic crisis? How much will it cost? 34 The job market conundrum – Is the record low unemployment a sign of a robust economy, or are other forces at play? 38 Are hypermarkets losing the hype? A major reshuffle is on the cards for the retail market.

W B J AUGUST/SEPTEMBER 2019

FEATURE | ECONOMY

Achilles and the tortoise

In the 1990s, former President Lech Wałęsa promised that Poland would be like Japan, Donald Tusk wanted Poland to become the second Ireland, but no Polish politician has ever dared compare Poland with Germany. For years, Poland’s main economic goal has been to catch up with its western neighbor. Polish salaries are constantly compared with their German counterparts, and the country’s economic and social system is perceived as a role model. The average Pole is often bothered by a fundamental question: when are we going to be as rich as the Germans? BY SERGIUSZ PROKURAT

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s a child, in the 1990s, I asked my father: “When will life in Poland be like in the West?” I remember that my father thought about it for a while and said that 30 years must pass in order for Poland to reach the level of Western societies. Now, nearly 30 years have passed since that conversation. Poland may no longer resemble the country from the 1990s – unkempt, post-communist, with almost no innovative products and services, with raging hyperinflation, mafia on the streets and low salaries – but have we gotten closer to Germany, the largest European economy? On the one hand, Germany is an ideal to which the Polish economy aspires, on the other hand, in a certain sense, it looks like Poles have a German hang-up, which results from historical events, and imaginary civilizational inferiority. So much so that Polish nationalism has chosen a narrative of turning this perceived inferiority into an alleged superiority. Nothing heats up Polish pride as much as the memories of the few victories over Germany in wars, or fairly rare victories over German sports teams. Every comment from a German politician concerning Polish politics is widely publicized and appended with a comment that the Germans are yet again interfering with Polish affairs. Nevertheless, German vehicles are predominant on Polish streets – the Volkswagen Golf has been the car of choice for Poles for years, and BMW is still a dream make for many.

basic indicator of economic development is the purchasing power of the GDP per capita (i.e. GDP per capita adjusted by the cost of living according to the methodology of purchasing power parities), it turns out that Poles are now about 38 percent poorer than Germans. If we assume that the indicator of economic development is the GDP per capita in the euro in current prices, it turns out that Poles are about 65 percent poorer than Germans. A country’s prosperity can be measured not only through GDP per capita, but – perhaps more accurately – by all of the wealth accumulated over generations. There is currently €5 trillion in German accounts. In order to get close to this amount, Poles would need to save money for 100 years, putting aside everything they earn, and yet they would not be able to make it, also because

DIFFERENT PATHS Historically, Poland and Germany started from a similar level. Both countries were almost completely destroyed after World War II. In Germany, however, human capital was at a much higher level, and Poland was gripped by socialism. We could compare this to a situation of two people who, as a result of a catastrophe, have lost absolutely everything. One of them is a well-educated engineer who is well-known and well-connected. He has extensive professional achievements, a portfolio of self-developed constructions and proprietary patents and a head full of interesting ideas. He knows influential people in the right places. If he starts a business, there will be banks to give him loans and people who will invest in his ideas. The second person is a very solid and hard-working laborer who can offer only his two hard-working hands and readiness to work. This is how Poland and Germany started out in the mid-20th century and this is why their paths diverged. American social psychologist Richard Nisbett, in the book Geography of Thinking, showed that a lot results from the cultural background in which people function. If we assume that the

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the population of Poland is over two times smaller than Germany’s. Wealth is also visible in infrastructure. Germans have 13,000 km of efficient highways – eight times more than Poland, and 400 high-speed trains (vs. 20 Pendolino trains in Poland operated by PKP since 2014). Added to this, there are also valuable, well-known and reputable brands built over the years: Porsche, BMW, Mercedes, Siemens, Volkswagen, Bosch, MAN, SAP. The best we could say about Poland is that is “on the right track” to having such global brands in the future. ARE WE CATCHING UP? When we look at the pace of economic growth, in the last 10 years the real GDP per capita in Poland has grown at an average rate of 3.4 percent annually, and in Germany at a rate of only 1 percent. At the same time, Germany experienced an extremely deep recession back in 2009, which significantly distorted its growth rates. If such differences in the pace of development persisted and the German economy didn’t move forward, theoretically the income in both countries would draw level at around 2039. Unfortunately, the assumption that Poland will be able to maintain such a rapid pace for the next 20 years is a daring one. Most

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economists believe that due to supply restrictions, such as employee shortages, the Polish economy is bound to lose its momentum to some extent. Moreover, the richer the country, the harder it is to maintain rapid economic growth. German Lidl, Aldi and Kaufland still make a great contribution to Polish economic development, but at the same time Poland is a back-up country; a service-outsourcing center and a subcontractor to the West. Global giants such as CD Project, a producer of world-class games such as The Witcher 3; or Synthos, a chemical industry tycoon, are some of the relatively few impressive brands of Polish origin. The model of economic growth, based on hard work, not innovation, will at some point be exhausted, so the road to achieving the level of German economic development will sooner or later start to steepen. In the Salary Catch Up Index report, Grant Thornton analysts looked at monthly salaries earned in various European countries and tried to estimate when Polish employers will start rewarding their employees at the same level as their counterparts in Western Europe. How quickly have salaries in Poland been catching up with the richer countries of the EU? Not too quickly. In 2000, the first year for which data is available,

average earnings in Poland reached 23.5 percent of the EU average, while in 2016 it was as much as 34.4 percent. Nevertheless, assuming that the current trends are maintained, in 2023, earnings in Poland will be higher than in Portugal and a year later they will be higher than in Greece. In 2027 they will reach the level of Malta, and in 2030, the level of Spain. In 2053, Poland will reach the average level in the eurozone, if economic trends remain unchanged. And finally, in 2077, earnings in Poland will overtake Germany. The calculations are based on the assumption that salaries will continue to grow at the same pace – 4.53 percent in Poland and 2.65 percent in the EU. One disadvantage of this model is that economists take into consideration average data from the past, while the future remains invariably unknown. To some extent, Poland’s economic pursuit of the West can be compared to the famous paradox of the Greek philosopher Zeno, who described the race of Achilles and the tortoise. Achilles, being the fastest among runners, gives the tortoise a head start and begins the race a few meters behind it. In order to overtake the tortoise, the runner must first reach the place from which the tortoise started. By this time, however, the tortoise will have moved ahead. Achilles will cover this distance again, but the tortoise will be able to move a few centimeters forward at the same time... and so on and so forth. According to that train of thought, Achilles’ pursuit of the tortoise will last forever. Achilles will never catch up with the tortoise, even though he is running two or ten times faster – and there will always be an ever declining distance between them. It is worth noting, however, that Aristotle, to whom we owe the depiction of Zeno’s paradox, formulated it with the intention of disproving it.

is an ideal to which the “Germany Polish economy aspires, on the other hand, in a certain sense, it looks like Poles have a German hang-up

According to economic theory, when fiscalism and state participation in income increase and the free market becomes more limited, economic growth slows down. By that token alone, in order to accelerate the catching-up process, the country would have to consistently focus on economic freedom, and not on building a welfare state. Nonetheless, Joseph Schumpeter, one of the greatest economists of the 20th century, claimed that it is unrealistic, because all countries, as they become rich, abandon some of their economic freedom in favor of greater security and a fairer income distribution, at the cost of lower economic growth. Regardless of whether Poland will catch up with Germany or not, Poles already earn as much as Germans, provided they work in the West. Employers all over the world values professionals, regardless of their nationality. Perhaps this is the work-valuing, meaningful system of thinking that Nisbett wrote about – a system that can convince people from both the East and the West to take a critical look and verify their own beliefs.

QUANTITY OVER QUALITY? Again, chasing German GDP levels does not directly translate into raising the quality of life for Polish citizens. In particular, it can be seen that these differences become smaller when we pay attention to other indicators. For example, according to Better Life Index, Poland is ahead of some of more affluent countries, e.g. South Korea and Portugal, almost catching up with Italy. It is important, because in recent years the government declared that GDP growth is not the most important criterion that the country’s policies will be guided by. And this is visible in the increased social transfers such as the additional 13th pension payment, or the extended 500+ program. The most powerful economies in the world have built their power on the wealth of society, basing their systems on free market solutions with a low share of government expenditure in GDP.

W B J AUGUST/SEPTEMBER 2019

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This year, Poland is celebrating 100 years since it declared independence after World War I. The past century has featured both successes and hard times, in every aspect of life BY SERGIUSZ PROKURAT

W B J AUGUST/SEPTEMBER 2019

FEATURE | ECONOMY

he Family 500+ program was introduced in 2016 after the Law and Justice party (PiS) won the parliamentary elections in fall 2015. Today it is the government’s showpiece, giving the party strong social support. However, when the program came into force, many people, including PiS voters, were disappointed with its form. It turned out that the pro-demographic program covered only the second and subsequent children in the family, and for the first child the money would be paid only in cases where parents met a certain income criterion of PLN 800 (ca. €190) per family member. This year, months before the next election, the government announced that the 500+ program is to apply to every child under the age of 18, without exception. The income criterion has been lifted. Nevertheless, the announcement that the 500+ allowance would cover all children has become a hot topic, in some cases even more so than its original, limited version. As much as PLN 67 billion has been dedicated for the implementation of the 500+ program over the last three years. According to government data, parents of 3.6 million children have taken advantage of the program. No expert, however, is in any doubt that the 500+ program is more than just about demographics or helping the poorest – this program has additional goals; both political and economic – and it was aimed at achieving far more extensive results in these fields. Can you pay people to have children? Yes, you can! Just like you can pay students for better grades. The purpose of a school experiment conducted several years ago by four economists: Steven Levitt, John List, Susanne Neckermann and Sally Sadoff, was to test whether certain incentives – monetary or non-monetary – make children improve their test results. During the experiment students were informed that if they improved their score they would receive a reward – either a financial reward ($10 or $20) or a trophy. Did it affect the results achieved by students? In general – yes. It was the financial incentives, in particular, that had a positive impact on test results. And the amount of the prize was a significant factor. OPPOSITE EFFECTS? On the other hand, are Poles going to be more willing to have more children if their financial comfort improves? After all, the relationship between the affluence of countries and fertility has long been established: there are more children in poorer countries. If we look at the effects of the program in 2016-2019, they don’t give a lot of cause for optimism. The pro-demographic plans of the Polish government after the implementation of the program were very ambitious. And in fact, in 2016-2017, Poland saw a slight increase in the number of births, but in 2018 there was a decrease. In 2018, 388,000 children were born, which is 13,000 fewer compared to the previous year. There is practically zero chance of going back to the level of 413,000 births recorded in 2010, not to mention 550,000 at the beginning of the transformation, or 700,000 in 1980. In other words, the Family 500+ program may have failed at achieving its primary goal, which was to increase the birth rate and improve the country’s demographic situation in the long run. It is equally unlikely that the extended 500+ will manage to reverse the trend. Currently, the fertility rate (about 1.3) is far below the threshold of generational replacement (2.1). Just like many developed countries, Poland is heading for a major demographic shift, if not a disaster.

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POVERTY AND LABOR MARKET EFFECTS If we consider Family 500+ a social program, it actually does eliminate poverty among the most disadvantaged. The Economist estimated a few months ago that more than two years after being implemented, the 500+ program has reduced the number of children living in extreme poverty from 12 to 3 percent, which in and of itself is a remarkable feat. Unfortunately, the side effect is that the extra income has pushed some women out of the labor market. It is, however, difficult to determine how many. Estimates from IBS Institute researchers show that almost 100,000 women may have decided to give up work. Withdrawing from the job market does, in the vast majority of cases, mean that women who have struggled to balance work and family care have been relieved from at least some of their burdens. And children having a full-time, stay-at-home mother is not a bad thing. COSTLY ENDEAVOR The 500+ program is the most expensive social program in Poland’s history. The annual cost after extending the scope of the 500+ program to cover the first child is PLN 42 billion per year (€10 billion), or a tenth of the Polish budget (PLN 416.1 billion in 2019). This is as much as the entire GDP generated by all citizens of Mongolia or Nicaragua. Even space flights are much cheaper. This cost per one working citizen amounts to almost PLN 2,500. It means forcing tax increases and/or reducing other state expenditures. Some experts claim that a significant part of this money will return to the state budget in the form of VAT. Others believe that the program triggers inflation, resulting in higher prices of basic commodities such as potatoes or bread. So far, we have no reliable data that would prove any of these viewpoints. A BLEAK SCENARIO Too few children can be socially expensive, assuming that there are no immigrants. At the current pace of depopulation, it seems that Poland is facing a population loss of 2 million by 2035, being the result of fewer births and mortality of older people, and it will overlap with trends as obvious and natural as the aging of those who are working today. So, although the population will be smaller by 2 million, the working-age population will decrease by almost 4 million, and the number of pensioners will increase by another 4 million. So the number of those who rely on social benefits will double. If the current birth trends are maintained, in 50 years almost 40 percent of society will be past productive age, and another 14 percent will be children unable to work yet. Poland will at that point have the lowest percentage of young people in relation to the eldest (over 65 years of age) in Europe. The problem is real, and it will become quite evident, but only within 15-30 years. The 500+ program will not change this irreversible trend. People in rich countries put off having children because they want to spend their youth on activities other than raising children. Nevertheless, the later we start having children, the fewer members of the family there are. And they are born later because of a prolonged education process and changing aspirations. This especially applies to women, who are culturally burdened with the duty to care for children, often unable to balance full-time work with childcare. It looks like economic growth is the best contraceptive, and it is proving to be more effective than the state incentive to get a bonus check for having children.

“ THE FAMILY 500+ PROGRAM MAY HAVE FAILED AT ACHIEVING ITS

PRIMARY GOAL, WHICH WAS TO INCREASE THE BIRTH RATE AND IMPROVE THE COUNTRY’S DEMOGRAPHIC SITUATION IN THE LONG RUN

W B J AUGUST/SEPTEMBER 2019

FEATURE | JOB MARKET

THE JOB MARKET 34

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Low unemployment and rising wages are what analysts usually look at when assessing the Polish economy in terms of labor. Nevertheless, a closer look reveals that the country’s labor market may not necessarily be described as favorable to employees and those looking for work BY KAMILA WAJSZCZUK

CONUNDRUM W B J AUGUST/SEPTEMBER 2019

FEATURE | JOB MARKET

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SEASONALLY ADJUSTED MONTHLY REGISTERED UNEMPLOYMENT RATE

June 2019

May 2019

April 2019

March 2019

February 2019

January 2019

December 2018

November 2018

October 2018

September 2018

August 2018

Source: GUS

July 2018

A JOB SEEKER’S DREAM… Agnieszka Kulesa, an economist at the Center for Social and Economic Research (CASE), agrees that the situation on Poland’s labor market is increasingly favorable for employees, albeit with some reservations. We may generally say that it is an employee’s market in Poland now, but only with regard to selected sectors of the economy and even selected professions within those sectors. Statistical data – on registered unemployment and the employment rate – is very good in Poland but it’s worth asking extra questions about the current structure of employment with regards to age, gender, disabilities and so on, she said. In her opinion, two groups of professions show symptoms of a tight market: jobs with difficult work conditions and jobs that require skills and knowledge that are difficult, costly or time-consuming to acquire. Especially affected are the construction sector, with a wide range of professions that require physical strength, availability at various times of the day and a willingness to travel, and the production sector, especially in the case of professions that require unique skills. In the transport sector, particularly in the western part of Poland, employers are seeking bus and truck drivers, mechanics and warehouse employees. The restaurant sector is also experiencing a staffing shortfall, notably in larger cities. Another sector is personal care and medical services, with a special focus on nurses and midwives, physicians, physical therapists, as well as careers for the elderly and disabled. In the services sector, she also pointed out a shortfall in the number of hairdressers and beauticians with documented skills and experience. In finance, accountants are sought after. Also, IT and telecommunications specialists are already seen as job seekers who set their own conditions, and that trend is likely to intensify. When we compare the situation on the labor market in 2019 to the one we had in 2016, we can see an increased shortage of job seekers. Fewer and fewer people are searching for employment in these sectors and professions, Kulesa stressed. However, Poland’s market still focuses on a cheap labor force and it has serious issues with satisfying some needs, she added.

…BUT IS IT REALLY? Professor Joanna Tyrowicz from GRAPE (Group for Research in Applied Economics) and the University of Warsaw spoke in a much more cautionary tone. In her opinion, current developments in the Polish labor market are not necessarily a sign of favorable circumstances. There are systemic reasons behind the fact that despite rising indicators of labor market tightness, the bargaining power of Polish employees is not high. Naturally, unemployment declines while wages and employment grow, but what counts the most is the ease of finding a new job. The key indicator for evaluating the condition of the labor market is the length of time needed to find a new job. An employee will think twice about leaving an unsatisfying job if the time needed to find a better job takes many months, as is the case in Poland. People have bills and mortgage installments to pay – they are thus less likely to even enter into bargaining if they are convinced they are stuck with what they have. The same applies to employers: e.g. the 3-6 months needed to fill a vacancy simply discourages job creation, because it may be easier to forego new business opportunities or to find a subcontractor, even abroad. As a result, the labor market is stagnant, wage dynamics remain low, personal wage profiles also grow slowly and there is little opportunity for new people to enter the market. These mechanisms are present in Poland, even if the current business cycle is generally favorable, hence we temporarily experience less adverse consequences, Tyrowicz concluded.

June 2018

ollowing years of double-digit registered unemployment, Poland has been enjoying one of its lowest levels for a considerable time now. According to data from the Central Statistical Office (GUS), unemployment reached a low of 5.3 percent in June this year (5.5 percent for seasonally adjusted data). At the same time, monthly wages have been rising steadily to reach PLN 5,138.50 (ca. €1,190) in June. In a recent study by Randstad, 88 percent of respondents were confident they would find a new job within six months if there were to lose their current employment. When asked about possible reasons for a job change, 55 percent of the respondents named remuneration and 46 percent mentioned professional development. However, the same consultancy’s monitoring shows that the time needed to find a job has slightly increased and currently averages 2.5 months. Candidates aged 30-39 need the least time (1.9 months on average), while those aged 40-49 need the most (3.7 months).

6.1% 6% 5.9% 5.9% 5.9% 5.8% 5.8% 5.8% 5.7% 5.6% 5.5% 5.5% 5.5%

GENDER AND AGE ISSUES What is more, those actually employed are more likely to be men (64.4 percent of men are active on the labor market according to GUS data) than women (48.1 percent). The European Commission’s data for working-age population paints an even darker picture: in the European Semester report for Poland it was pointed out that 79.3 percent of Polish men aged 20-64 were employed, with just 65.1 percent of the corresponding group of women. Kulesa believes that employers will soon have to start including older staff in their perspective. The over-55 population is growing while the availability of young people declines. Yet another challenge for employers is the Z generation, which is hardly loyal to companies they work in. These young people also prefer more flexible working conditions. It will also be a challenge for employers to change the way they think about their work culture so that people feel more comfortable and more stable at work, Kulesa said. In her opinion, there are already companies open to such changes, yet an old style of work management still dominates in Poland. Changing it will be hard for both employers and employees. Companies seem to be unaware that changes may also bring profits in a financial sense. HOW TO FIND THEM? Tyrowicz also argues that there is a large number of people available for work. “Employers usually complain about insufficient skills, excessive wage expectations and too few workers. There is nothing wrong about those complaints, but I would be cautious in interpreting those complaints as actual measures of labor market situation,” she said.

Average monthly gross wages (seasonally adjusted), PLN

5090,69

5123,33

5138,50

April 2019

May 2019

June 2019

4975,70 December 2018

5055,26

4962,01 November 2018

March 2019

4935,35 October 2018

5045,04

4902,81 September 2018

February 2019

4873,67 August 2018

5015,52

4848,19 July 2018

January 2019

4830,22

Source: GUS

June 2018

WHY WORK AT ALL? These comments may sound strange in a country where employers, especially those active in the construction, manufacturing and IT sectors, complain about a shortage of workers. However, Tyrowicz explained that labor shortage is not the right diagnosis. Currently, about 10 percent of Poland’s potential labor force remains outside the labor market. The main barrier for those individuals to work is flexibility in terms of working hours and part-time rather than fulltime employment opportunities. While the skills of those who remain outside the labor market may be perfectly matched with the needs of employers, the potential workers and the employers do not even enter negotiations to cooperate, because the employers do not offer positions which respect the need of the workers to combine their professional and private lives. Part of the problem is also that for lower paid jobs, part-time employment results in low total compensation, which reduces incentives to even start working. Economically inactive people comprised 44.1 percent of the total population above the age of 15 in the first quarter of 2019, slightly more than in Q1 2018, GUS data shows. Within that group, 54.6 percent were pensioners and 16.4 percent were students. In the case of working-age people (defined in Poland as aged 18 to 59 for women and 64 for men) neither working nor seeking a job, the most often mentioned reasons were family duties (31.9 percent), disease or disability (25 percent) and further education (24.4 percent).

Within the group of potential workers not currently entering the labor force, women are naturally the largest group, but gender is not the defining characteristic. The individuals forced out of the current labor market require flexible hours for a variety of reasons: caring for a family member, a partial physical disability or mental disabilities. With today’s state of automation and use of robots, it should not be a problem to employ people with a broad range of disabilities. If we compare the number of hours worked, it would seem that a Polish person with a disability is 17 times more disabled than a peer in the Netherlands. This is obviously absurd and shows how little we have done to create an inclusive labor market, Tyrowicz said. In her opinion, the required solution is not to change the labor code, which in Poland is strict, yet easily circumvented by employers. For an efficient labor market, it is fundamental to have efficient job counseling services. Ten years ago I would have said the same. Companies do not know how to find employees because there are no available services in that regard, Tyrowicz concluded. This shortage is not provided for by existing temporary job agencies or existing brokers, which are rather bulletin boards. The rules are simple: a professional job brokering and counseling service available broadly and free of charge to workers, at some fee to employers. Such services exist in different forms and rely on different technologies in the Netherlands, France, Belgium, the US or Germany. There is no need to reinvent the wheel, the economist said.

W B J AUGUST/SEPTEMBER 2019

FEATURE | RETAIL

ARE HYPERMARKETS LOSING THE HYPE? Why are some retail concepts dying while others are flourishing? What is so special about the Polish retail market that makes it so attractive for large retail chains, despite extremely low margins? Who stands to gain, and who will lose in this game of ever-changing rules and consumer habits?

AUGUST/SEPTEMBER 2019 W B J

BY MAURYCY SZWAJKAJZER

oland is a peculiar market for retailers. Over the past three decades, it has attracted a slew of international retail chains, some of which are now withdrawing or changing their retail concepts. The change that the market is experiencing is profound. For some it is good – even sensational – with an abundance of opportunities on every corner. At the same time, it may prove difficult – or even catastrophic – for others. For a better understanding of the Polish retail market, it’s a good idea to focus on its segmentation first. Proximity and partly convenience – These are small or very small facilities, located very conveniently for the customer (on the way from home to work, in a block of flats, etc.). Sales are largely impulse driven, and the service must be very easy and fast. Prices are usually slightly higher, which, however, does not seem to be the most important thing. Most products are packaged. Traditional-style sales of, for example, meat still exist but are disappearing. Instead, new services appear, such as take-out coffee and hot dogs. Discount stores – Stores derived from discount and hard discount stores in the Western European style of the 1990s. The investment cost in the aesthetics of the facility has historically been very small and not considered significant. Currently, however, the aesthetics are becoming important. The variety and quality of goods are improving. Prices are the lowest on the market (sometimes too low). They are free-standing or on the ground floor of residential buildings. Less often in shopping centers. Supermarkets – Historically the oldest format of (organized) mass sales, originating in the 1950s in France and the US. A wide range of goods offered. Prices are moving towards those at discount stores. The format is currently undergoing major changes. Hypermarkets – Format resulting from the high popularity of supermarkets. It was born in the suburbs of France, the

US and Germany. It can be compared to a two-story passenger plane, which at one time was very cost effective. Prices of products tend to fall. Online sales – A kind of parallel format to all of those previously mentioned. It is implemented in two ways; by collecting from store shelves (local stores in small cities), but more often from central warehouses located in the suburbs (so-called last mile). The format is currently developing very intensively, but also the most strongly conditioned by consumer habits, which are rather conservative in Poland. The above division and definitions are far from exhaustive, but sufficient for the needs of our considerations. Food products are a good litmus paper for assessing the condition of a given format. They are usually the largest part of sales and CAPEX/OPEX associated with it (storage, display). To put it simply – profit from sales of food products is based on the difference between the purchase and sale of the product minus operating and employment costs. This relationship in recent years, and especially last year, has changed dramatically.

LOW PRICES, HIGH COSTS

Compared to our neighbors, food costs in Poland are extremely low. Poland has the second cheapest food in Europe – for example it is half the price of food in Denmark. The revenues of companies selling products to the end customer are therefore limited. On the other hand, the costs of production, and thus of purchasing by store chains, are rising. The situation in food production costs could also be described as “strange.” The pressure to lower the prices payed by the retail sector is enormous. Purchasing power and the ability to exert pressure by the largest discount chains is unprecedented. Food producers tend to settle for excessively low margins, saving their financials with scale. There are already negative effects of such a pricing policy. The effects are felt both by the producer and the retailer, who negotiated “too well.” This type of situation is bound to be repeated. On the other hand, the operating

W B J AUGUST/SEPTEMBER 2019

FEATURE | RETAIL costs of commercial facilities increased significantly last year. The first factor is the increase in electricity costs by up to 50 percent (with perspective for more). The second is the increase in wage expectations along with the problem of finding workers. The third is the need for a technological change. This change is related to the need to implement energy efficiency.

IS IT TOO LATE?

Another aspect haunting the trade is legal in nature, including changes in regulations in refrigeration, the Sunday trading ban and the announcement of an additional tax for hypermarkets. All of the above create a very difficult situation in retail. On the revenue side, little more can be done than to expect B2C price increases. On the cost side, you first need to find investment capital to get cost-effective technology that will reduce operating costs or improve sales. Borrowing this capital gives little, because the sum of lower operating and loan costs produces no change in costs on this side of the balance sheet. If a retailer did not invest in modern and effective trade at a time when the money was still there, it may now be too late.

WHO STANDS TO WIN?

Not all chains and formats handle these challenges equally well. It depends on the current tastes of the average Pole and the business courage of the store owner. Discounters – the time is good for them. The owners of these chains turned out to be brave visionaries. They not only invest in proven locations and concepts, but also find time for experiments (sometimes expensive) that are a must for future success. Sometimes the experiment fails, and when it does, the store/concept is closed and everybody moves forward. Proximity/Convenience – theoretically, low end-client food prices in Poland should hurt this format the most. Poles are, however, demanding customers. According to research, Polish customers, even more so than the rest of Europeans, do not like to queue. So, they want to make purchases quickly and conveniently. These needs are best met by this format. Customers do not make large purchases, but the margin remains significant. New locations of this format are being created all the

AUGUST/SEPTEMBER 2019 W B J

“ Purchasing power and the

ability to exert pressure by the largest discount chains is unprecedented

time. The drive of some Poles to “work for themselves” also helps the development of this format, which is often franchise-based. Hypermarkets – this format is in the most precarious situation. At present, it may even seem like the only solution is to move out. Just think about the British chain that recently announced the reduction of its facilities to the size of supermarkets, or about the German chain that withdrew completely from Poland, or the French one that did the same in Italy. Investment and operating costs of such facilities are the highest, the legal burden is very difficult, meanwhile clients are embracing new, innovative formats.

THE CRUX IS RIGHT AHEAD

The crux is the most difficult moment of a climb, and it is an apt metaphor for the challenge major retail chains are currently facing. Reducing hypermarkets to a supermarket format seems like the only way to go, since the supermarket appears to be the largest rea-

sonable business format. However, reducing the sales area is often more complicated that it sounds. As long as the facility is located in a shopping center, it is possible to release some of the space to another tenant. On the other hand, in stand-alone buildings (as is the case for most of Poland’s hypermarkets) it is a task that no one seems to be able to do – at least not so far. When following the retail market throughout Europe, it is hard to avoid the impression that Poland is a little like a lab, where retail patterns and formulas for the entire continent are being prepared and tested. This is where the giants come and go, interestingly, often at the same time. Within two to four years, we could witness a few more spectacular twists, such as: an increase in food prices (clothing probably not, maybe even a decrease), withdrawals from the market and the creation of the “de lux/convenience” discount format, which has always been and will always remain – a local store.

MAURYCY SZWAJKAJZER Board Member, Enreco

A graduate of the Warsaw University of Technology specializing in refrigeration and air conditioning. Since 2008, he has been involved in the development of retail chains in Europe and the development of new commercial formats. He advises on and develops energy efficiency technologies and creates strategies for their application in the refrigeration industry.

E X P E RT O P I N I O N

SUPPORTING THE INDIVIDUAL RETAILER

Small individual retailers need a large partner to be able to withstand the growing pressure put on them by large retail chains. For the SPAR Group, having store owners who are part of and know their local communities is a great opportunity to develop a loyal customer base, says Tomasz Syller, Chief Executive Officer at Wasz Sklep SPAR INTERVIEW BY BEATA SOCHA

WBJ:

The SPAR Group has recently taken over the remaining Piotr i Paweł stores. What plans does SPAR Group have for the Polish market? Tomasz Syller: Following UOKiK’s positive decision on July 17, we began cooperation with the Piotr i Paweł team with a view to ensure we remain true to the legacy of the brand and retain the best of what Piotr i Paweł had to offer Polish consumers. We are now focused on building relationships with all our new partners in order to create the best possible offer for our customers. For example, we have already started the training process, making plans to upgrade existing shops, and in the coming weeks consumers will start to see a normalization of stock availability as we conclude our negotiations with suppliers and further extend the product offer. I’m sure our consumers will welcome the positive changes. SPAR as a model is extremely flexible and can cater for any market. We run a variety of different formats; from the small SPAR Express format, to the medium Spar, large Eurospar and the hypermarket type Interspar. One of the key elements of our success in the past has been the ability to customize our offering to the immediate community that our respective stores and formats serve. In almost every case the product offering will be common in some respects, while unique in others.

Polish economy and the opportunity for growth that it provides. I think that Poland will be one of the most exciting markets for the development of the SPAR brand. It is one of very few markets that still has a vibrant retail economy with an additional attraction; namely, that there is still a large number of independent retailers who trade and make a living in the country. What is more, the market is rapidly evolving with the entrance of many large retail chains. This is precisely the challenge that we have faced in many countries around the world, where major chains have become more dominant, putting pressure on smaller independent retailers who no longer have the power or support to compete with them. Unfortunately, the future of independent retail in Poland, without a large partner, will end up being the same as in the rest of the world. Individual retailers will gradually disappear as they become less and less competitive. It is this trend that we have stopped in close to 50 countries where we operate around the world, allowing the small independent retailer to act like a big player because they have the backing to do so. Without successful retailers we don’t have a business. It’s a very simple philosophy that works across the ten countries where The SPAR Group is present, and this is how we intend to operate in Poland.

Some retail brands have gone under in recent years. Where do you see the market headed in the future? We have a very positive outlook on the

What are your observations regarding Poles’ shopping habits? Are they in any way different from other European countries?

One key observation for me is the amount of shopping that gets done in terms of frequency and across many supermarket brands. This is both a challenge and an opportunity. It’s challenging in that loyalty to a single brand is rare, but an opportunity in that if you are able to create a comprehensive shopping solution which provides the best experience combined with competitive pricing, you should be able to create more loyalty to your store. We have the unique advantage in that our owners are part of their communities and have a far more in-depth knowledge of the people that support their stores. This is a great platform from which to develop loyal customers. Support your community and in turn they will support you. As opposed to corporate managers who earn a monthly salary, independent retailers run their businesses to look after their families and increase their own wealth as a result. This is the best motivator for a successful business, and also for creating an offer best suited to serve the needs of your customers.

Tomasz Syller, Chief Executive Officer at Wasz Sklep SPAR

W B J AUGUST/SEPTEMBER 2019

AUGUST/SEPTEMBER 2019 W B J

TECH i n s i g h t s

TECH NEWS SHUTTERSTOCK

E-scooters bring new profession to Poland Electric scooters have quickly conquered Polish cities. They have also created a new profession – scooter loaders, also known by experts as “juicers.” Their earnings can reach up to PLN6,000 net. Ingenious juicers who, for example, use bicycles with trailers instead of moving by car, can earn even more. Lime, one of such companies, pays around PLN 10-12 for each scooter the juicers charge at home and later returns to the street. The cost of charging one scooter is estimated at PLN 0.20.

>>>

W B J AUGUST/SEPTEMBER 2019

TECH

Investments in start-ups reached record high level in Q2 The Polish venture capital industry showed record-high investments in the second quarter and its value may reach over PLN 1 billion in 2019 if growth remains at the current level, Inovo Venture Partners fund said. Transactions in the second quarter totaled PLN 444.2 million, which is more than the total investment in 2018. The transaction value growth, however, was recorded, despite the lower number of transactions. The record investments in April-June was helped by the success of the Docplanner start-up, which owns ZnanyLekarz service. Four funds have invested a total of PLN 344 million in it.

WSE to launch WSE Data system in 2021 The National Center for Research and Development (NCBR) awarded the Warsaw Stock Exchange (WSE) co-financing from EU funds to build WSE Data system, the stock exchange said. The project’s budget is about PLN 8.3 million, of which PLN 4.2 million will come from co-financing by NCBR. The system implementation is scheduled for the second half of 2021. “The automation of sharing and analyzing stock market data is very important for the development of the Polish capital market. This project will allow us to set new trends in creating modern technological solutions on the Polish capital market,” WSE board member Piotr Borowski said in a statement.

Apple sues Corellium for creating ‘perfect replicas’ of iOS Apple has filed a lawsuit against Corellium, accusing it of illegally selling virtual copies of the iPad and iPhone operating systems. Corellium describes itself as the “first and only platform” that offers iOS, Android, and Linux virtualization on ARM. Apple said that the replication of iOS by Corellium is a violation of copyright. “Although Corellium paints itself as

AUGUST/SEPTEMBER 2019 NOVEMBER/DECEMBER 2018WW B BJ J

Big changes for bank customers to come in September On September 14 this year, the European Commission’s Regulatory Technical Standards (RTS) regulations of the come into force. They are to increase the security of using electronic payment services and thus limit the possibility of fraud associated with these services. The new requirements are also to secure so-called open banking customers. The EU revised Payment Services Directive (PSD2) provides that, with the clients’ consent, banks are to provide access to their payment accounts to licensed, external entities, namely other banks, developers of financial programs and applications, payment services, known as TPP (third-party providers). According to the new regulations, transactions on card readers will have to be validated with a PIN code either after every five transactions or after the total payment amount has exceeded EUR 150. Another change is the strong customer authentication (SCA) when logging into a bank via the internet. It will involve a minimum of two separate elements to prove the client’s identity.

providing a research tool for those trying to discover security vulnerabilities and other flaws in Apple’s software, Corellium’s true goal is profiting off its blatant infringement,” Apple said in the complaint. “There is no basis for Corellium to be selling a product that allows the creation of avowedly perfect replicas of Apple’s devices to anyone willing to pay,” it added.

T-Bull records 4.5 mln game downloads in July T-Bull recorded 4.5 million game downloads in July, a similar level compared to the previous month. “The gaming market is changing every day. We can never really say that we know the recipe for a game that will appeal to all tastes,” board member Damian Fijałkowski said in a

statement. However, events in the game industry, such as Casual Connect, allow developers to discover new opportunities and to exchange experience from many markets, he added. T-Bull specializes in creating mobile games based on the Free-to-Play (F2P) payment model. In August 2018, the company debuted on the Warsaw Stock Exchange main market.

Polish start-up to educate Arabic IT specialists Polish start-up ChallengeRocket has started work on the implementation of an innovative educational program in cooperation with the United Arab Emirates. The learning platform for programming may be used in private schools, which

TECH NEWS

Tesla introduces solar roof rental system Tesla has launched a rental program for roof tiles which are solar mini panels. The company hopes that in this way it will increase the demand for the solar roof technology the company has developed, informed TechCrunch. Elon Musk says people who take advantage of the Tesla offer can save $500 a year on utility bills.Tesla is offering its clients the option to rent solar systems for anywhere from $65 for a small installation to $195 for its largest installation. Customers only need to pay a fully refundable $100 charge. The contract may be canceled any time, but Tesla would charge $1,500 to remove the system once it has been installed.

AI copywriter writes better ads than humans can The largest bank in the US, JPMorgan Chase, has signed a five-year deal with a software start-up that uses artificial intelligence to write marketing copy, following a successful pilot with the technology. In tests, JPMorgan Chase found that Persado’s machine-learning tool crafted better ad copy than its own writers could muster, as measured by higher click rates — more than double in some cases — on digital ads for Chase cards and mortgages. The algorithm builds its advertising slogans based on a database containing a million words. Words have appropriate tags and are arranged according to the score determining their ability to affect emotions. The bank now hopes to use it not just for advertising but also in its internal communications and in customer-service prompts.

constitute 55 percent of educational institutions in the United Arab Emirates. The company also joined the government program One Million Arab Coders, managed by Dubai Future Foundation. It was involved in creating a skills assessment system for young programmers.

SHUTTERSTOCK (3)

Poland considering use of social scoring Social scoring, i.e. checking creditworthiness based on data from social networking sites, may soon spread on the Polish market. There has already been a credit platform (Akredo.pl) that offers such opportunities, but banks are still not reaching for this method of collecting information about potential customers, Puls Biznesu (PB) daily reported.

Banks said they do not use social media in the credit process yet as there is not enough added value. Among others, this was the answer given by the Pekao press office. ING does not consider such a solution, mBank does not comment on the matter. PKO BP is considering using social media to assess creditworthiness. However, this requires the integration of the offer with e-commerce channels and building an integrated customer experience.Experts say social scoring may be an efficient tool in the Polish market due to the popularity of social networking platforms.

Swedish start-up becomes most expensive fintech in Europe Swedish payment company Klarna has

become the most expensive fintech in Europe. In the last financing round, the start-up accumulated $460 million and was valued at $5.5 billion. According to the Financial Times, the company falls in eighth place on the list of the most expensive fintechs in the world. The company will use its funds to expand in the US market, where it acquires about 6 million customers annually. In addition, it is expected to enter markets in New Zealand and Australia. The Swedish founder of Polish origin, Sebastian Siemiątkowski, admitted that the more markets the company covers, the better. Klarna’s investors include Snoop Dogg, Visa, Sequoia Capital and Hennes & Mauritz – the owner of the H&M clothing network.

W B J AUGUST/SEPTEMBER 2019

TECH

GAME OF DRONES UNMANNED AERIAL VEHICLES, WHICH ARE OFTEN SEEN AS TOYS, STILL REPRESENT A GROWING MARKET – INCLUDING IN POLAND. IT’S ENOUGH TO SAY THAT EVEN IN A MODERATE SCENARIO, ITS VALUE IN 2026 WOULD REDUCE PUBLIC DEBT BY 60 PERCENT BY KRZYSZTOF MACIEJEWSKI

rones, commonly known as unmanned aerial vehicles (UAVs), really are everywhere. As of December 31, 2017, there were as many as 1.1 million drones in the US alone. At the end of 2019, according to information from the Federal Aviation Administration (FAA), this number will exceed 2 million. As stated by the “White Paper Market for Unmanned Aerial Vehicles” prepared by the Polish Economic Institute (PIE), the value of the global civil drone market will reach $73.5 billion in

AUGUST/SEPTEMBER 2019 W B J

2017-2026, which is equivalent to the annual GDP of Lithuania and Latvia. The value of the European market is estimated at $20.7 billion. But what about Poland? “Building a new market segment that has great development opportunities will be the next step. Its scale for 2017-2026 is estimated at PLN 3.3 billion. However, the value of integrating drones into the economy (i.e. the indirect benefits that drone use can bring) is significantly higher,” said Piotr Arak, director of the Polish Economic Institute (PIE).

DRONE HIGHWAYS

At the very beginning it will be necessary to make the U-space concept real, i.e. a space in which remotely controlled, automatic and (in the future) autonomous flying platforms will safely perform operations in line with precise air traffic management. Before full integration of drones into the economy, it is crucial to ensure safety similar to that in road traffic. According to Małgorzata Darowska, the Minister of Infrastructure’s Plenipotentiary for Unmanned Aerial Vehicles, the era of mass

DRONES

THESE DEVICES ARE OFTEN TREATED BY END USERS AS A NECESSARY EVIL THAT DESTROYS THE EXISTING ORDER, AS ANOTHER WAY TO TAKE PEOPLE’S JOBS production is coming to an end and the time of specialization is about to begin. Further development of commercial applications will require the creation of drone traffic rules. “Drones that move in the air, or unmanned aerial vehicles, will become increasingly automated and autonomous. The superior ICT system will create, control and enforce traffic rules in space. Thanks to this, a lifesaving drone will take priority over a drone transporting people or parcels,” explained Darowska. Also, citizens will be able to find out if the drone is “legal,” as well as reserve or make the space over their property available to this type of traffic. “U-space will open a completely new market of technologies and services, with an estimated value of PLN 310 billion to even PLN 913 billion over the next 10 years, depending on the development scenario. Given the moderate development of this sector, in 2017-2026 revenues from the integration of drones into the economy will amount to PLN 576 billion, i.e. the equivalent of the amount that would reduce public debt by 60 percent,” Arak emphasized.

IN THE SKY, AND ON THE ROAD

But where is the market now? “There are over 100,000 drones in Polish airspace, except that this number covers only commercial drones, i.e. those that can be bought in a store. Custom-made drones for a specific application and those constructed by users themselves, e.g. for drone racing, need to be added to that number,” said

Dariusz Werschner, president of the board of the Polish Chamber of Unmanned Systems (PISB). In his opinion, the number of unmanned flying devices (as well as those that drive on roads and float on water), will grow, and in the future drones will be as common as smartphones or CCTV cameras are today. There are already a lot of very interesting applications, such as medical transport of blood, test samples and even organs for transplantation. “Drones are great for quick deliveries in the city, as well as over longer distances, e.g. between cities,” said Werschner. It is already technologically possible today. Procedural and legal issues are being developed, and pilot transports in Poland should launch in the next six months.

GETTING STRAGGLERS ON BOARD

The president of PISB pointed out that the situation on the professional drone market is not easy. These devices are often treated by end users as a necessary evil that destroys the existing order, as another way to take people’s jobs. “And that’s not true! Innovations not only do not eliminate people from work processes, but above all often give them new quality and increase safety, e.g. through greater situational awareness. At the Polish Chamber of Unmanned Systems, we try to diagnose all barriers to the implementation of innovation and help companies offering drones and institutions interested in drone services to meet each other,” concluded Werschner. One of the most interesting solutions that gives drones

good publicity is the use of the machines in firefighting or when searching for missing people. However, it turns out that simply equipping the fire brigade with drones is not enough to make them useful. “We learned from firefighters that although they have them in their inventory, they don’t use them at all. The reason for this was the fear of losing them, mainly due to the difficulties associated with landing. In addition, the use of drones meant that one firefighter had to be away from the action because they were completely preoccupied with piloting the vehicle,” explained Łukasz Raczkowski from the Polish start-up Solutions for Tomorrow (S4T). The company has created a module for autonomous landing of drones, which significantly aids firefighters working with them. Now the machine is tasked with the patrol area and the rest of the work is done by the drone itself: from flying over the designated area, detecting a low battery level, through to landing on its own, even on a moving vehicle, and replacing the battery with a new one.

SURVEYOR WITH A REMOTE CONTROL

Surveying is a fairly fast-growing drone market. In this case, the competitive advantage gives the opportunity to take accurate pictures of often inaccessible places. It is especially useful for so-called photogrammetric measurements. “The most commonly used are medium surface drones (a few square kilometers) to create an orthophotomap used in

The article was adapted from an original first published in T4B Magazine in July. t4bmagazine.pl W B J AUGUST/SEPTEMBER 2019

TECH planning and controlling investments, as well as performing cubature measurements such as calculating the volume of solid objects. Drone studies also have an invaluable contribution to architectural inventories (measurements of sculptures, basreliefs, barriers, windows, etc.),” noted Marcin Przybysz, team head and surveyor at Geodetic. What are the approximate costs of investing in drone technology for a company that intends to start using it? The price range is substantial, depending on what the drone is to be used for. “The cheapest devices for short-range photogrammetric studies cost about PLN 8,000 for the machine itself. In the case of professional equipment, you should expect a cost of even a million PLN depending on the equipment. The price of software and sophisticated computer hardware able to process the data comes on top of that (another several thousand PLN). The team then needs to be trained, including flight qualifications, and then there’s the cost of maintenance and repair of the equipment,” concluded Przybysz. Maybe that’s why, according to a report published in March 2019 prepared by the trade magazine Geodeta, only 9 percent of surveying companies have drones in their resources, while 11 percent are planning such a purchase.

NICHES AND WHITE SPOTS

Interestingly, according to The Economist, commercial drones constitute only 6 percent of total drone sales in the US, but they provide as much as 60 percent of the industry’s revenues. That’s because of their relatively high prices compared to consumer models. All it takes is mounting a few additional sensors on a regular drone to change a toy

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No-fly zone

There is a long list of countries that do not let drones enter their airspace. In many countries there have been concerns about the possibility of the misuse of drones and threat to security and privacy through unregulated use. In Egypt and North Korea, punishments for operating a drone range from one year in prison plus a fine, up to the death penalty. In Cuba, provisions regarding the importation of unmanned aerial vehicles by natural or legal persons are also subject to scrutiny. That is why the local customs office of the Republic “suggests” that passengers traveling to the country refrain from importing drones in order to avoid inconvenience and unnecessary delays. Similar restrictions were also introduced in India. The government is concerned that drones could be used in potential terrorist attacks. Indian authorities also say that drones will

be used to spy on government installations or that operators will fly them near airports and cause interference with air traffic control. Iran has also banned private drones from flying over Tehran after at least two devices were shot down in 2018 due to security concerns. Licenses will now only be granted to “relevant authorities, not individuals,” the military said at the time. Drones have also been banned in Morocco, Nicaragua, Saudi Arabia, Uganda, Cambodia, Uzbekistan and Zambia. There’s one country on the “no fly” list that some may find puzzling – Belgium. In this case, the reason is that the country that is home to the EU is way behind in terms of drone legislation. The development of commercial operations using drones in Belgium is still practically impossible. This is despite the fact that there are 330 approved operators in France and over 2,000 in Germany.

into a highly specialized machine worth ten times more. The global leader in drone production, DJI, is well aware of this. It is based in Shenzen, China, but 80 percent of its products are sold abroad. The Chinese have a very strong position on the US drone market, with a share of over 66 percent in the $1,0002,000 price range and a similar (67 percent) in the $2,000-4,000 bracket. Outside the US, DJI is doing even better. According to

the Drone Deploy Report, the company has an 85 percent share in the global commercial drone market. Does the Polish drone industry stand a chance of making its mark amidst the cheap mass-produced junk? According to Krzysztof Śmierciak, chairman of the board of UAVS Poland, Polish UAVs can successfully compete on the global market, but only in niche solutions. “We can find our place where the rest of the

DRONES

world has never been or is only now venturing. We are talking here about large vertical take-off platforms in the fixed-wing VTOL (Vertical Take-Off and Landing) systems. We can also gain a competitive advantage by producing highly advanced sensors carried by drones and through the use of other modern technologies, e.g. in the field of artificial intelligence or augmented reality,” Śmierciak commented. While at the moment price competition is difficult for Polish producers, it is also possible that customers will turn to them for completely unrelated reasons. “We have no chance to conquer the market filled with cheap and highly specialized Chinese drones. Perhaps this will change in the future, because storm clouds are starting to gather over DJI, which has 80 percent of the global drone market. It’s about the accusations of spying for the Chinese government,” he added. Polish manufacturers should observe innovations introduced in the drone industry, such as increasingly lighter and more durable composite materials for the construction of load-bearing structures, algorithms that improve stability and flight length, as well as modules that enable object recognition in real time. It is also interesting that power systems are evolving towards renewable energy sources. “The use of PEM-FC cells is becoming more and more common, allowing a flight of several hours on a single hydrogen cylinder. In the field of security, procedures embedded in software are being developed, but also active solutions in which drones are equipped – e.g. rescue parachutes. All of these things combined make for extremely secure platforms, which will soon appear above our heads,” Śmierciak said.

Maciej (Mac) Poschwald has been racing drones for four years. He has several dozen victories and medals won in tournaments played all over the world – from Poland, through South Korea, to the US.

RACING IN THE DARK

Interview with Maciej Poschwald, drone racing pilot and co-founder of the ROTORACER company

Drone racing is a relatively young sport, isn’t it? How did your interest start? The explosion of the popularity of racing drones piloted using FPV goggles began with a movie on YouTube from 2014. I discovered this phenomenon a few months later – at that time I was looking for something new in my life. The vision of moving onboard a flying robot that leaves the fastest vehicles in the world behind (thrust to weight ratio of 10:1), and the opportunity to experience the environment from a completely new perspective – so far practically unattainable for a mortal – seemed extremely attractive. Which victories and medals do you consider the most important so far? They are all equally important, because I put all of my heart into every race and I don’t underestimate any of them.

What do the races look like? I understand that you see everything with the help of goggles, as if you were flying on this drone yourself? What do you feel then? Exactly. We mainly race with four to eight competitors. We usually fly a few laps on a specially designed track (3D). During the race, we see everything from the drone’s point of view, which makes us feel as if we were inside. We forget about drones, goggles and rods. Only self-control, piloting and reflexes matter at that point. But there is sometimes also a specific strategy. It is primarily a race of mind and skills. This is what pilots experience. And the viewers watch the blindingly bright racers crossing the unique tracks taken straight out of video games. What are the perspectives for the development of this sport in Poland and in the world? The entire drone industry is growing fast. Drone racing is the most exciting part of this. Different leagues broadcast their races on leading TV stations (CBS, ESPN, Eurosport). Although the sport is still in its early stages of development, huge resources are being invested around the world to promote it. In Poland, however, events are still low-budget, because there are no sponsors who would be ready for something so unusual. What drones are the best to fly? The fastest. And really the best equipped, i.e. those where the combination of parts is perfectly harmonized with the flight controller settings. Such a drone is piloted as if it were your third hand that you had completely forgotten you had.

W B J AUGUST/SEPTEMBER 2019

TECH

SYMA X5SW

The Syma X5SW drone has an FPV camera and Wi-Fi technology (image transmission directly to a phone), Intelligent Flight Orientation mode, and is radio controlled at 2.4GHz. Thanks to the realtime preview, photos and videos will be even more interesting. Propeller guards ensure safety of use and limit the possibility of damage in a collision. The camera can easily be removed thanks to the rail for easy installation. The high landing gear enables landing in previously inaccessible places, it also improves the camera's viewing angle.

UP TO PLN 200

ACME X8300

This drone can both take off and land on water. It is made of soft, but extremely strong plastic, so when it hits something, lands unexpectedly or collides with another drone, nothing will happen to it. Because of this, it is nice to play with this drone, testing its capabilities or just learning how to control the device. What's more, it has a compass mode, which is why the drone always flies forward, regardless of which way it faces. Other useful features include 360° rotation, pilot flight at the push of a button and various speed modes.

DRONES: MARKET OVERVIEW

Overmax X Bee

The camera suspended under Overmax X-Bee Drone 3.1 Plus Wi-Fi allows the user to not only play the role of an amateur filmmaker, but to also have a constant preview of what is currently in front of its lens on the smartphone connected to it. Six-axis flight stabilization, as well as easy-to-handle controls, help in filming or taking photos. The youngest drone enthusiasts can also enjoy the possibility of performing various aerial acrobatics.

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UGO Fen

Fen is a drone model designed for novice users who are looking for the most functional equipment. Thanks to the VGA camera, the user can record their flight to a micro SD card. The drone is ready for operation immediately after unpacking and only needs the battery inserting. Unfortunately, maximum flight-time is only seven minutes. On the other hand, thanks to its small size, you can fly it indoors. Out in the open its range is up to 100 m.

DRONES

UP TO PLN 500 Xiaomi Mi Drone Mini MITU The built-in 720p camera is finely tuned to record and take photos from the sky, and FPV transmission is done in real time. Thanks to the Altitude Hold function, the drone hovers at a certain height and flies evenly and smoothly outside and inside. In G-sensor mode, the control is performed only when tilting the drone. One hand is enough for full control. In addition, the drone also has an infrared combat mode. You can shoot other drones using the infrared laser function.

DJI Ryze Tello This is a tiny drone of the size of a smartphone with Intel and Dji technology. It can take off and land automatically, perform stunts, and even hover in the air precisely, using a vision positioning system to take a picture. Interestingly, the built-in HD camera with electronic stabilization can also be used for flights with VR goggles. The perfect complement is the extremely easy-to-use control application. It is even possible to program the drone yourself, with the help of a dedicated version of the Scratch program, in which the whole process of creating commands works to combine simple block diagrams.

ACME X8500 The main advantage of this drone is the case for a standard size sports camera, allowing active users to film and photograph from above. Because the drone also has an integrated anti-vibration handle, photos or videos remain clean and sharp. The drone begins to fly towards the remote control at the touch of a button, has a compass mode, can rotate 360°, flies up to 10 minutes at a distance of 100 m and is larger than most drones. It has a screen remote control as well. What's more, the propellers have collision protection in case of unexpected landings.

Hubsan x4 H502E Hubsan x4 H502E has a return-tohome function, previously reserved for professional and semi-professional drones. In the event of problems during a flight, e.g. loss of orientation, just press the appropriate button once and the aircraft will return to the point from which it took off. What's more, the RTH function will be automatically activated if the GPS signal is lost, which provides additional security when using the device.

W B J AUGUST/SEPTEMBER 2019

UP TO PLN 2,000

TECH

1/Parrot Disco FPV The ultra-light Parrot Disco drone has great capabilities and amazing performance during flight: it can reach a top speed of 80 km/h and will provide 45 minutes of continuous flight. No previous piloting experience is necessary to control the Parrot Disco. It takes off and lands automatically and is also equipped with an excellent autopilot function. For example, when the remote control joystick is tilted to the right, the drone will turn in the same direction, while the autopilot takes care of the tilt of the wing and increasing the engine speed. Operation of the Parrot Disco is very intuitive, while providing an incredible, realistic experience. Also available are goggles called Parrot Cockpitglasses, providing a first-person view.

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2/Blade Vortex 150 FPV Racer This is a racing model RC quadrocopter for remote control Vortex 150 from ImmersionRC and Blade with Spektrum DSMX technology, with which you can start in FPV competitions as a professional. It has powerful drive, a 32-bit ImmersionRC F3 Fusion control unit, a programmable LED system, a 40-channel NexWave RF 5.8GHz video transmitter and a FatShark 700TVL CMOS v2 camera.

3/Yuneec Breeze 4K

4/Hubsan High Edition

Thanks to its compact dimensions (diameter of only 24 cm and weight of 385g), you can store and transport Breeze in virtually any bag. The drone is controlled by a smartphone, which also receives transmission in real time from the camera. And as for the photo-shooting, it is worth mentioning that the Breeze is equipped with a mechanically and electronically stabilized 4K UHD camera. An advanced processor has been installed in the camera which guarantees high-quality, supersharp photos. Thanks to the wide range of flight modes (selfie, journey, orbit, return home, follow me) you can take photos and record videos, thus capturing beautiful moments and beautiful places from an unprecedented perspective.

The H501S offers a high resolution 1080p camera, GPS positioning, automatic return home function, altitude hold, follow me function, maximum flight time of 20 minutes, maximum distance of 300 m, brushless motors, headless mode, RTH and an FPV transducer with LCD display. The device has a built-in 7.4V 2700 mAh Li-Po battery with a charging time of 210 minutes.

DRONES MORE EXPENSIVE SUGGESTIONS Dji Mavic Air

(PLN 3,500-4,300) The Mavic Air drone is the most compact device of this type equipped with a three-axis gimbal, which is to compensate for camera shake, and it must be said that it works great, among other things, by reducing angular vibration to just 0.005°. With the advanced software, you can create horizontal, vertical and 180° panoramas. In addition, Mavic Air is a great device for creating spherical panoramas. They consist of 25 combined photos that you can view, for example, in DJI goggles to get the full experience.The advanced camera and components of the Mavic Air drone are capable of recording 4K movies with a 100 Mbps bitrate. It also has a slow-motion mode. You can record a movie in Full HD resolution at 120 frames per second, and then play it back in a four-fold slow motion while maintaining the smoothness of the action to show the details of the movement.

Dji Phantom 4 Pro (around PLN 8,000)

The new Phantom 4 Pro V2.0 has an OcuSync transmission system that supports automatic frequency change, enables connection to DJI Goggles wirelessly, and increases the transmission range to 4 km. The use of a new propulsion system (propellers and regulators) has allowed a reduction of the noise level by 60 percent. The improved obstacle detection system allows the drone to detect obstructions from 30 m. The new Phantom is made of titanium and magnesium alloys, making it more stable, and at the same time its weight is similar to the regular version. Phantom 4 Pro is equipped with an innovative FlightAutonomy system that intelligently avoids obstacles. The drone has dual vision sensors at the front and rear, a five-way obstacle detection system, and a four-way avoidance system. During flight, the system guarantees safe filming and the ability to create complex shots even in the most difficult conditions.

SwellPro Splash (approx. PLN 8,500)

Splash 3 is an innovative quadrocopter from Sweel Pro. They stand out from the competition because of their water resistance and very durable construction, thanks to which they can fly in even extremely harsh weather conditions – the drone withstands winds of up to force 4 on the Beaufort scale. The Splash 3 drone frame is made of durable, reinforced 3 mm thick ABS plastic that provides excellent water sealing. All external parts are made of high-quality stainless steel and are designed to provide maximum corrosion resistance from salt water. The high resistance of the Splash 3 drone is confirmed by the fact that it meets the military protection standard MIL-STD-810.

Gladius Advanced Pro 4K (approx. PLN 12,000)

Gladius Advanced Pro is designed for underwater filming, discovery and observation. It can dive to a depth of up to 100 m and has a maximum of 100 m horizontal range. Controlled by a smartphone or tablet, Gladius is agile and easy to control thanks to its Quattro mechanisms. Gladius has a built-in 1080P/4K camera, allowing the user to take high-quality photos and videos with the ability to stream live in HD. Most importantly, Gladius can be used for up to 3.5 hours on a single charge (charging time 1.5 hours). The built-in Full HD camera and LED lighting system has been optimized for immersion, so users can take great underwater photos with a resolution of 12 megapixels and 4K movies. Gladius' internal enclosure uses aluminum alloy materials with oxidation treatment to ensure water resistance and corrosion resistance up to 100 m.

W B J AUGUST/SEPTEMBER 2019

Latest news in the retail, logistics and office sectors

Interview with Jarosław Zagórski of Ghelamco Poland

New real estate investors in Poland

Green residential projects

Investment market Echo to buy part of Warsaw’s EMPARK complex Warsaw Stock Exchange-listed developer Echo Investment and Vienna and Warsaw Stock Exchange-listed commercial real estate investor Immofinanz have signed preliminary agreements for the sale of part of the Empark office complex that is located in the Mokotów district of the Polish capital and which currently totals approximately 117,000 sqm of GLA. Echo Investment will acquire four office buildings and a plot of undeveloped land there for a total of €48.9 million, with the agreements expected to be finalized in two phases in 2020 and 2021. The buildings and land site will be replaced with residential space, thus making Empark a mixed-use scheme. Immofinanz will retain four office buildings with a combined leasable area of around 63,500 sqm and will focus on their management and further modernization. >>>

Interview with Jacek Putaj of Pro Urba Group

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LOKALE IMMOBILIA | NEWS

Investment market (continued) BRIEFS WARSAW’S ETHOS AND ASTORIA BUILDINGS CHANGE HANDS

Credit Suisse Asset Management Global Real Estate has, acting on behalf of its property funds, acquired the Ethos and Astoria buildings in downtown Warsaw from Kulczyk Silverstein Properties and Strabag Real Estate respectively. The value of the transactions has not been disclosed. Built in 1998 and thoroughly refurbished in 2016-2017, the Ethos building comprises 13,000 sqm of office space and nearly 4,500 sqm of retail area. Astoria was completed in 2016 and offers around 19,000 sqm of office and retail GLA.

SKANSKA SELLS POZNAŃ OFFICES FOR €36 MLN

Developer Skanska has sold the second building in the Nowy Rynek office complex in Poznań to Corum Asset Management for €36 million. The property is to be completed and transferred to the new owner in the final quarter of this year. The building will comprise approximately 12,000 sqm of GLA with its office space having already been fully leased out to convenience retailer Żabka. The property is expected to be LEED-certified at the Platinum level.

ARCHICOM SELLS WROCŁAW OFFICE BUILDING

Warsaw Stock Exchangelisted developer Archicom has signed a preliminary agreement for the sale of its West House 1A office building in Wrocław to GNT Ventures Properties. The value of the transaction, which will also inlude the sale of land lying adjacent to the building, will amount to PLN 80.3 million. West House 1A is part of the West Forum complex and comprises approximately 10,000 sqm of GLA which is currently around 75 percent leased out. In 2015, Archicom sold the complex’s West House 1B building to the same buyer.

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Atrium offloads two malls for almost €300 mln Atrium European Real Estate has finalized the sale of two major malls – Atrium Felicity in Lublin and Atrium Koszalin in Koszalin – to ECE European Prime Shopping Centre Fund II for €298 million. JLL advised the seller during the process of negotiating the transaction, which is the largest retail investment deal to have been completed in Poland so far this year. Atrium Felicity and Atrium Koszalin offer approximately 77,000 sqm and 57,300 sqm of retail space respectively.

€374 million the value of investment transactions finalized in Poland’s warehouse property market in H1 2019 Source: JLL

Logistics BRIEFS Logistics Park Wrocław, the scheme has already got a building permit and the company is planning to launch construction work once it has secured a tenant for the development. The planned investment will offer 75,000 sqm of warehouse and industrial space at full build-out. Segro currently has two logistics parks in the Wrocław area.

PANATTONI WITH PRUSZCZ GDAŃSKI DEVELOPMENT SEGRO ACQUIRES SITE FOR WROCŁAW LOGISTICS PARK Developer Segro has acquired over 17 hectares of land near Wrocław on which it wants to build a logistics park project. Called Segro

Developer Panattoni Europe will build a logistics park project near Pruszcz Gdański in the Tri-City agglomeration which will sit on 25 hectares of land located close to the A1 motorway. The planned scheme will

consist of two industrial/ warehouse buildings offering a total of 75,600 sqm. Construction work on the development is scheduled to launch in the final quarter of this year. The investment will bring the volume of Panattoni Europe’s space in the Tri-City area to more than 300,000 sqm.

ly launched its 7R City Flex Łódź I investment there. The 7R Park Łódź West project, which will be located near the S14 road, will comprise a total of 32,000 sqm of space in two buildings.

7R BUYS LAND FOR SECOND ŁÓDŹ PROJECT Developer 7R has acquired seven hectares of land in Konstantynów Łódzki in central Poland for its planned 7R Park Łódź West logistics park project. The transaction was brokered by CBRE. The scheme will be the company’s second development in the Łódź area – 7R previous-

Retail open areas combining the retail and leisure functions to be created there. The entertainment offering of the mall will be expanded. Galeria Malta accommodates 54,000 sqm of GLA. It is managed by Sierra Balmain.

ACTEEUM WITH KOSZALIN RETAIL PARK SCHEME POZNAŃ’S GALERIA MALTA BEING REVAMPED

The Galeria Malta shopping center is Poznań is now going through a major modernization process. Some of the existing stores will soon be relocated within the mall, which will also get a number of new tenants. The first floor of the shopping center will be rearranged, with new

Developer and investor Acteeum Group is planning a retail park project in Koszalin in northern Poland. The park will be located near the S6 road connecting Szczecin with the Tri-City. Called Koszalin Power Center, the scheme will accommodate 30 stores and will be part of a bigger retail complex totaling over 37,000 sqm of GLA that will also include a Leroy Merlin DIY store (10,600 sqm), an

Agata Meble furniture store (10,500 sqm), a grocery supermarket (2,200 sqm) and a drive-thru restaurant. The development is scheduled to open for business in the first quarter of 2021. The portfolio of Acteeum Group includes retail investments such as the under-construction Galeria Chełm shopping center project in eastern Poland.

biggest Vendo Park-branded scheme in the company’s portfolio. Construction work on the planned development is scheduled to begin next year. Trei Real Estate has to date completed 11 Vendo Parks across Poland with a further four currently under construction. The company is also developing the chain in Slovakia and the Czech Republic.

TREI BUYS LAND FOR LOWER SILESIA SCHEME

Developer Trei Real Estate has acquired almost 70,000 sqm of land in Bolesławiec in Lower Silesia where it plans to build a major retail project including a DIY store, a discount grocery supermarket and a Vendo Park-branded retail park. The retail park will comprise more than 9,000 sqm and will be the

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LOKALE IMMOBILIA | NEWS

Office

406,000

BRIEFS sqm

the amount of office space leased in Warsaw in the first half of this year Source: JLL

BGK TO MOVE INTO WARSAW’S VARSO PLACE COMPLEX

Bank Gospodarstwa Krajowego (BGK) has leased 12,400 sqm of office space in the Varso Place mixed-use complex, which developer HB Reavis is now building in downtown Warsaw. The tenant will take up space in the Varso 2 building of the complex and will move into the property in the spring of next year, with the lease agreement having been signed for a period of five years. Varso Place will consist of three buildings (including a skyscraper designed by Foster + Partners) and will comprise a total of 144,000 sqm of leasable area.

PROFBUD COMPLETES VECTOR + OFFICES IN WARSAW

Developer and investor Profbud has obtained an occupancy permit for its Vector + office project in Warsaw. The scheme is located near the intersection of ul. Prymasa Tysiąclecia and ul. Obozowa in the Wola district of the city and offers more than 13,500 sqm of leasable space. The development features a BREEAM Interim certificate for energy efficiency and environmental performance at the Very Good level. Profbud’s portfolio now also includes a number of ongoing residential investments in Warsaw and Łódź.

WARSAW’S WOLA CENTER TO BE RE-COMMERCIALIZED

Torus with new office project in Gdańsk Developer Torus has launched construction work on its Format office project in Gdańsk. The five-floor scheme will comprise over 15,700 sqm of leasable space and is scheduled to be completed in the second quarter of 2021. It was designed by the APA Wojciechowski architectural studio and is expected to be certified in the LEED system at the Gold level. Torus has to date completed more than 120,000 sqm of office GLA in the Tri-City market. The company is now working on its Officyna and Alchemia office investments in Gdańsk.

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Developer LC Corp is looking for tenants for its Wola Center office complex in Warsaw. The property, which is located in the Rondo Daszyńskiego area in the city’s Wola district, is currently fully leased out, but in the third quarter of next year its anchor tenant, Getin Noble Bank, will move to the nearby The Warsaw HUB complex, vacating 18,000 sqm. Nuvalu will support the landlord during the re-commercialization process. Completed in 2013, the Wola Center complex comprises four buildings totaling 31,000 sqm.

E X P E RT I N T E RV I E W

THE NEW BUSINESS CENTER OF WARSAW

The new office hub in Warsaw’s Rondo Daszyńskiego area will continue to attract large tenants. Ghelamco Poland, one of the most active developers there, is planning further investments in the neighborhood, reveals Jarosław Zagórski, commercial and business development director at the company INTERVIEW BY ADAM ZDRODOWSKI

Who is now driving the demand for office space in the area? The Rondo Daszyńskiego area is now the new business center of Warsaw. Recent transactions show that this area is a popular choice for companies from the banking and insurance sectors. IT companies are also among the companies interested in our projects. This part of the Wola district has already become one of the biggest office hubs in the Polish capital. Are some people’s fears that the boom will result in the creation of another Several very large lease neighborhood with an office monoculdeals have recently been signed in the ture justified? Rondo Daszyńskiego area. Judging by I completely disagree that the Rondo the enquiries you are getting, can we Daszyńskiego area will become an expect to see more major transactions office monoculture. It is enough to look there later this year? at the projects that are being created Jarosław Zagórski: Yes. According to there. The Warsaw HUB itself will have JLL data, the biggest leases in H1 2019 retail, gastronomy and hotel functions. were signed by banking and insurance Tower “A” of the complex will host sector firms. They included an 18,500- Crowne Plaza and Holiday Inn Express sqm pre-let by Getin Bank in The Warhotels. Tenants from the retail secsaw HUB and an around 20,000-sqm tor will include a Biedronka supermarpre-let by Warta in Warsaw UNIT. These ket, a Zdrofit fitness club, a Rossmann transactions show the attractiveness drugstore, and McDonald’s and Olimp of the Rondo Daszyńskiego area and restaurants. the projects we are building there. The Just next to it, the 19. Dzielnica Warsaw HUB is very attractive to tenresidential project is being built. The ants. We have signed a contract with Asbud company is planning to build Atradius (1,500 sqm), one of the leading new apartments here. Nearby, there insurers in the financial and debt colwill also be the Browary Warszawlection market. The complex will also skie and ArtNorblin complexes. Echo be home to, among others, Standard Investment is planning a multifuncChartered’s global business services tional complex on ul. Towarowa. Tourcenter (3,600 sqm). We are currently in ists are attracted by the Warsaw Upristhe final stage of negotiations with sev- ing Museum and Plac Europejski. Most eral significant tenants. I think we will of the planned new projects will have be able to announce them by the end of well-designed public spaces. Additionthe year. ally, there is a great public transport

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system there – subway, trams, buses, railways and modern bicycle paths. I think that in less than two years we will see it become a lively and attractive part of modern Warsaw. Thanks to its residential, gastronomic and public space functions, the whole area will not be closed after working hours. When you look at how Plac Europejski operates, you can already see it now. How much space is Ghelamco now building in the Rondo Daszyńskiego area? The Warsaw HUB and The Warsaw UNIT are currently under construction. Across its 113,000 sqm of space, The Warsaw HUB will offer office areas, a conference center, hotels, a convenience center, a fitness club and coworking space. At over 200-meters tall, the Warsaw UNIT skyscraper will provide around 57,000 sqm of modern office space across 45 floors. What are your further development plans there? Ghelamco Poland is currently preparing several large projects there. We are now focusing on completing the construction of The Warsaw HUB and Warsaw UNIT. We will announce further projects next year.

Jarosław Zagórski, commercial and business development director at Ghelamco Poland

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LOKALE IMMOBILIA | NEWS

Residential BRIEFS MORE APM APARTMENTS ON SALE IN WARSAW

Robyg enters Poznań market Residential developer Robyg, which is mostly active in Warsaw and Gdańsk and has recently launched its first project in Wrocław, has now announced its first housing investment in Poznań. The planned scheme will be located in the city’s Ostrów Tumski historic area and will comprise approximately 1,400 apartments. Poznań is an excellent market to enter, argued Robyg’s board vice president and CFO Artur Ceglarz. He noted that in Q1 2019 apartment sales in the city grew by 36 percent. “The numbers speak for themselves,” Ceglarz said.

Developer APM Development has launched sales in the second phase of its Cristal Park Residence luxury residential project in Warsaw. On offer are apartments sized from 85 sqm to 188 sqm and located in four buildings called Onyx Villa, Topaz Villa, Amethyst Villa and Beryl Villa. The Cristal Park Residence scheme is being built near the Park pod Skocznią green area in the Mokotów district of the city and will consist of nine low-rise buildings. APM Development was established in 2005 and has to date completed more than 1,000 housing units in the Polish capital, mainly in the lower-middle and upper-middle segments of the market.

PHN WITH BUILDING PERMIT FOR WARSAW SCHEME Warsaw Stock Exchange-listed, state majority-owned real estate developer and investor Polski Holding Nieruchomości (PHN)

has obtained a building permit for its planned Młoda Białołęka residential project in the Polish capital. The scheme will be located on ul. Geodezyjna in the Białołęka district of the city and will comprise approximately 500 apartments. The first phase of the development, for which construction is scheduled to begin in the final quarter of this year and be completed in Q3 2021, will deliver 174 housing units.

YIT BUYS LAND FOR MORE WARSAW APARTMENTS Finnish developer YIT has bought a plot of land in the Mokotów district of Warsaw on which it will build a residential project comprising almost 300 apartments. Construction work on the planned scheme, which will be called Nordic Sadyba, is scheduled to launch in Q4 2019. YIT entered Poland over three years ago and is currently working on four other housing developments in the Polish capital. The company is also planning a major co-living investment in Mokotów.

Hospitality Radisson adds two hotels to Polish portfolio Hospitality company Radisson Hotel Group and investment and hotel group Zdrojowa Invest & Hotels have signed an agreement regarding the opening of two new Radisson hotels in Polish resorts. Radisson Resort Szklarska Poręba in the Karkonosze Mountains will offer 104 rooms and will open for business in the coming winter season. In the future, a second phase of the project with additional rooms and apartments is to be developed. Radisson Resort Kołobrzeg on the Baltic coast will comprise 209 rooms and is to be ready in the summer of next year. After the two openings, the Polish portfolio of Radisson Hotel Group will consist of 18 hotels operated under five brands.

AUGUST/SEPTEMBER 2019 W B J

SAVE THE DATE ULI’s Places + Spaces conference, September 10, Warsaw The Urban Land Institute is the oldest and largest network of cross-disciplinary real estate and land use experts in the world. The ULI is its members – delivering the mission, shaping the future of the industry, and creating thriving communities around the globe. The ULI has been active in Europe since the early 1990s and today it has over 45,000 members worldwide. Places + Spaces is a year-long series of events focused on issues that impact cities. Organized by ULI Poland, the meetings present high-profile, international projects and speakers to discuss how “best practice” development principles and initiatives can be adapted to deliver positive impacts to Warsaw and other Polish cities. Each event, focused on one topic, is envisioned as a two-hour, theatre-style presentation for 80+ participants and a panel discussion, followed by a mixer. On September 10, we will focus on “Recreating neighborhoods” and the biggest challenges of urban re-development. There is a number of very insightful speakers confirmed, including Alexandra Notay, an internationally recognized expert on build to rent, place-making and sustainable urban development; as well as Maria Vassilakou who has been the Vice Mayor of Vienna in 2010-2019, responsible for the city’s transformation and its smart framework. Another esteemed guest will be architect Viggo Haremst from Henning Larsen Architects who will deliver insights to his practice’s design methodology, while Lars Funding will discuss Urban Rigger, a concept that aims to solve the shortage of affordable housing in urban areas with floating sustainable container villages. More on poland.uli.org.

Interview with Dorota Wysokińska-Kuzdra, chair of the Urban Land Institute Poland How is the Urban Land Institute different than other such organizations? At the ULI, we provide a learning and networking platform for all real estate players. We are a network of people in every profession and sector, in every career stage. Outstanding people and leading companies are our members. What we share is a commitment to exchange ideas and experiences, to learn best practices from each other, to inspire and to work together. And all that is worldwide, because the organization operates across six continents, in 81 nations. We are also non-profit and non-political. That is especially important when working with local authorities that expect trust and transparency. We are able to show munici-

palities how to create development strategies and inspire them with best practices brought from around the world. What does the Urban Land Institute membership give? When you join the ULI, you can enjoy discounts on conferences, workshops, webinars, and other ULI events worldwide. There is plenty of books, reports and research papers available. Our case studies provide global examples of proven real estate projects that are financially successful, including access to costs, trade-offs, the challenges faced, and the lessons learned. We also focus on sharing know-how across the industry, one can expect lots of opportunities for networking and to give back, by mentoring, speaking or serving on advisory panels. Our Navigator programme matches you with engagement and volunteer

opportunities specific to ULI members to learn, lead, and grow by advancing your career and making an impact on your community. We have a growing library of member-generated content and ideas that includes panel reports, District Council events, industry reports, Product Council agendas, all in one place and searchable. What are your plans for the future? After the very successful ULI Poland Annual Conference 2019 we are already working on next year’s topics and expert line-up. So far, the edition this year has been one of Poland’s biggest events to define trends and bring together investors, developers, architects, urban planners and innovation experts, with real impact on the evolution of urban spaces. You can expect more details to be revealed later, but make sure to save the date on April 1-2, 2020.

PLACES + SPACEs

Lars Funding

Alexandra Notay

Chairman Urban Rigger Aps Copenhagen

Marc Lebbe

Build to Rent Fund Director PfP Capital London

Managing Director Liebrecht & wooD Group Ghent

Viggo Haremst

Maria Vassilakou

Nicklas Lindberg

Partner & Design Director Henning Larsen Architects Copenhagen

Vice Mayor and Deputy Governor Vienna 2010 - 2019

RECREATING NEIGHBOURHOODS

Tuesday 10th September 2019, 5:30pm Winosfera Theatre, Warsaw

CEO Echo Investment Warsaw

poland.uli.org

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LOKALE IMMOBILIA | INVESTMENT MARKET

AUGUST/SEPTEMBER 2019 W B J

CHANGES IN THE FLOW The Polish commercial real estate investment market has been going from strength to strength of late. New investors are increasingly driving its remarkable performance BY ADAM ZDRODOWSKI

oland’s commercial property market has continued to attract more and more foreign capital in recent years, with the total 2018 transaction volume having exceeded €7.2 billion. Although unlikely to beat that record, this year’s volume is also set to be very high. While the market has been awash with international investors’ money for a long time now, the sources of the incoming capital have changed a lot over the past few years. Funds from new geographical directions – until recently not represented in the country – have become big buyers.

GROWING POOL

The Warsaw Spire tower has recently been acquired by Austria's Immofinanz for approximately €386 million

According to Cresa data, Western European investors remained the dominant force last year, accounting for investments valued at a combined amount of more than €2.8 billion – a significant increase on 2017. They were followed by US investors, who invested over €1.5 billion. “Going forward, Poland is likely to see increased investor interest coming from the US, Western Europe and Asia following its recent upgrade to the developed market status on the FTSE Russell index,”

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LOKALE IMMOBILIA | INVESTMENT MARKET argued Krzysztof Stempień, senior advisor, capital markets, at Cresa. The pool of foreign real estate investors active in Poland has been growing. Additionally, those investors are now looking at a bigger pool of assets than before, said Przemysław Felicki, director, capital markets, at CBRE. Most foreign property investors in the country were until recently focused on core assets – new buildings in central locations and with long-term lease agreements – or so-called opportunistic assets that are offered at a discount. The latter category includes buildings with high vacancy rates and older buildings with remodeling potential. Today, the Polish market is also increasingly attracting investors who are interested in buildings in non-central locations and with shorter lease deals, Felicki said. He explained that this trend is mainly driven by the very good shape of Poland’s economy and the strong leasing market fundamentals in both the office and the logistics sectors, which stand out in Europe.

Philippine fund ISOC Group earlier this year bought Business Garden Wrocław offices for over €95 million

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NEW STREAMS

The increase in the number of foreign investors actively buying commercial property in the country has meant a major shake-up of the investment scene and a noticeable re-division of the investment pie. A look at where the capital invested in Polish commercial real estate in 2015 and in 2018 came from (see graphs) reveals how much changed in this regard within just three years and how quickly newcomers became a significant (and growing) force in the market. Savills data shows that in 2015, European and North American capital jointly accounted for more than 70 percent of the investment volume in Poland. Domestic investors’ share was 19 percent, but the volume was then much lower than today and stood at slightly over €4 billion. Three years later, European and North American investors still accounted for 65 percent of the invested capital, but the vast majority of the remaining investments were accounted for by investors from South Africa, Asia Pacific and the Middle East.

South African investors were behind some of the biggest investment transactions closed in the Polish market since 2015. The 2016 purchase by Redefine Properties of a 75 percent stake in an Echo Investment portfolio for €891 million is one of the largest deals in the market’s history. In that year, South African investments totaled almost €1.8 billion, which represents a nearly 40 percent share in the aggregate volume. Due to factors including increasing competition from investors coming from such new directions as Asia, the figure has since gone down.

ASIAN TSUNAMI

The wave of the new capital from Asia Pacific has been spectacular. While in 2015 the region’s investors had no share in the Polish investment pie, in 2018 their share already stood at 11 percent. Preliminary Savills estimates show that in H1 2019 Asian Pacific capital accounted for as much as 36 percent of the total investment volume. The most money is now flowing from South Korea and Singapore, with investors from Japan and the Philippines also being active. Asian investors became active in Central and Eastern Europe in 2016-2017 when they signed a number of big-ticket agreements in the industrial sector (including those for the acquisition of P3 and Logicor portfolios in several of the region’s countries. “Although the industrial sector continues to feature prominently on the radar of Asian investors, we are seeing a growing focus on portfolio diversification, with some investors looking for office and retail assets,” Stempień noted. Examples of Asian investments in those sectors include the purchase by Philippine fund ISOC Group of Business Garden Wrocław offices for over €95 million and the acquisition of the Galeria Katowicka mall in Katowice by Malaysia’s EPF fund for €300 million. “[Asian] investor interest in the Polish commercial

South Africa

real estate market is expected to grow further in the near future, underpinned by very competitive returns in comparison with Western Europe,” Stempień said.

19%

27%

DOMESTIC DROUGHT

Investors from other Central and Eastern Europe region countries have become increasingly interested in the Polish commercial property market in recent years, but their share in the combined transaction volume remains rather small. In 2018, they invested approximately €200 million in Poland, accounting for around 3 percent of the total investment volume. Experts predict that they will remain relatively active in the country as their strategies envision the expansion of their existing portfolios. Czech companies such as CPI Property Group have already made a number of major acquisitions in the Polish market. Czech investors are expected to close several sizable deals later this year, with Hungarian capital expected to become more active. By contrast, the activeness of domestic investors is still very low – Savills assesses that in H1 2019 they accounted for only 1 percent of the invested capital. Commercial property is relatively pricey for Polish investors, explained Michał Stępień, associate, investment, at the company. He argued that legal changes are needed to improve the situation. For example, the law regulating FINNs (the Polish equivalent of REITs) could be modified so that they can also invest in commercial property, rather than just residential real estate. Of a similar opinion was Felicki, who said that giving Polish investors the proper tools to allocate capital would lessen the disproportion between foreign and domestic investors’ share in the market. “The potential that changes in legal regulations could unlock is huge,” he maintained.

Domestic

US and Canada

Regional split of Poland’s commercial property investment volume in 2015 Source: Savills

Europe

46%

Asia Pacific

Domestic

11% South Africa

Europe

15%

Middle East

39% Regional split of Poland’s commercial property investment volume in 2018 Source: Savills

US and Canada

26%

Africa

16.97%

Western Poland

26.54% America

6.04%

Regional split of Poland’s commercial property investment volume in H1 2019

Poland

1.01%

Source: CBRE

Other countries

9.86%

CEE

1.71%

Asia

37.88%

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LOKALE IMMOBILIA | RESIDENTIAL

IT’S ALL ABOUT THE GREEN STUFF Green certificates are becoming more and more popular with residential developers in Poland, but they are still relatively rare when compared to the office market. Will certification ever become the standard in the housing sector? BY ADAM ZDRODOWSKI

he number of certified residential properties in Poland increased by as much as 133 percent in the March 2018-March 2019 period, according to the “Polish Certified Green Buildings in Numbers” report published in April by the Polish Green Building Council (PLGBC). The organization’s data shows that in March 2019 there were 28 certified housing buildings in the country, of which 23 were certified in the BREEAM system and five were certified in the HQE system. The number accounts for 4.3 percent of all certified buildings in the Polish market. The figure may seem unimpressive when one looks at the office sector with its 418 certified buildings (64.5 percent of the total). However, the upward trend is clearly visible – the residential sector’s share increased from 2.4 percent over the year in question – and is expected to continue. The history of residential certification in Poland is relatively short – the

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Skanska employs a number of green building solutions in its residential projects, including air filters, photovoltaic panels and rainwater recycling systems

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LOKALE IMMOBILIA | RESIDENTIAL first two projects were certified in 2015 (in the HQE system). Three more schemes were certified in 2016 (two of them in HQE and one in BREEAM). In the following year, the number went up to four. Last year was a breakthrough year, with 19 housing developments having been given green certificates. New residential investments are getting higher marks each year, with all of the projects certified to date located in either Warsaw (86 percent) or Kraków (14 percent). In terms of certification, the housing sector is 15-20 years behind the office sector, but buyers’ and developers’ interest in sustainable construction keeps growing, said Artur Łeszczyński, innovations and sustainability coordinator at Skanska Residential Development Poland.

the number of green certified residential buildings in Poland as of March 2019 Source: PLGBC

GREEN LEADERS

The company – one of the leaders in green residential building in the country – believes that in a decade or so we will reach the point where BREEAM and other similar systems become key factors taken into consideration by clients making apartment purchase decisions. The developer, which has already secured several BREEAM certificates for its schemes, employs a number of green building solutions in its investments, including air filters, photovoltaic panels and rainwater recycling systems. Other green residential certification leaders include Yareal, whose strategy envisions obtaining certificates for all new housing developments. The company has to date secured BREEAM certificates for six Warsaw projects. Three more schemes are now going through the certification process, with one of them expected to get Poland’s first BREEAM Communities certificate. For its part, Bouygues Immobilier Polska has been building its investments in line with the French HQE standard. Łukasz Paryś, director of the developer’s Wrocław office,

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Very few people think about the future cost involved in the upkeep of an apartment

revealed that challenges include the need to meet the requirements of aged zoning plans and other planning regulations, which often do not provide for sustainable development. He complained that administrative barriers sometimes hinder, if not make impossible, the implementation of new interesting energy solutions. In his opinion, there is room for better cooperation between developers and local authorities in this regard.

MARKETING TOOL

Kazimierz Kirejczyk, board vice president at JLL in Poland, argued that one can look at the potential advantages of green residential certification in two ways. On the one hand, the process is a tool allowing developers to create better buildings or even entire communities. It ensures that they keep quality at a high level. On the other hand, one can assume that certification is an asset making it easier for developers to sell their products. However, there are doubts as to whether buyers indeed appreciate the asset and are willing to pay for it. Kirejczyk pointed out that the business model in the residential sector is very different from the business model in the office sector in that the developer sells its products to a large number of individual private buyers, rather than one long-term investor. The lack of developers’ conviction that the effort put into certifying a residential project will pay off in a situation when the vast majority of buyers do not want to shoulder the additional costs is the main barrier to certificates becoming more commonplace in the sector, he said. Bartosz Turek, chief analyst at HRE Investments, also maintained that green certificates will not become the standard in the residential property market any time soon as most buyers still view price and location as the two most important factors

while choosing an apartment. “Very few people think about the future cost involved in the upkeep of an apartment,” Turek said. He claimed that, for the time being, green residential certificates mostly play the role of an additional marketing tool.

GROWING AWARENESS

The situation could change as the public discussion about unfavorable climate change – and the influence that people’s everyday life has on it – continues. Perhaps sustainability-related arguments will make certification more attractive in buyers’ eyes in the near future. Katarzyna Szawłowska, an expert in the building consultancy department of Colliers International, believes that Poles’ growing awareness of ecological issues and healthy living means that green residential buildings have significant potential. In her opinion, certified housing projects will become more and more available. She expects that residential schemes will in the future also meet the standards of such certification systems like WELL, which focuses on the well-being of buildings’ users. According to Kirejczyk, much will depend on how fast the prices of energy and water, as well as fees related to environmental pollution, go up. It remains to be seen if the costs of building materials start to include costs related to the exploitation of the natural environment. Also, the ongoing development of the institutional rental apartment market in Poland could, in the future, significantly contribute to increasing the popularity of green residential certification in the country. For funds investing on a long-term basis, being able to estimate a building’s operating costs and optimizing building operation-related expenses is very important during the process of assessing the profitability of a real estate project, Kirejczyk noted.

Yareal's strategy envisions obtaining green certificates for all new housing schemes

W B J AUGUST/SEPTEMBER 2019

LOKALE IMMOBILIA | RESIDENTIAL WBJ:

What made the Spanish investors behind Pro Urba enter the Polish market? Jacek Putaj: Following its accession to the EU, Poland became increasingly interesting for Spanish investors. The country was already at that time perceived as an attractive market with lots of future development potential allowing foreign investors to diversify and expand their European real estate portfolios.

STRONG FUNDAMENTALS

Poland’s residential property market is still defined by stable demand. Pro Urba Group, the developer of the 19. Dzielnica large-scale project in Warsaw, is now looking at new investment opportunities in the sector, says management board member Jacek Putaj INTERVIEW BY ADAM ZDRODOWSKI

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A number of other Spanish investors and developers withdrew from the Polish market after the outbreak of the global financial crisis… Correct. Only a handful of Spanish investors present in the Polish market prior to the crisis still run their businesses here locally. In my opinion, the disappearance of many Spanish companies was not entirely caused by the crisis itself, which did not severely impact the Polish economy and the Polish real estate market. I would point to some poor business decisions made at that time, such as ill-considered, expensive and irrational land purchases as well as the lack of support from local professionals, coupled with the lack of knowledge of the local planning procedures and a mismatch between the market expectations and those companies’ offers. One could come up with many more reasons. In my view, other factors leading to the lack of success of the Spanish developers and investors in question included their attempts to implement the Spanish business model in the Polish reality, which has its own specificity, and their remote investment management processes, conducted at the Spanish headquarters level, which often led to the blocking of the decision-making process. Poland’s residential market continues to be defined by large supply and sales volumes. How long will the boom last?

Demand in the housing market is still large and the market itself is developing steadily. Provided that no major macroeconomic problems occur, apartment sales levels should remain stable in the coming years. Will apartment prices continue to grow? The price increases that we are witnessing now are mainly the result of the fact that ongoing projects are being built on expensive land plots purchased by developers in recent years. Additionally, the shortage of qualified employees in the construction sector and the growing prices of building materials are contributing to the already high and continuously growing construction costs. It is worth noting that despite the general apartment price increases, the margins earned by developers remain at the same level. This shows that it is these external factors, rather than developers’ thirst for profits, that are driving prices up. What do you see as the main risks that could threaten the further growth of the market? When it comes to the demand side, any limitations imposed by financial institutions regarding the granting of mortgage loans It is thanks might be treated as a risk facto the tor. As for the supply side, one implementaof the risk factors could be the tion of as potential tightening up of regulasignificant a tions and the introduction of the project as 19. so-called Developer Guarantee Dzielnica that Fund – any costs associated with we became a such changes would be passed recognizable on to the buyers, which would brand lead to further apartment price increases and could, potentially, limit demand. Your flagship project – 19. Dzielnica in Warsaw’s Wola district – has already helped revitalize a sizable portion of previously neglected land in the city and has been widely acclaimed. What is the idea behind the scheme and how was it born?

The acquisition by a single company of a large plot of land located in the city center, lying adjacent to a major transport and office hub, allowed for the development of a well-designed, architecturally harmonious neighborhood in a post-industrial area. One could simply not miss such an opportunity! The project is important from the perspective of the whole city of Warsaw – it comprises over 1,700 apartments, has created new urban fabric with cozy local streets, ground-floor commercial units, publicly accessible fountains, attractive street furniture and green patios for the apartment owners to use. We contracted the acclaimed JEMS architectural studio to design this scheme – the result of this cooperation is excellent buildings that have won numerous architectural awards in recent years. Further proof of our success is the many satisfied residents who recommend

our estate to their friends and also often decide to buy their next apartment here. What are your investment plans in Poland as far as new residential projects are concerned? Although the availability of land is becoming more limited, we are currently looking for interesting plots that will allow us to implement further investments. How has Pro Urba changed over the last 15 years? We started with much smaller projects in Warsaw’s Wilanów and Mokotów districts, but it is thanks to the implementation of a project as significant as 19. Dzielnica that we have become a recognizable brand. The company has grown, but the important thing is that the same people who have worked with us for years are behind it. This is a team of great professionals who identify with the company and form its solid base.

W B J AUGUST/SEPTEMBER 2019

The organisers of

are pleased to welcome you

4 BUILDINGS Technologies of the future Sustainable construction Energy efficiency and renewable energy Smart buildings

15–17 NOVEMBER 2019 The International Congress Centre KATOWICE The 4Buildings is a new event for the construction industry in Poland and four independent conferences on the most important trends in construction in the 21st century

GoGreen

NoWaste

InTech

BeSmart

everything about renewable energy resources

everything about sustainable construction

everything about technologies of the future

everything about smart solutions in buildings

www.4buildings.pl/en/

Life + Style Triumph TR3

Classic investment

Limited series, a unique and timeless design and a good investment – that’s what classic and vintage car enthusiasts are after. Who wouldn’t want to get into an Oldtimer and test their mettle when firing up a manual-choke engine? WBJ talked to Przemysław Grygiencze, COO of Ardor Auctions INTERVIEW BY BEATA SOCHA

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Life+Style WBJ:

Who buys vintage, classic cars? Przemysław Grygiencze: Classic and vintage cars are a passion for people who love the automotive industry, but they also offer an alternative form of investment. Our clients are private collectors who search for unique items to expand their collection. Our affluent clients appreciate the beauty and the chicness of the vintage style, which was so inimitable that they consider it timeless. Vintage car owners often attend events, both across Poland and elsewhere in Europe, where classic cars are displayed to show their car to a wider audience. They take part in competitions, rallies and other events, collect trophies, awards and diplomas that confirm their car is an extraordinary vehicle. Another group of people are clients who are only just beginning their adventure with Oldtimers (a term used to describe classic cars registered at least 40 years ago) and Youngtimers (relatively young classic cars which have not yet acquired Oldtimer status). They remember the first cars their parents had and want to fulfil their childhood dreams. What these two client groups have in common is the awareness of the investment value of these cars. Accessibility of these vehicles is limited and their prices keep going up. Naturally, we need to bear in mind that cars get older and require care and upkeep – more than just technical maintenance. Is it a good investment? Each country, including Poland, has their own specific trends. Different cars are popular in Germany, in France and in Poland. We can see the differences because we work on a day-to-day basis with our offices across Europe. Each make can be a very good investment, but the actual return depends on the market. We, Ardor Auctions and Ardor Cars, have several years of experience in trading these cars and we provide our clients with expertise on where and when to buy or sell a particular make. Our upcoming auction will feature 30 different classic models, which can definitely be considered in terms of a capital investment. Which makes and models are the most in demand in Poland? In Poland there are many makes and models that have achieved cult status. Because of our proximity to Germany, makes such as Mercedes, BMW, Porsche and Opel have always been popular. We know these cars, we see or used to see them on Polish roads. But not just them. Let’s remember that our own automotive industry has been quite interesting; from FIAT through to cult Warszawas. We’ve been close to Ital-

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Clients appreciate the beauty and the chicness of the vintage style, which was so inimitable that they consider it timeless. ian and French automotive trends too: FIAT, Alfa Romeo, Citroen, Renault and Peugeot. We also love English roadsters, such as MG, Jaguar and Triumph. We always try to follow where the market is and have popular vehicles from all over Europe in our offer. We always add well-known and popular US cars, so you’ll always find a cult Mustang, Corvette or another American cruiser. In September, you’ll be able to find some of these cars at a show before the auction in the former FSO factory, where the Polish automotive industry was born. That’s also where the auction will take place. Do clients drive them or do they keep them in their garages? Are they street legal (e.g. in terms of

safety and environmental requirements)? All our cars are in good technical condition and ready to be registered. Some clients prefer to get the “yellow” registration plates, meaning they are driving a vintage car, and are thus not required to have continuous insurance and regular check-ups. Some people register cars just to use them every day. We offer our potential clients an indoor track, where they can take a car for a test drive. We also have a garage with a lift and professional help for technical inspections. We want to make sure that clients who take part in the auction know the vehicle they intend to buy. We also offer service packages for continued maintenance of the car they buy, including garage storage, additional detailing, photo shoots by request and help with registration. Where do you find these cars for auctions? The process of finding these cars is complex and time consuming. We’ve been on the market for four years and we’ve organized 11 auctions, we are an increasingly recognizable brand. In a large majority of cases it

is the owners themselves who find us, which makes us very happy and proves that there is real value to having an auction house like ours. We also receive a lot of recommendations and referrals. Additionally, we have a procurement department where we try to reach owners, collectors and vintage car restorers. It takes many months to accept and prepare a car before presenting it at a pre-auction show and at the auction itself. Is there a way to tell which models that are currently produced will become vintage in 30-40 years? As a rule, we know that cars manufactured in limited series and quantities are the most sought after and have the best potential to gain a cult status later. These are often sports cars that you don’t often see on city streets – projects which car manufacturers put a lot of thought into. Interestingly, Korean makes currently have a few inspiring models which are aspiring to be some of those interesting projects. These are the cars that will draw attention of future collectors and maybe even today’s investors.

Citroen DS

W B J AUGUST/SEPTEMBER 2019

Life+Style

Mercedes 190 SL

Would a regular driver of a modern car be surprised if they sat behind a wheel of a vintage model? What is the most surprising thing? Most definitely. Classic and vintage cars are not just beautiful, they also exemplify the technology of the time when they were produced. Operating them requires skills that you don’t need to drive modern cars, because a lot of these processes have been automated. And that’s a tremendous challenge. Firing up the engine with a manual choke, no power steering, crude suspension systems, unexpected malfunctions while driving… we don’t even think of all of that when driving a modern car. And that is what forged characters; learning to drive and dealing with extreme situations. Driving a classic is extremely satisfying; it takes us back to when our adventure with cars started. Anyone who wants to begin or continue their journey into classic cars is welcome to attend our pre-auction exhibit, where we will show many interesting vehicles, as well as to the auction where extraordinary classic and vintage cars will be sold.

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Driving a classic is extremely satisfying; it takes us back to when our adventure with cars started The pre-auction exhibition will continue throughout September and end with an auction on September 28, at 5 p.m. in the old FSO factory in Warsaw, ul. Jagiellońska 88b. Please register to take part in the auction. Details and registration form are available at ardorauctions.pl

Plac Piłsudskiego 3 – Warsaw Metropolitan Office Building 22 628 00 23 www.thealchemist.pl

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SELF-SERVICE BEER TAPS

* POUR-YOUR-OWN PROSECCO

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BROUGHT TO YOU BY SENSES

MASTER OF THE ARTS

WBJ catches up with Andrea Camastra, the Italian mastermind behind the award-winning Senses restaurant

espite being relatively new on the scene, Warsaw’s Senses restaurant has become arguably the most highly decorated restaurant in Polish history. Michelin starred since 2016, the last two years have seen the restaurant’s credentials further boosted after the city center venue achieved the highest recorded score in the annual Gault & Millau guidebook (18.5 points and four caps). Incredibly, these honors represent just the tip of the iceberg. Senses was recognized as one the World’s 50 Best Restaurants and included in the prestigious The Diners Club® 50 Best

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Discovery Series. Further glory came earlier in the year when Andrea Camastra was inducted in the Top 100 list of best chefs in the world by Le Chef magazine. Still, even grander ambitions remain to be conquered. “The ultimate mission isn’t about obtaining three stars,” says Camastra, “because that’s inevitable. Instead, the wider target is to establish Poland on the international stage, which is why you find us reinterpreting Polish dishes a little like Noma reimagined Danish cuisine. We want people to recognize Poland, and I think that’s definitely possible – I’m ranked as one

of the top 100 chefs in the world, so believe me, I wouldn’t be here if I didn’t think that was possible. At the end of the day, I believe in the mission here, and I expect those who work with me to do so as well.” Certainly, if there’s a man to achieve that then it is Andrea Camastra. Known for his visionary approach to cooking, the Italian chef has been singled out by Hervé This (one of the founding fathers of molecular gastronomy) as the natural successor to Ferran Adrià. Eating in the Michelinstarred Senses, one understands why. Working with lab technician Wiktor Faliszewski, Camastra’s tasting menu follows the “note by note” philosophy, a complex artistic process that sees flavor molecules extracted from one food and added to another. A complete reimagination of how ingredients are structured, the culinary experience is a complex odyssey that engages all the senses. With world-class dining in luxury surrounds, this restaurant – and the chef at its helm – is at the forefront of pioneering techniques. Here, the impossible happens. Even so, Camastra is quick to remind people that the novelty factor isn’t some kind of gimmick. “People expect to ride a Star Trek shuttle when they come into Senses,” he says, “but this is a misconception. Yes, we do place an emphasis on note by note, molecular cooking, but a lot of dishes have a classic application. Sure, we do things to add the wow factor and lend a sense of artistry but these tend to act as a wider frame. Honestly, I’m happy to serve conventional food, so long as it’s the best. But to achieve that standard you need to know how food ‘works’ and that’s when the chemistry comes in.” Regardless of all the hype, Camastra happily cedes that his job is, in many ways, to act as a dream weaver; a caster of spells: “We provide a oneof-a-kind experience, the kind of meal you won’t find anywhere else in the world. There are many places you can find really good food, but I want to dig deeper and give something of emotional value.” In this, he succeeds. Senses Bielańska 12, sensesrestaurant.pl

THE FUTURE

OF OF FITNESS FITNESS IN IN POLAND POLAND LOOP LOOP has has in in 10 10 years years grown grown to to more more than than 100 100 fitness fitness clubs clubs –– now now also also in in Poland. Poland. 10 10 years years grown grown FRANCHISE FRANCHISE ––AA GREAT GREAT BUSINESS BUSINESS OPPORTUNITY OPPORTUNITY We Weare arelooking lookingfor forfranchisees franchiseesthat thatwant want to tobe bepart partof ofthe thesuccess successjourney. journey. The TheLOOP LOOPconcept conceptand andplatform platformisisvery veryeffective, effective, what whatfranchisees franchiseesshall shallbring bringto tothe thetable tableis: is:  Start Startcapital capital(from (from300,000 300,000pln plnper perlocation) location)  Local Localmarketing marketing  Experience Experience&&engagement engagement

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LAST WORD

WE’VE ALL EXPERIENCED IT in one form or another. When there’s a deadline, there’s crunch. Long hours, working weekends, seeing your family for only an hour a day, before everyone rushes off to the daily grind. No other industry knows the crunch culture better than tech, and the gaming business in particular. So much so, that game designers and programmers have started to unionize in the US, even ending up in mass walk-outs. Many tech firms, including giants like Google, have experienced it first-hand. Some say it hasn’t been this “bad” since the 1970s. There’s an answer to why the gaming industry is seeing their employees protest. In the gaming industry, workers are passionate about their jobs, probably more so than in most other professions. And when you love what you do, you’re willing to endure more than if you don’t really care about your job. That’s true for all industries: the people who care are in

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fact those who leave the company before those who are just there to collect a steady paycheck. They are invested in their organization and in their job; they work harder and longer, they care more about failures and push harder to avoid missed deadlines. That is, until they reach breaking point, where they can no longer abide the inefficiencies, office politics and difficult conditions, including but not limited to the crunch culture. Are companies so short-sighted that they will allow the crunch culture to push away entire teams of talented people? Perhaps they think there is an endless supply of driven, smart workers to take their place? Or maybe they know that if they leave one company, they will probably end up hired by another, hoping that the new employer will offer them better treatment? And since there is a limited number of companies in the gaming industry, the circle will close. After all, if you’re just as bad as your competitors, you will most likely stay in the game – pun intended. – BKS

SHUTTERSTOCK

The crunch culture

Firma z historią, która tworzy przyszłość.

By tworzyć historię, należy odważnie spoglądać w przyszłość. Grupa FM Logistic nieustannie wprowadza pionierskie, przyszłościowe rozwiązania, optymalizujące łańcuchy dostaw. Jest autorem koncepcji, takich jak pooling (wspólne zarządzanie zasobami transportowymi i logistycznymi) i Collaborative Routing Centre (łączenie przepływu towarów wielu klientów i dostawców) oraz innowacyjnych rozwiązań wykorzystywanych w „magazynach jutra”, takich jak: AGV, drony, roboty, Big Data. To właśnie wizja ciągłego rozwoju sprawiła, że rodzinna firma założona we Francji w 1967 roku jest obecnie jednym z międzynarodowych liderów w dziedzinie magazynowania, transportu i pakowania, ekspertem w obsłudze logistycznej klientów z sektora dóbr konsumpcyjnych, środków czystości i kosmetyków, artykułów przemysłowych oraz produktów ochrony zdrowia.

Warsaw Business Journal August/September 2019 #53

Articles inside

LIFE + STYLE

Interview: 19. Dzielnica

Green residential projects

Real estate news

Investment market

Feature: Drones

TECH INSIGHTS

Retail market reshuffle

The job market conundrum

Interview: Longin Pastusiak

Reverse takeovers

Poland catching up to Germany

Business intelligence becoming greener

The 500+ program