What potential do investors see in Poland
The dynamics of changes that are taking place today in connection to the epidemiological situation is increasing, and the evolution of global business processes related to it has never been so rapid. However, regardless of the global economic turmoil, Polish market remains an attractive place for investors. This is evidenced by, for example, large transactions concluded in recent months in the commercial real estate sector, as well as the uninterrupted, intense development of the business services segment in our country.
According to Why Invest in Poland report, prepared by Walter Herz in cooperation with Polish Investment & Trade Agency (PAIH) and People agency, Poland has attracted investments worth around USD 196 billion in the last 20 years. Only in 2018 alone, the value of direct foreign investments amounted to USD 15.3 billion, which accounted for 7 per cent of all investments in Europe.
Increasingly higher in the rankings
The report states that due to such high activity of investors, we are ranked fifth in Europe in terms of the value of direct foreign investment, and the second in terms of the number of jobs that they have created.
In recent years, the sector of modern business services has grown to be a star of Polish economy. We have become a leader in Central and Eastern Europe, both in terms of the number of BSS centers and the volume of employment in the industry. There are over 1500 centers in Poland, that is almost 70 per cent of all BSS centers operating in the CEE area. They already employ over 300 thousand people, which is almost half of those employed in the industry in the entire region. Now, due to the global changes, we have a chance to take over the processes carried out in business service centers in other parts of the world.
Grzegorz Słomkowski, Executive Vice President of Polish Investment & Trade Agency, believes that the main advantage of Poland in acquiring sector projects is primarily, educated and qualified staff, speaking many foreign languages. - Another important factor is the strategic location of our country in Europe, in a time zone that allows for cooperation with companies from around the world, as well as the development of modern business-related infrastructure and an ecosystem supporting the activities of investors - informs Grzegorz Słomkowski.
Supporting the inflow of foreign direct investments (FDI) is one of the main tasks of the Polish Investment & Trade Agency (PAIH). Since 2016, the agency has assisted in the implementation of over 100 BSS investments in Poland.
Global hubs and advanced processes implemented in Poland
An important trend that we can observe recently is the development of research and development centers, many of which are related to the IT segment. - Foreign companies more and more often strive to create global hubs in Poland, that is centers specializing in selected processes with a global reach. This is a result of maturity of the Polish market, which allows for locating more and more advanced services in the country - points out Grzegorz Słomkowski.
One of the recent examples may be the development of Ericsson company, which in May 2020 launched the research 5G network and the Innovation Hub at the Łódź University of Technology. The company cooperates with Łódź Special Economic Zone, which supports the implementation of new technologies.
Bayer company, which in 2012 located its center in Gdańsk also points out to Polish human resources potential - The key factors that had influenced the decision at that time, were access to employees with language skills and university graduates, the offer of modern office spaces, good infrastructure and presence of other SSC/BPO organizations. The commitment, proactivity and professional approach of local investment agencies also played an important role. Today, these factors are still important to us. We began to appreciate the geographic and cultural proximity to our headquarters in Germany. The benefits also come from the fact that Poland belongs to the European Union, which in turn affects our flexibility and effectively reduces the administrative burden in many areas - admits Remigiusz Wojciechowski, Head of Service Center Gdańsk Bayer.
Rafał Brzoska, CEO of InPost, also sees people as the greatest value offered to investors by our market.- Apart from all obvious economic aspects of investing in Poland, the main reason why our country is an excellent destination for business development is simply people. Poles have incredible human capital and the courage to undertake completely new projects that are only waiting to be incorporated by companies. We have a true spirit of innovation. Despite the increasing difficulties on the European labor market, Polish employees are assessed very highly in terms of loyalty and commitment. What’s important for investors, we have one of the best ratio of work quality to its price. These aspects are the reason why Poland outclasses its competition in the field of human capital - admits Rafał Brzoska.
Analysis of companies that considered the possibility of relocating operations to another country, are also favorable to Poland. - We are a company from the IT sector, hence the availability of specialists on the labor market is one of the most important criteria for us. Therefore, while looking for the right place, we focused on such elements as quality of life, cultural coherence and safety. We wanted to compare these parameters with the cost of work to check how realistic is an attractive vision of working from the beach, for example, in Portugal. In the analysis, we decided to look mainly at the countries that are in the European Union, including Poland. This was dictated by the obvious amenities related to EU membership and relatively small differences in time zones. The analysis of the labor cost criterion did not surprise us. It is the most expensive in the Scandinavian countries, and the most cost-effective in Bulgaria and Romania, but these countries were characterized by significant labor cost inflation of up to 25 per cent. When we applied the results of analysis in other categories to these observations, such as World Bank's Ease of Doing Business, Global Talent Competitivness and Corruption Perception Index, it turned out that Poland is sensational compared to the other countries. Knowing that staying in Poland means we also know the legal regulations, the language and the same time zone, the choice was obvious. Ultimately, we decided to stay in Poland. In the end, we work from the beach, only in Gdańsk - says Adam Lasoń Board Member, member of the Management Board of Objectivity.
Warehouses are on top
Despite the limitations caused by COVID-19, the activity of investors who want to invest capital in our commercial real estate market is also not weakening. Funds are still actively searching for properties, only their preferences regarding the asset class have clearly changed.
In the second half of this year, the warehouse segment became the first choice for investors. - In the third quarter of 2020, the warehouse segment was responsible for about 70 per cent of the generated transaction volume. As a result, the warehouses have already achieved their historically best annual result. About half of the total capital invested this year on the commercial real estate market in Poland, has been invested in the segment. In three quarters of this year, the warehouse segment achieved a result twice as high as in the corresponding period of last year - notes Bartłomiej Zagrodnik, Managing Partner / CEO of Walter Herz.
- The value of investment transactions finalized this year, from January to the end of September, amounted to almost EUR 4 billion. It is only a dozen or so per cent less than during the same period in 2019. Considering the situation, this is a very good result. Despite the difficulties related to COVID-19, this year will probably end with one of the highest results achieved by the Polish investment market in the commercial real estate sector - adds Bartłomiej Zagrodnik.
In the first half of this year, despite the pandemic, our investment market recorded the second best six-month result in history. The value of transactions concluded on the commercial real estate market in Poland accounted for almost half of the share in the investment market in the CEE region.
One of the largest transactions concluded this year, was the purchase of over 61 per cent shares of GTC's office and commercial portfolio by the Hungarian company Optima Investment, for approximately EUR 550 million. And also, the purchase of five office buildings in Warsaw for almost EUR 230 million by CPI Property Group.
Locating capital in Poland is justified by the competitive level of interest rates offered by our real estate market, compared to Western European countries. According to Walter Herz data, in mid-2020 the capitalization rates for the best office buildings in the center of Warsaw were at the level of 4.5 per cent. On the warehouse property market, the viability of facilities reaches 5.5 per cent.
For companies entering our market and developing operations in Poland, investment incentives granted under regional aid are of great importance. Investors can apply for a refund of up to 70 per cent of eligible investment costs. Strategic investments may also obtain support in the form of subsidies under the government grant program.
For several years, Poland has also been the largest beneficiary of EU structural funds. Under the 2014-2020 financial perspective, Poland has been granted EUR 82.5 billion. It is the third financial perspective with the participation of Poland with the largest budget among the Member States. The offer of aid funds supporting the activities of enterprises will also be extensive in the 2021-2027 perspective, it will amount to EUR 72.5 billion.
Large EU funds
According to Why Invest in Poland report, in the upcoming years the level of funds allocated to financing research and development and innovative projects will not decrease. Projects involving R&D works, which will result in introducing modern products and services to the market, will still be of great importance. For the further development of business in Poland, this becomes particularly important in the context of the current situation related to the economic stagnation on global markets.
In addition, we also have EU funds from the Horizon 2020 program in the amount of EUR 77 billion, and from 2021 Horizon Europe program, the budget of which will amount to approximately EUR 100 billion. Both programs are focused on conducting cutting-edge research and innovative solutions within three priority areas: excellent science base, industrial leadership and social challenges.
To repair the direct economic and social damage caused by the coronavirus, Poland will receive around EUR 64 billion in support from the EU in the form of grants and loans, which should help us restore the normal course of business processes faster.