Warsaw Business Journal Nov-Dec 2019 #55

WARSAW

BUSINESS JOURNAL S i n c e 1 9 9 4 Po l a n d ’ s l e a d i n g

NOVEMBER/DECEMBER 2019 ~ No. 11/12 (55)

business magazine in English

For daily news visit us at wbj.pl

ATRIUM’S SCOTT DWYER ON POLAND’S

CHANGING RETAIL SCENE

MAKING PLACES

JEMS ARCHITEKCI AND CAPITAL PARK ON LARGE MIXED-USE PROJECTS

CHINA-POLAND RELATIONS AMID

GLOBAL TURBULENCE

A GAME CHANGER

DEEP LEARNING OPENS A REALM OF POSSIBILITIES, AND THREATS SUNDAY TRADE RESTRICTIONS | 2020 TRENDS IN REAL ESTATE | AI CHALLENGES

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THE JEWEL

IN THE HEART OF MOKOTÓW The second phase of the investment is now on sale.

NOVEMBER/DECEMBER 6

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

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OPINION

Chocolate and ice cream market trends..................... 12 Interview: Pharma industry issues.............................. 14 Interview: Chinese-Polish innovation.......................... 16

22

TECH INSIGHTS

Tech News......................................................................... 22 Interview: Artificial Intelligence................................... 30 Interview: Digital solutions for the beauty market... 32

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LOKALE IMMOBILIA – REAL ESTATE

Real estate news............................................................. 34 Feature: City Space......................................................... 37 Feature: 2020 property market forecast.................... 38 Interview: Atrium............................................................ 42 Feature: Warsaw office market.................................... 45 Feature: Mixed-use projects.......................................... 46 Interview: JEMS Architekci............................................ 50 Interview: Capital Park................................................... 54 Feature: Luxury residential........................................... 58 Feature: Office fit-out...................................................... 62 Interview: TDJ Estate...................................................... 64

Feature:

Who’s gaining from the retail trade restrictions 18

66

LIFE + STYLE

Interview: CulinaryOn..................................................... 66

70

EVENTS

24th Book of Lists Gala................................................... 70 9th European Forum for New Ideas............................. 74 2nd Business Insider Trends Festival.......................... 74 8th Innovative Manufacturing Forum.......................... 76 11th AI & Big Data Congress......................................... 76 Polish Residential Market & Office Buildings in Poland................................................................................ 78

80

LAST WORD

Changes............................................................................. 80

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Tech:

Deep Learning – brave new world of Artificial Intelligence 24

EDITOR'S LETTER

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

Beata Socha

Managing Editor

bsocha@wbj.pl

Adam Zdrodowski

Managing Editor, Lokale Immobillia

azdrodowski@wbj.pl

Krzysztof Maciejewski Editor

kmaciejewski@wbj.pl

Kevin Demaria Art Director

kdemaria@valkea.com

Michael Evans Copy Editor

Contributors

Ewa Boniecka Sergiusz Prokurat Joanna Rubin Sales

slowest pace of change you will experience in the rest of your life.” This is because the pace of life already makes it difficult to handle day-to-day challenges, let alone create sustainable, future-proof solutions. We also like to say that “technology is supposed to make life more convenient.” And while we are relying more and more on robots and AI, I wonder if we can handle the consequences of them becoming indispensable.

As Poles participated in the elections this October, society was once again divided in an almost 50-50 split. What I found most interesting was the fact that whereas prior to the elections the hopes for a change were extremely high, and people’s efforts to be heard loud and clear were immense, there was almost complete silence and indifference afterwards. Does it mean that the saying “well, nothing will change, but what does it matter” is the most accurate description of the situation? Or does it prove one of my own naïve theories; politicians come and go, but business will survive no matter who runs the country?

I think one of the biggest “discoveries” of 2019 was the realization that businesses need to take responsibility for our wellbeing and for the future of the planet. This attitude has already been adopted by Fortune 500 companies. Those great players invest a lot in reducing plastic and other harmful waste and opt for environmental-friendly substitutes. Speaking out for the better future of our planet is the right way to go, and yet world leaders – including those in Poland – seem incapable of choosing that path.

So, coming back to my naïve thought that business will continue while the turnover of politicians continues; maybe the future of our planet is in our hands as business people. However, let’s not assume someone will solve it for us. Instead, let’s do the right thing and be accountable to our employees, their families and our future.

With this I sign off for 2019 and wish you all a good and responsible 2020.

- Morten Lindholm

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

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

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PORTRAIT BY PIOTR NAREWSKI

TECH PUNDITS LIKE TO SAY “today, now, this very moment, is the

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NEWS HIGHLIGHTS OF THE PAST MONTH FROM WBJ.PL

SOCIETY

OLGA TOKARCZUK wins Nobel Prize

ECONOMY

Polish cumulative investments abroad to increase to PLN 208 bln in 2024 The cumulative value of Polish FDI may amount to approximately PLN 208 billion at the end of 2024, according to a report prepared by PFR TFI and PwC. The authors of the report estimate that the cumulative annual growth rate of Polish FDI streams may exceed 10 percent in the next five years.

“Polish FDI in 2017 amounted to just over PLN 8 billion. However, our analysis shows that the ratio of foreign investments of Polish entrepreneurs to the country’s GDP still remains below the EU average.

The full use of the development opportunities of Polish companies and the potential of

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foreign markets also depends on adequate public policy and the availability of support instruments,” said Dionizy Smoleń, director of the public sector team at PwC. The authors of the report informed that at the end of 2017 the cumulative value of Polish FDI amounted to PLN 102 billion, of which 27 percent was located in Poland’s neighboring countries.

ECONOMY

Three rating agencies evaluate Poland Standard & Poor’s has maintained Poland’s long-term rating at “A-” with a stable outlook. In addition, the agency raised the forecast of Poland’s GDP growth in 2019 from 4.1 percent to 4.3 percent. The 2020

GDP growth forecast was raised from 3.1 percent to 3.2 percent. Moody’s did not publish a report on Poland’s credit rating, which means that according to the agency Poland’s long-term rating remains at “A2” with a stable outlook. Last but not least, the Fitch rating agency is looking closely at the independence of institutions in Poland. The chief Fitch analyst for Poland also said that until the country has recorded an improvement in the area of foreign debt, it will be difficult to change its rating. According to Fitch, Poland’s 2020 budget will not be balanced, contrary to the plans of the ruling party. Standard & Poor’s has a similar view: it forecasts Poland’s public finance sector deficit at 2.5 percent in 2020 and 2021.

>>>

SHUTTERSTOCK

The Nobel Prize in Literature for 2018 was awarded to the Polish author Olga Tokarczuk. She won “for a narrative imagination that with encyclopedic passion represents the crossing of boundaries as a form of life.”

The Nobel Prize in Literature for 2019 was also awarded to the Austrian author Peter Handke.

The Nobel prize in literature was awarded twice this year, after the Swedish body that selects the laureates was engulfed in a sexual assault scandal that forced it to postpone the 2018 ceremony.

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WBJ

In Review ECONOMY

also hundreds of thousands of workers employed in Poland and other EU countries.

known around November 12, when the first sitting of the new Parliament will take place.

The index of consumer inflation expectations in Poland fell to 20 points in October 2019 from 23 points in September, results of the European Commission’s DirectorateGeneral for Economic and Financial Affairs (DG EcFin) show. Respondents were asked about how they think prices will change over the next 12 months. However, the indicator does not take into account the fraction of respondents expecting price increases but slower than currently perceived.

In turn, the Economic Sentiment Indicator (ESI) fell to 100.2 points in October from 102.1 points in September. The Economic Sentiment Indicator (ESI) consists of indications for industry (40 percent), services (30 percent), consumers (20 percent), construction and retail trade (5 percent each). Level 100 corresponds to the ESI long-term average (since 1990).

DOMESTIC

INTERNATIONAL

Poland is perceived as a regional leader in security matters, Chief of the General Staff of the Polish Armed Forces Lieutenant General Rajmund Andrzejczak said. He emphasized Poland’s involvement in NATO initiatives and the cooperation with partner countries.

Andrzejczak mentioned the improved ability to cooperate and communicate with the forces of Finland and Sweden, especially in the Baltic Sea area. He also told that Poland has very good relations with the armed forces of Ukraine. Andrzejczak added that “joint exercises, initiatives, operational plans are building an ever stronger, safe environment for Poland” and that Poland is building a strong position in the Visegrad Group.

The Three Seas Initiative also has a military dimension.

Poland joined the group of the 25 largest exporters in the world in 2018, and exports remain the development lever of the Polish economy, according to Bank Pekao’s analysis. Over the past dozen or so years, the ratio of Polish exports to GDP increased by over 20 percentage points to 55 percent in 2018. The foreign trade surplus has been in the last three years at the level of PLN 70-80 billion.

“Nearly half of the value of our exports has been earned by less than 11,000 companies with foreign capital. As many as twothirds of the top exporters in our country are local subsidiaries of major global concerns.

At the same time, 27 percent of the total value added in Polish exports is generated abroad – it’s more than just the average for developed countries, but also for most developing economies,” the analysis stated.

EC reports drop in sentiment and inflationary expectations in Poland

INTERNATIONAL

No-deal Brexit may cost Poland nearly 120,000 jobs In the case of Brexit without a deal, Poland may lose almost 123,000 jobs, according to a report prepared by scientists from the Belgian University of Leuven. This would mean a reduction in the overall employment level by 0.79 percent in the country. Poland would be most affected by the problems that the food and drink industry would encounter. Additionally, Poland would face the predicted global decrease in added value generated by the pharmaceutical, chemical and petroleum industries, estimated at €14 billion.

A no-deal Brexit could directly affect not only millions of Poles living in the UK but

QUOTE OF THE MONTH

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Poland considered regional leader in security matters

Poland joined the 25 largest exporters in the world in 2018

POLITICS

Government may restore Ministry of Treasury – Müller The government is considering restoring the ministry or another means of managing state resources, including state-owned companies. It is at the analysis stage, government spokesman Piotr Müller said.

When asked about the composition of the new government, Müller emphasized that it had been clear before the election that if PiS won, Mateusz Morawiecki would become the prime minister, but his candidacy still needs official approval of the PiS Political Committee. The spokesman added that the full composition of the cabinet will be

ECONOMY

One in four industrial companies introduces innovations – GUS In 2016-2018, 24 percent of industrial enterprises introduced innovations, mostly those employing at least 250 people, according to the Central Statistical Office (GUS) study on the innovation activity of companies in Poland. “The expenditure on innovation activities incurred in 2018 in industrial enterprises amounted to PLN 23.38 billion,” the study states. As reported by the GUS, the percentage of industrial companies that introduced product innovations increased by 4.8 percent.

“The shopping center market slowed down a bit, although the pace of development depends on the size of the city and its saturation with retail space. In major cities, it is becoming increasingly difficult to find an attractive plot. In the future, I expect greater interest in leasing premises in high streets. Demand is supported by a steady increase in the purchasing power of Polish consumers and a change in their lifestyle. It is becoming increasingly fashionable to spend time away from home,” said Magdalena Frątczak, head of retail at CBRE

NOVEMBER/DECEMBER 2019 W B J

Powiśle stands for PLEASURE

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ime is almost up on the construction of a boutique apartment building at Dobra 32 in Warsaw.

The revitalized Powiśle district has been enriched by a luxurious building with 18 apartments for the most demanding clients. The original, albeit subdued, architecture of the building was provided by the design of the APA Wojciechowski studio. The investor is Powiśle BJK, a company belonging to the BJK Group – a family company with over 20 years of experience in the real estate market.

COMFORT FOR RESIDENTS ABOVE ALL

Many luxury apartment buildings are being built in Poland, but not all deserve this name. At Dobra 32, however, you can talk about apartments for demanding clients, because their comfort was taken care of in two ways. First of all, there are only 18 apartments in the building, thus maintaining intimacy and limiting the number of neighbors. Secondly, the developer contracts expressly prohibit short-term rentals.

NOTHING IS ACCIDENTAL

“In all our investments, we focused primarily on the architecture and quality of the materials and solutions used,” says BJK president Bartosz Kuźma.

“Dobra 32 Apartments is a particularly important project for us due to its unique location. When choosing the materials from which the building is made, we did not look for savings. Aesthetics and quality have always been the most important criteria. An example is the most modern elevator available on the market, with a custom-made cabin, as well

as panoramic windows of impressive dimensions that open with electric cylinders hidden in the frame. The premises are equipped with the highest class air-conditioning with fan coils hidden in the floor. This guarantees not only greater aesthetics of the rooms, but also the comfort of even temperature at every point of the premises,” he adds.

Silence is also a sign of a comfort. To provide noise control to residents, a detailed acoustic audit was carried out for each floor, and windows with the highest levels of sound insulation were selected. The advantage over the competition is also the ceiling height of the apartments set at 292 centimeters with floor-to-ceiling windows, meaning there will never be a lack of natural light.

The reception and concierge will take care of the peace

and comfort of residents. Everyone will be guaranteed a correspondence and courier service, as well as the highest level of service. With the price per sqm starting at PLN 20,000, it is a must.

The most expensive penthouse at Dobra 32 costs over PLN 8 million. The developer reveals that one, with a view of the Vistula from the terrace, is still available.

that only an exclusive apartment building can provide.

LOCATION IS KEY

The inhabitants of Dobra 32 will be close to the Vistula boulevards and Kazimierzowski Park, which guarantees them the possibility of outdoor recreation. Shopping and gastronomy are also taken care of; the Powiśle Power Plant complex is being built nearby, implemented by revitalizing the former APARTMENTS FOR THE MOST DEMANDING power plant, which ended electricity production in 2001. On an area of 15,500 ​​ sqm there will be 40 restaurants with dishes OF CUSTOMERS The building is dominated by apartments of above 100 sqm. from all corners of the world, unusual cafes, wine and whiskey A real pearl among them is a penthouse with an area of ​​291 bars with sophisticated drinks. sqm located on three floors. The owner will have a large terThe revitalized interiors will include boutiques and stores, race on the highest of them which is up to 60 sqm and balco- including those run by designers as well as pop-up stores. nies on the other two. On each floor there is a bathroom (two They will sell the best global brands, including those previon the fifth floor) or a toilet. The apartment also has three ously absent in Poland. The complex will also house modern bedrooms, a 100-sqm living room connected to the kitchen, offices, apartments and a boutique hotel with unique architecliving room and office, a closet and a hallway. ture. The creators' intention is that Powiśle will be a combinaThe penthouse has been designed so that each floor can de- tion of rest, pleasure and entertainment. liver a different function. The proposed layout is a bedroom on the fifth floor, daytime area on the sixth, and gym, spa or entertainment space on the seventh, where on the terrace you can admire panoramic views of Warsaw. However, this is only one of many possibilities, because such a large, luxuriPowiśle BJK ous space on three floors can be arranged in many different Europejski Offices ways. In such an apartment you can lead an active social life, ul. Krakowskie Przedmieście 13 host private and business guests, relax and work efficiently 00-071 Warszawa – it all depends on the needs of the owner. Certainly, this T. 733 208 103 place will be an excellent showcase, proving the prestige of its www.dobra32.pl owner. It's like a large, two-story house, but with the comforts

FORECAST 2020

Consumers’ curiosity determines the confectionery and ice cream market

POLES ARE MORE AND MORE PASSIONATE ABOUT FOOD, WHICH AFFECTS THEIR AWARENESS AND GROWING EXPECTATIONS. THE CHOCOLATE INDUSTRY RESPONDS TO THESE CHALLENGES WITH AN OFFER TAILORED TO CONSUMER NEEDS, MEETING THE CHALLENGES OF A MATURE, SATURATED MARKET. WE ARE INCREASINGLY LOOKING AT NEW DEVELOPMENT OPPORTUNITIES ABROAD OR MOVING IN COMPLETELY NEW DIRECTIONS; FOR EXAMPLE, ICE CREAM

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T

he value of the chocolate industry has increased by 5 percent over the past year, and it is currently worth nearly PLN 7.2 billion. The increase in value is the result of rising prices and growing sales of brand and premium products. Polish consumers already spend and are ready to spend more in the future. They look for products that stand out from the rest by using original ingredients, developing sophisticated flavor combinations and designing elegant packaging. This is in line with the global trend of producing premium products, which is manifested primarily in growing quality expectations and focusing on the added value of the product (e.g. attractive design). In the coming year, we expect a further increase in the chocolate industry in terms of value, partly due to consumers’ greater purchasing power. Prices, and consequently the value of the industry, will also go up due to the dynamically rising costs of business operations (e.g. energy prices).

2020 will be a year of consumer convenience. All this is due to the rapid development of convenience stores, the transformation of discount stores into so-called corner stores and growth in the segment of small-sized products for immediate consumption. Due to the further restrictions on Sunday trade, we expect to see sales outlets “close to home” develop further at the expense of hypermarkets (which are recording a clear decline).

We also assume the maintenance of high-growth dynamics for chocolate products with a higher cocoa content, especially bitter chocolates, because the health and wellness trend is not weakening. More and more of us are looking for healthier versions of dishes and snacks, including sweets.

PHOTOGRAPHS COURTESY OF WEDEL

ICE CREAM OPPORTUNITIES

Growth in the chocolate industry remains stable at a few percent a year, as the market is already mature. We can observe much higher increases in the ice cream category, for which we forecast an upward trend until 2023. The good condition of this industry is influenced by various factors, including climate change (high temperatures), which determine the needs of consumers to seek sweet refreshment. At the same time, it is important to emphasize the high growth potential for this category in our country – Poles still consume less ice cream than Germans, Swedes or Americans.

The most promising sales channels for ice cream are discounters, which show continuous growth and traditional channels, which accounts for almost half of the market. Premiumization also applies to the ice cream category – a constantly increasing range of “high-end” replacing private labels. This relationship can be treated as a standard in the economic cycle that we are witnessing in the current economic climate.

On the one hand, buyers are open to new products and like to be surprised, which opens an area for new brands and formats, on the other hand, traditional flavors such as cream/vanilla, chocolate, strawberry are

“

Due to the further restrictions on Sunday trade, we expect to see sales outlets “close to home” develop further at the expense of hypermarkets

still the most popular. When it comes to new formats, so-called pouches – ice cream in sachets – were first propagated on Asian markets and are now conquering European markets, including Poland. New ice cream flavors that are now popular are combinations of sweetand-sour and sweet-and-salty ingredients. Double-branding based on the cooperation of two producers specializing in a particular area, e.g. fruit ice and chocolate, is an increasingly popular trend.

The characteristic feature of the Polish ice cream market is the higher share of impulse formats – we rarely choose family formats, which shows that ice cream has not (yet) replaced traditional desserts, i.e. cakes. At the same time, we are observing an increase in ice cream sales in the multipack formula, mainly due to the rise of discount stores.

The expectations of retail chains are also a challenge when it comes to reducing the number of products in bulk cartons to make more efficient use of freezer space.

For manufacturers, this involves additional packaging and logistics costs.

The general trend for the food industry is the growing expectations of buyers, who are bolder and eager for rich taste sensations. At the same time, consumers are becoming more aware of product composition, production methods and packaging, to which manufacturers are responding with vegan alternatives, environmentally friendly packaging or so-called clean labels.

Maciej Herman Managing Director, Wedel

W B J NOVEMBER/DECEMBER 2019

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Interview PHARMA

Time to fulfill promises

Polish pharmaceutical companies are waiting for a groundbreaking strategy that will improve how the industry functions. Barbara Misiewicz-Jagielak, vice-president of the management board of the Polish Association of Pharma Industry Employers, talked to WBJ about what to expect from the government in its new term

WBJ: Some say that new regulations in pharmaceutical law are long

overdue. How does the Polish Association of Pharma Industry Employers (PZPPF) view the current legal conditions related to operations?

Barbara Misiewicz-Jagielak: We are in a situation where the most interesting legal provisions – including those promised earlier – are yet to be implemented.

In 2016, the then Minister of Economy, Mateusz Morawiecki, who was trying to boost economic development, noticed the innovative pharmaceutical sector in Poland and its high potential for investment. We have, after all, many companies with Polish capital, and several large foreign companies that have settled here. Considering the fact that an enormous amount of funding goes towards the reimbursement of drugs, it is worth spending that money in a way so as to stimulate the Polish economy.

Discussions have been ongoing for four years, and some promises were made that encouraged the drug manufacturers to start investing. However, the project called the Refund Development Mode (RTR) still hasn’t been implemented.

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How exactly would the RTR work?

Our sector is a very highly regulated.

The Minister of Health decides on the prices for reimbursed drugs, which make up about half of our portfolio. The problem is that the health ministry sets goals that are sometimes at odds with the interests of the Polish economy.

Sometimes those conflicting interests cannot be reconciled because while importing medicines from China would probably be the cheapest option, Prime Minister Mateusz Morawiecki insists on supporting our own providers to boost the national economy. Jadwiga Emilewicz, Minister of Entrepreneurship and Technology, proposed setting price conditions based on companies’ suitability. For now, however, the Ministry of Health does not seem particularly interested in such a proposal.

As a new government has now been formed, can this problem be solved?

Deputy Minister of Health Janusz Cieszyński has indeed promised to deal with this project at the beginning of the government’s new term. Both him and the prime minister care about the

development of our sector.

How about other provisions that deal more generally with business matters?

How favorable are they?

Economic departments are actually trying to create a friendly ecosystem for our industry. There are also many European regulations created on the basis of the EU law which have a big impact on the activities of this sector. That said, there are still some inconsistencies and differences in how particular ministries interpret the law. Most certainly, there is no government strategy for the pharmaceutical industry. This is a situation that does not occur in much wealthier countries.

How important is cooperation with foreign entities?

First of all, it should be remembered that no producer in the pharmaceutical sector is self-sufficient. Drugs are made from active substances obtained from intermediates, and there are no factories of this type in Poland, except the one in Starogard Gdański. Today, the vast majority of ingredients are imported

SHUTTERSTOCK

WBJ

INTERVIEW BY KRZYSZTOF MACIEJEWSKI

from Asia, mainly from China, and several European countries. Of course, cooperation between entities is not only about importing drug ingredients.

Perhaps we lost a great opportunity in 2017, when the RTR was meant to enter into force. Foreign companies were looking to cooperate with Polish companies and intended to become partners for the Polish economy. However, since RTR was not successful, neither were the deal negotiations. Cooperation is absolutely vital. It also concerns biotechnology companies, because they are not selfsufficient. However, it works both ways, because some Polish firms have offices and factories outside of Poland.

of generic medicines, and fortunately the associated costs are not so high. But the outlay on research and development of the pharmaceutical industry is much higher than in other sectors of the Polish economy. Between 2016 and 2018, every other company from this sector (52 percent) carried out research or introduced innovative products to the market. This is almost twice the percentage of the average rate for the entire industrial production in Poland (26 percent). The pharmaceutical industry spends about PLN 700 million a year on innovation, which is about 60 percent of its profits.

This places the industry at the top of Poland’s innovative sectors.

And what about the availability of medicines today? Is the country’s pharmaceutical safety currently guaranteed?

For many years, globalization seemed to be the solution for all problems. Then China released much cheaper, goodquality active substances, which caused most European manufacturers to go bankrupt. However, two years ago an environmental law was introduced in China, and costly investments in environmental protection affected the price of active substances. As a result, prices went up, and the production volumes went down. It also had an impact in Poland – we depended not only on those supplies, but also on the conditions of the import of medicines. We must be prepared for similar situations.

The recent drug crisis, which resulted in a shortage of medications in our pharmacies, only confirmed our dependence on imports. We need to remember that the Polish market is only a priority for companies that produce drugs here.

When there are problems in accessing certain medicines, Germany will first protect the German market, France will focus on their own companies, etc.

Therefore, we must become independent from foreign drug supplies and increase the production of pharmaceuticals in Poland. Only then will we be able to talk about the stability of the Polish drug market, and therefore the safety of Poles.

Does this mean that we can expect many innovative drugs to be introduced in the near future?

It doesn’t work that way. A breakthrough drug that changes therapy comes along every ten years. Most new drugs are, unfortunately, only slightly better than those already available on the market.

Domestic companies mainly focus on the development of generic medicines used by millions of patients. Therefore, our research is going to improve the form of these drugs so that patients can take them without worrying about side effects. Domestic companies specialize in drugs that are difficult to manufacture and those that have added value. The latter include medicines that combine two or three active substances in a single pill. It is a real game-changer for patients, because they only have to take one pill instead of three. Without doubt, this is a huge technological challenge. Imagine two or three substances that are released in different sections of the gastrointestinal tract, at different times, often affecting each other, encapsulated in an easy-to-swallow tablet. The technology of drug forms changes very quickly, and our scientists are eager to take advantage of the new solutions.

Are other costs such as clinical trials a heavy burden?

Clinical trials mainly concern drugs that are not already available. Domestic producers concentrate on the production

What other trends are currently making waves in the industry?

In addition to the above-mentioned combination drugs, the most popular are those with prolonged effects and the equivalent biological drugs. More and more emphasis is also put on healthier products without preservatives, such as eye drops. The industry also invests a lot

of money in environmental protection.

And what does the competition look like on the market?

Medicine patents last 20 years, so their producers are de facto monopolists.

After a patent expires, the drug can be manufactured by other companies, and then competition begins. Domestic companies are doing better and better in this field. We also noticed that our society is becoming more mature and more aware when making choices. Poles may have been delighted with everything that was foreign, but economic patriotism is our innate quality. That is why we choose products made in Poland more and more consciously. It has got to the point that when a foreign pharmaceutical company enters Poland, their products are sold under Polish names, because Polish patients prefer drugs manufactured in the country.

We must become independent from foreign drug supplies and increase the production of pharmaceuticals in Poland

Barbara Misiewicz-Jagielak Vice President of the Polish Association of Pharmaceutical Industry Employers Director of Price Strategy and Refunds at Polpharma

W B J NOVEMBER/DECEMBER 2019

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Interview POLISH-CHINESE RELATIONS

East meets West

WBJ talked to Liu Guangyuan, China’s Ambassador to Poland, about the economic turbulence caused by the USChina trade conflict, about the “Belt and Road” infrastructure, the 5G cooperation between Poland and the US and the economic and political system in China

WBJ:

There have been concerns recently about whether Chinese-Polish relations will face turbulence given the tensions in world policy and the economic conflict between the world’s two great powers: China and the US. Do you think there is cause for concern?

Ambassador Liu Guangyuan: I have noticed that there are some such concerns in Polish society. Even some American politicians have suggested that other countries should choose to stand side by side between the US and China. This is obviously outdated and irresponsible, not only against the trend of a win-win era characterized by peace, development and cooperation, but also not in line with the fundamental interests of all countries.

Since the establishment of diplomatic ties between China and Poland 70 years ago, the bilateral relations have maintained

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a good momentum. The friendly cooperative relationship between China and Poland is based on mutual respect, equality and mutual benefit. It does not target any third party, nor should it be influenced by third parties. It does not need to look at other countries. The China-Poland relationship can run parallel with Poland-US and China-US relationships.

This year marks the 40th anniversary of the establishment of diplomatic relations between China and the US. Forty years of historical experience tells us that as the world’s two largest economies, China and the US have formed a blend of interests of “you have me, I have you.” Both will benefit from a harmonious relationship or be injured by the conflict. A healthy and stable China-US relationship is not only in the interests of those two countries, but also the common good of the international community.

Polish Prime Minister Mateusz Morawiecki and US Vice President Mike Pence signed the 5G network cooperation during Pence’s visit to Poland. There is talk that it may result in the introduction of an embargo on Chinese network Huawei. What will China say if it comes to that?

Regarding the joint statement you mentioned, I would like to reiterate some points here. First, the Polish side have repeatedly emphasized that the statement is never targeted at any particular country or specific enterprise. The Polish leaders also made it clear that they will maintain a fair and open telecommunications market and will not adopt exclusionary policies for specific countries and enterprises. I believe that the Polish side will abide by its commitments. This is the attitude that independent countries should have, and it is in Poland’s best interests.

SHUTTERSTOCK

WBJ

INTERVIEW BY EWA BONIECKA

Second, the US is suppressing Chinese enterprises on the groundless charge of “security concerns.” This is in line with its waging global tariff wars and stirring economic and trade frictions. Its essence is still conducting unilateralism and protectionism in the field of science and technology.

The fundamental purpose is to maintain US hegemony, which is firmly opposed

by China. US Vice President Pence visited four European countries and spread rumors about Chinese companies everywhere, but he was embarrassed without gaining any support, which once again proved that a just cause enjoys abundant support and an unjust cause finds scant support. I hope that Poland will not be tempted and exploited by the US on this issue.

Third, 5G is one of the most representative technologies of the fourth scientific and technological revolution. It is the common innovation of the international community and will bring important development opportunities for countries around the world, including China and Poland. Human science and technology advancement requires open cooperation.

Technical security issues should be solved through technical means. Politicizing technical issues, engaging in small circles and even adopting discriminatory practices are very narrow-minded behaviors. I believe that Polish politicians have sufficient strategic vision to make an independent and correct choice.

China and Poland are partners in building the “Belt and Road” infrastructure linking China with other countries in Asia, Africa and Europe that will contribute to the exchange of products and also help the development of Poland. How is the work on the route progressing?

In the past six years, the Belt and Road Initiative has become the world’s most popular public product and largest cooperation platform. As many as 136 countries and 30 international organizations have signed 195 intergovernmental cooperation agreements with China under the framework of the Belt and Road Initiative. China’s total investment to the countries along the Belt and Road has exceeded $100 billion, and the investment of these countries in China has reached $48 billion. It can be said that from an initiative to consensus, from plan to action, the Belt and Road has been an important boost for the world economy.

Poland is an important node country

along the Belt and Road and one of the first European countries to sign relevant cooperation documents with China.

We are pleased to see that the cooperation between the two countries under the framework of the Belt and Road has gradually blossomed. In recent years, Chinese companies’ investment in Poland has developed rapidly. As a result, cumulative direct and indirect investment from China has exceeded $3 billion; 90 percent of China Railway Express trains have passed through or arrived in Poland; the port of Gdańsk is the distribution center of COSCO Shipping in the Baltic Sea, nearly 20,000 TEUs of freighters travel between Poland and the Far East every week; and LOT Airlines has direct flights to China.

We import quite a lot from China, while Polish exports to China are relatively small. How could that change?

First of all, we must objectively and comprehensively look at the current state of China-Poland trade. In the context of current economic globalization, the industrial chain, supply chain and value chain have crossed national borders and form a global layout, and trade between countries is mutually beneficial. By participating in the global industrial division of labor, China and Poland have realized the convergence of supply chains and the value chain, bringing benefits to both sides. Poland imported high-quality raw materials, semi-finished products and spare parts from China and processed them for export, forming a trade surplus with Germany, the UK and other countries. Poland has added value between the product’s entry and exit, earned revenue, and consolidated its role as Europe’s processing and manufacturing center. After the goods exported by Poland were processed by third countries, a considerable part of them were re-exported to China, but this part is not reflected in the Polish export data to China.

Secondly, we must have a clear understanding of the causes of the China-Poland trade deficit. In addition to the differences in economic scale and industrial structure between the two countries, there are some specific reasons that should be analyzed.

For example, 80 percent of enterprises in Poland are small and medium-sized companies. They are undoubtedly unable to rely on their own strength to open up the Chinese market. They need more support and help from the Polish government

and industry associations. We also know that Poland’s traditional export market is Western Europe. To allow exporters to adjust their established channels and turn to the Chinese market in a short period of time, they will also face certain internal and economic resistance.

It is hoped that the Polish government and industry organizations will play a more active role as a bridge connecting Chinese consumers and Polish products.

The Chinese political system and internal structure which you describe as “socialism with Chinese characteristics,” is based on your culture, history, tradition, ambition and responding to your people’s wishes. Do you think that your system has proven to be the best for modern China and its further development?

The world is rich and colorful, and development models are diverse. There are differences in national conditions in different countries, and there is no uniform standard in national systems. China has always insisted that all countries are equal, no matter whether they are big or small, strong or weak, rich or poor. And we respect the right of the people of all countries to choose their own development path. We recognize differences in cultural traditions, social systems, values and development concepts, and we strive to promote the common development of different civilizations.

No matter what doctrine, system, model, or path, a development model must be tested by the times and practices.

In modern times, in China it was difficult to explore and experiment on the road of seeking development and revitalization, and it finally found a development path suited to its own national conditions, that is the road of socialism with Chinese characteristics. After 70 years of historical inspection, this road has proved to be completely correct, and it has received unanimous and firm support from the Chinese people.

Liu Guangyuan China’s Ambassador to Poland

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FEATURE / TRADE BAN

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SUNDAY TRADE BAN – A QUESTION OF FREEDOM The ban on Sunday trading was intended to allow families to spend more time with their loved ones. It was supposed to bring people together. But it has had the opposite effect, as discussions about the trade ban continue to divide Poles

BY SERGIUSZ PROKURAT

W B J NOVEMBER/DECEMBER 2019

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FEATURE / TRADE BAN

“It is important that Sunday is for the family; some clients and thus lower income. They say that Sunday was that you can spend time together, go to the cinema or theater,” the most profitable day that cannot be compensated for on other Piotr Duda, the chairman of the Solidarity trade union, said in days of the week. The loss is even greater, as rent and other fixed 2016. On the initiative of the union, a draft law was introduced costs remain the same. Free Sundays have not given those people restricting trade on Sunday, which was applauded by religious cir- more time for the family, because if they want to compensate for cles, including the Catholic Church. This law banning almost all the losses, they need to work longer during the week. Moreover, trade on Sundays took effect in 2018, with large supermarkets and if they work until late hours, they still have to do their own shopmost other retailers closed for the first time since liberal shopping ping, which means that the time for the family is reduced further. laws were introduced in the 1990s after the collapse of commu- People emphasize that they have been deprived of a choice, rather nism. President Andrzej Duda, when signing the law on trade-free than being given more freedom.

Sundays, said: “We flipped over the free market, the increase in If we delve into the demographics of trade ban supporters and wealth, freedom, sovereignty and everything that Poland had not opponents, the division becomes clear. According to a study by had for decades. But in this process there were also changes that Maison & Partners conducted in December 2018, supporters were not good from the point of view of significant values, in par- of keeping stores open are mostly those with higher education, ticular those related to the family.” while supporters of closing stores are those with only primary or Statistical data indicates that more than half of Poles shop on secondary education. Trade on Sundays is supported by working Sundays, including one-fifth often and oneresidents of large cities, and the ban is popular third occasionally. The restriction on trade mainly among residents of villages or small was meant to improve the social situation of towns – where there are no large stores – as employees in the retail sector, especially those well as among the unemployed or people on who work in large-format stores and small enparental leave. trepreneurs. It was supposed to change the way Restrictions on large stores lead to shifting Poles spend their free time. The Sunday trade employment to small stores, which is good ban, enacted at the beginning of 2018, involved for the owners of the latter, but not for cusIn 2020, trade will an almost two-year transitional period aimed tomers, who have to pay higher prices. The be allowed on: at the complete closure of stores on that day. withdrawal of Tesco hypermarkets from PoJanuary 26 From March 1, 2018 to the end of the year, land is closely related to the ban on Sunday trading was allowed on the first and last Suntrading. Such hypermarkets are stores where April 5 day of the month. From the beginning of 2019, you don’t do the shopping in half an hour, April 26 you could only trade on the last Sunday of the because it takes more time to get around. month. The most substantial changes await They are not the type of store that customJune 28 customers in January 2020, when stores will be ers visited after work, so they generally made August 30 open on only seven Sundays a year. a profit at weekends, especially on Saturdays On the one hand, it is indisputable that large and Sundays.

December 13 groups of people have gained the opportunity December 20 to relax with their families. On the other hand, FINDING LOOPHOLES there is growing dissent from the middle class, Poland is not the only country where many particularly those living in large cities, who people look at large foreign-capital stores feel their freedom to shop when they want has with contempt. In Hungary, another ex-combeen restricted. In cases where two sides claim their freedom is at munist country, a ban on Sunday trade imposed in 2015 was so stake, it is up to an external arbitrator to determine whose free- unpopular that authorities repealed it the next year. In Poland, aldom is more important. The state can either give a helping hand though the change in the rules of opening stores has forced people to the middle class wanting to shop on Sundays, or side with those to reorganize their lives, finding time to go shopping during the who don’t want it. But there are questions as to who the ban is week is still a problem. The regulation, containing up to 32 excepsupposed to protect. Retail workers who supposedly wanted to tions, is sometimes circumvented. For example, there are certain have time off on Sunday are, interestingly, against the ban. Less units whose activity, apart from commercial sales, incorporates adopportunity to earn income and concerns about layoffs have re- ditional provision of postal services, which makes trading on Sunsulted in a situation where the only proponent of the ban is the days possible, provided that there are family members of the store strong trade unions, not regular employees. If you count the num- owner behind the counter. The condition is that the spouse, chilber of working days in a year, it becomes evident that the number dren, parents, stepmother or stepfather (informal relationships are of working days per employee or the number of employees will not taken into account) cannot be permanently employed in the have to be reduced. store. This is the result of the interpretation of existing provisions.

For many people, closed shops on Sundays is a significant prob- Another beneficiary of the ban is Orlen, which boasts in its finanlem. Its main side effect is that Saturdays are now the busiest trad- cial results that its increased income is due to the Sunday trade ban ing day, with crowds storming supermarkets. Stores are crowded, – gas stations have turned into shops that operate non-stop. hectic and their employees have more work and responsibilities.

The law that restricts the choice of where to shop continues to The trade ban has affected large families in particular, where it is raise controversy. There are those who support it, those who vemore difficult to find time for shopping during the week due to hemently oppose it, those who suffer losses as well as unexpected the excess of duties. Entrepreneurs complain about the loss of “winners.” And 2020 will likely see the conflict escalate.

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Trading Sundays in 2020

etail workers who supposedly “R wanted to have time off on Sunday are, interestingly, against the ban

W B J NOVEMBER/DECEMBER 2019

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TECH i n s i g h t s

TECH NEWS CD Projekt the most promising company of 2020

Bloomberg Intelligence analysts who evaluate companies in sectors such as energy, technology, commerce and finance have selected 50 companies that are preparing a product or service which could be a hit next year. Increases in revenues, margins, market share, and other economic factors were taken into account. The Polish game producer CD Projekt took first place in the ranking both in terms of forecasted sales growth and increase in earnings per share (EPS).

Analysts have estimated that in 2020 CD Projekt’s sales will increase by 446.12 percent and EPS growth will amount to 1183.13 percent.

Next year’s sales value could beat expectations as a result of the anticipated release of the game Cyberpunk 2077. Matthew Kanterman from Bloomberg said that the game could sell 20 million copies in its first year.

Cyberpunk 2077 will be released on April 16, 2020, but pre-sales already started this summer. CD Projekt has not revealed the number of orders so far, but the company says it is very pleased with the results, which are better than the pre-sales of The Witcher 3 in 2015. The Witcher 3 is considered by some to be one of the best games of the 21st century.

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NEWS

Polish start-up takes over Italian producer of software for hospitals DocPlanner, a platform for arranging online medical appointments to which ZnanyLekarz.pl belongs, has announced the acquisition of TuoTempo, an Italian software producer for hospitals and medical facilities. The purchase price has not been disclosed.

So far, the DocPlanner Group has focused on solutions for smaller medical entities (facilities from 1 to 20 doctors).

“Thanks to the acquisition, TuoTempo will expand the offer for the largest medical service providers, investing capital, sales experience and focusing on supporting sales teams, customer service and product development,” the company stated.

The DocPlanner Group websites are visited by 30 million patients a month, and 1.5 million visits are made each month. DocPlanner was established in 2012 in Poland. It employs 1,300 people and has offices around the world.

Klabater: Crossroads Inn in 3rd place of global sales on Steam

DataWalk begins pilot project with US System Integrator

Depending on the selection of the game mode, players will be able to try the ordinary inn simulator, as well as play the protagonist of the fictionalized campaign.

WSE-listed DataWalk has launched a pilot project with Systems Integrator in the US, whose goal will be to support the customer technology offer directed to government institutions in the US, the company said.

“The board of the company considered the launch of the pilot to be confidential because there are indications that cooperation may have a positive impact on the future competitive position of the issuer’s capital group in the US,” DataWalk stated.

DataWalk (formerly PiLab) is a technology firm that has built an analytical product based on its own technology that solves global security problems. The DataWalk platform connects billions of objects from many sources, finding applications in the field of forensic analytics in the public and financial sectors, including the fight against crime (US agencies), scams (insurers) and fraud identification (central administration).

Computer game Crossroads Inn produced by Kraken Unleashed, Klabater’s internal production studio, was third in global Steam sales a few hours after its release, Klabater said.

“Crossroads Inn is our key title in 2019.

Game streaming ran on the Crossroads Inn channel for several hours after the launch was watched by over 3,000 players from all over the world. It is an excellent result, confirming interest in our title,” Michał Gembicki, board member, said. The company declared long-term support for the game after the premiere in the form of paid and free add-ons (DLC). Paid DLC will bring new mechanics to the game, free DLCs will contain new interior design elements, textures and resources.

BROUGHT TO YOU BY BCHAIN

Robert Pardela CEO BCHAIN PARTNER Sp. z o.o.

softWORM 3 S DOC new generation of durable medium If you are concerned with the MiFID and PSD/PSD2 directives, then you know the problem of durable medium, if not, check whether you should use it anyway

A

durable medium is a medium that makes it impossible to change the content of documents in a technological way.

This provides protection for consumers against entrepreneurs who implement unfair practices. The S³DOC (Secured Solid State Documents) system is an EU-wide IT system that has the characteristics of a durable medium. These features are guaranteed by internationally recognized cryptographic techniques and methods.

The system is supported by blockchain technology. S³DOC is the answer to the problem of providing documents such as important contract terms, fee and commission tables, regulations and other documents on a durable medium.

The system will work in any industry service provider that is required to use a durable medium, which includes, among others, banks, insurers, funds, e-payment brokers as well as e-commerce companies such as online stores, websites, service and media providers, including telecommunications companies.

The S³DOC system was successfully audited by a team of researchers from the System Research Institute of the Polish Academy of Sciences. This means that the S³DOC system meets all the requirements of a durable medium within the meaning of the EU legal regulations, in particular the Office of Competition and Consumer Protection (UOKiK). Manufacturing company BCHAIN PARTNER ​​ Sp. z o.o. prepared versions of the S³DOC system dedicated to large enterprises, SMEs and even micro-entrepreneurs.

Find out more at www.s3doc.com

W B J NOVEMBER/DECEMBER 2019

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TECH

MULTI-LAYERED BLACK BOX

WE’VE GROWN ACCUSTOMED TO FACE RECOGNITION AND MACHINE TRANSLATIONS. THE LATEST ACHIEVEMENTS IN ARTIFICIAL INTELLIGENCE EVOKE AS MUCH AWE AS CONCERN. HOW DO “DEEP” NEURAL NETWORKS OPERATE AND WHAT CAN THEY REALLY DO?

BY BEATA SOCHA

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ARTIFICIAL INTELLIGENCE

SHUTTERSTOCK

T

he foundations for artificial neural networks, what we commonly refer to as Artificial Intelligence (AI), were created in the mid-20th century. Since then, the field has gone through rapid advancement as well as periods of “AI winter,” when scientists came across a limitation they couldn’t overcome with the technology available at the time. Then there was a breakthrough and another surge, and so on. “Luckily for the field, there was always a group of researchers somewhere in the world who shared an unlimited conviction that neural networks had incredible potential and they always managed to break through the barriers and push development forward,” said dr. Paweł Rzeszuciński, Chief Data Scientist at Codewise.

Theoretical understanding is only the first of the necessary ingredients that made AI possible.

The second element was data – the fuel of neural networks. The breakthrough in digitization and mass communication we saw happen in early the 21st century resulted in vast amounts of data that could be used to power the emerging neural networks. The development of cloud computing was another factor. “Immense computing power necessary for working with neural networks became available to researchers who had been unable to meet the necessary hardware requirements before,” explained Rzeszuciński. “To work with networks effectively, you also need a dedicated kind of equipment, which is based on graphic processing units. Once they became accessible, training neural networks really took off, as did all the research and development, whose results we can see today,” he added.

MILESTONES

Over the past few decades, AI has been crossing more and more boundaries that once seemed unattainable: from “Deep Blue” beating Kasparov in a game of chess in 1997, “Watson” triumphing at Jeopardy! in 2011, through to “Alpha Go” besting in 2017 a champion in one of the hardest strategic games of all time – the Chinese game Go. These few examples are just scratching the surface of what neural networks can do. The past few years have seen significant acceleration. Since deep learning neural networks were created, their capabilities have surpassed any expectations. “Using machine learning and deep learning we can build computer systems and apps that carry out tasks normally associated with human intelligence, such as image and speech recognition and language translations,” said Marek Pyka, AI Architect at Microsoft Poland.

WHAT MAKES THEM “DEEP”?

The thing that differentiates deep neural networks from regular machine learning is their multi-layered structure.

A classic neural network has three layers: input, a data processing algorithm and output. Deep networks contain numerous intermediate layers, which are hidden and which make doing the most complex operations possible, producing more valuable insights.

“It is because of their multilayered nature that deep neural networks don’t need data features to be precisely defined. They can identify these features themselves, oftentimes better than humans,” said Rzeszuciński. That is also

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TECH

DEEP LEARNING IS A ROCKET AND DATA IS ITS FUEL: THE MORE FUEL IT GETS, THE FURTHER IT CAN GO why they are more effective when dealing with noisy data.

Meanwhile, for machine learning algorithms to work, data needs to be separated from the so called “noise,” which requires a lot of effort.

Deep neural networks are more efficient with every piece of additional information they receive, while “classical methods reach a point of data saturation, where their effectiveness plateaus. Andrew Ng, currently one of the biggest authorities on AI, used a simple analogy that deep learning is a rocket and data is its fuel: the more fuel it gets, the further it can go,” Rzeszuciński added.

Multi-layered networks can learn to distinguish features at various levels of abstraction.

“For example, if we carefully train a deep neural network to classify images, we will find out that the first layer trained itself to recognize very basic objects like edges, the next layer is able to recognize collections of edges such as shapes, the third layer trained itself to recognize collections of shapes like eyes and noses, and a further layer will learn even higher-order features like faces,” explained dr.

Dominika Tkaczyk, Principal R&D Developer at Crossref, an organization that digitizes scientific publications.

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HOW DO NEURAL NETWORKS MAKE FACES LOOK OLDER? Among the many training methods used for image recognition and modification, two are particularly interesting: the “autoencoder” and GAN (Generative Adversarial Network). Both methods involve two networks that together train one another to recognize and generate data (e.g. text or image).

The autoencoder model consists of an encoder that receives an image and tries to “summarize” it using much less information. Meanwhile, its “partner” – the decoder – tries to recreate the original based on the summary alone. It’s a little akin to playing charades. In the initial phase of this “guessing game,” the encoder loses a lot of key information and the product that the decoder delivers is nowhere near the original. However, after a number of repetitions, it turns out that the key information provided by the encoder is enough to reconstruct the image. “Autoencoders are trained to achieve a result as close to the original data as possible, while limiting the size of the intermediate representation (called the hidden vector),” explained Filip Wolski, Research Scientist at OpenAI. “As a side effect of the process, the features that may differentiate images (e.g. age, sex, skin color, hair length, etc.) must be encoded in the hidden vector and thus become separated from the information necessary to recreate the original. These features can be easily read from the vector – as well as changed:

The article was adapted from an original first published in T4B Magazine in November. t4bmagazine.pl

ARTIFICIAL INTELLIGENCE

JUST A CHEAP TRICK? we can obtain a picture of the same person with one feature changed,” he added.

Training GANs, on the other hand, resembles a “true or false” challenge. One of the networks in this model, the generator, creates a random set of data forming e.g. an image. The other network, the discriminator, is supposed to guess if the image it “sees” is real or the product of the generator. “We train the generator only for the purpose of misleading the discriminator,” Wolski explained. It is being “rewarded” each time it is able to deceive the discriminator. But the discriminator is also learning in the process and is able to recognize more accurately real images from the generator’s “noise.” And so on, and so forth.

“In time, the discriminator learns to recognize real images very well, and the generator learns to create very realistic looking pictures,” Wolski added.

This is how we can create photorealistic pictures, and soon also videos, indistinguishable from the images of real people. It is also the technology behind making faces look older or younger. “Making people look older in images is possible through the cooperation of two or more neural networks. Based on sample images, one network trains in determining which features are typical of people in different age groups. This abstract representation of age can then be blended with a real image to make the person look older, while the other networks in the model make sure the face maintains the features which are characteristic of the person,” Tkaczyk clarified.

Face recognition is already being used in biometrics, e.g. while logging into your computer.

“Thanks to the IR camera in the screen, the user is verified by scanning their face. To log into their account, they don’t need to put in the password – all they have to do is look into the camera. Face recognition is already used in Windows' Hello interface, available on computers with Windows 10,” said Pyka.

Soon we will also be able to do our shopping in so-called intelligent kiosks, equipped with AIbased face recognition and eye tracking – Microsoft has been developing the concept with Leaware and M4B. “Algorithms recognize age, sex, other demographic features and even the mood of the consumers, and the recommendation mechanism chooses personalized content and products for each client. The system learns what customers find interesting and continuously tracks eye movement, suggesting the most effective solutions,” Pyka described.

Over the past few months, there’s been a lot of buzz around apps that can age people’s photos. While being able to age an image or make it look younger can have certain uses in filmmaking, where one actor can play a character through many decades of their life, without resorting to imperfect make-up, applications in the real world seem scarce. Who knows – maybe soon we will see some novel uses too.

“At the moment it’s more of a trick, but soon we will see it applied in business. We can think of ads tailored to the viewer, as well as multiple uses in media, filmmaking, videogames etc.,” Wolski said. “Unfortunately, the same techniques can be used to

generate fake videos of celebrities, which makes recognizing and regulating such situations all the more important,” he added.

IN THE TIMES WHEN CLICKABILITY IS KING AND USERS ARE FLOODED WITH SENSATIONAL FAKE NEWS STORIES, THE PRESENCE OF INCREASINGLY SOPHISTICATED AI ALGORITHMS MEANS WE SHOULD BE ON OUR GUARD MORE THAN EVER FAKE NEWS DILEMMA

One of the latest achievements of AI is the ability to generate text that not only sounds authentic but can be an uncanny imitation of speeches given by well-known people. In February 2019, OpenAI, whose co-founder was Elon Musk, announced it had developed an algorithm called GPT-2, which was so good at generating human-like text they decided against releasing it. “No later than in August, however, a heavily limited version of the algorithm was made public to allow for a wider debate, in a controlled manner, on the potential abuses of the model and to start working on methods of detecting them automatically,” said Rzeszuciński.

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TECH

IT IS REMARKABLE THAT COMPUTER PROGRAMS ARE TRYING TO GET INTO SUCH AN ULTRA-HUMAN PART OF OUR WORLD AS MAKING MUSIC

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AI DOES ART Looking at neural networks imitating human-like creativity only as a threat may be excessively fatalistic. Perhaps they will be able to enrich our culture by creating works not only similar to what humans produce, but even entirely original and valuable.

In 2016, a book written by an algorithm went through the first round of review in a Japanese literary competition. “It didn’t win the prize, but it goes to show the potential of computergenerated text,” said Rzeszuciński. He also stressed that deep neural networks processing natural language have developed tremendously since then.

AI has also made its mark on the world of music. By “observing” musical arrangements in a given genre, AI algorithms can distinguish characteristic motifs and create abstract compositions that may seem unique. “It is remarkable that computer programs are trying to get into such an ultra-human part of our world as making music,” he stated, noting however that algorithms creating music still have a long way to go before they could compete with the products of human talent. At the moment, AI-generated music is so repetitive that listening to it wears people down pretty quickly. “Computer-generated music, however good, will always remain a cold stream of ones and zeros, and it will never create the intimate relation of two human minds sharing a mutual appreciation of certain sound waves,” he adds. YouTube recently launched a channel called “dadabots,” which played algorithmically generated death metal songs. “As a fan of this genre, I immediately wanted to check out this novelty. I only managed to listen to it for less than a minute,” he concluded.

SHUTTERSTOCK

“It’s possible that it was an overly cautious decision, because text produced by GPT-2 can be relatively easily identified as machinegenerated, but this approach can be seen as ‘training’ before future publications,” Wolski added.

Algorithms like this one need only a handful of key words to create a text that is practically impossible to detect as fake. As an experiment, a group of people were presented with an article generated by GPT-2, which the vast majority (70 percent) identified as authentic copy written by a New York Times journalist. “In the times when clickability is king and users are flooded with sensational fake news stories, the presence of increasingly sophisticated AI algorithms means we should be on our guard more than ever,” cautioned Rzeszuciński.

If we learn to use the benefits of AI in a responsible fashion, their potential can be enormous.

“Thanks to technology like GPT-2, everyone will be able to have a virtual assistant that is so good at their job that we will have no objections about allowing them to make decisions about where we should eat or about our holiday destination. Perhaps we will see personalized, automatic teachers? The possibilities are endless,” Wolski concluded.

ARTIFICIAL INTELLIGENCE

BROUGHT TO YOU BY LEPSZAOFERTA.PL SA

With AI to conquer the world

Will the new government make Polish fintechs have to look for markets in South America? WBJ talked with Paweł Wągrodzki, president of the board at LepszaOferta.pl SA, about changes in the industry and future opportunities

BY KRZYSZTOF MACIEJEWSKI

Paweł Wągrodzki CEO at LepszaOferta.pl SA

WBJ:

What is the mood in the industry after the recent parliamentary elections in Poland?

Paweł Wągrodzki: The result accurately reflects expectations, but many things remain unknown. As a fintech company working closely with non-banking companies, we are awaiting the next amendment to the antiusury act with considerable concern. Previous changes in regulations have already caused a lot of reshuffling on the market, and in the case of the currently planned regulation there were two versions of the document.

The first was widely consulted socially and contained compromise provisions. Unfortunately, the second one contained such a drastic reduction in the allowable margins of loan companies that it will probably affect the entire market.

So what does LepszaOferta.pl SA plan to do in this situation?

In this situation we are looking for investors and new areas of expansion. This is quite a natural operation for technology companies at a certain stage of development, and I must admit that we have recently attracted considerable interest from Spanish investors, as well as a company in Israel. Discussions are at a very advanced stage. For this reason, it is already possible we will appear on European markets, including the Spanish and Ukrainian markets, where the first talks with potential loan companies are underway. In a slightly longer perspective, we are also thinking about Asia and South America.

Aren’t the legal or cultural barriers too much of a challenge there?

We are a technology company, so our business model is based on new fintech solutions. Thanks to this, the implementation of solutions does not require large expenditure. We have experience in this as one of the first fintechs on the Polish market that has created its own API infrastructure for contacts with financial entities. This solution also significantly facilitates contacts with people in need of a loan and we are working on its greater functionality based on AI and machine learning. I think it will be a revolution, because the system will allow monitoring and validation of scoring models in the background, thanks to machine learning. It is a mechanism that only the biggest players on the financial market can dream about at the moment.

So you are not abandoning your expansion plans on the Polish market?

Not at all. Until now, banks have been slightly less willing to use the opportunity to cooperate with technology companies such as ours, but completing the implementation of the requirements of the PSD2 Directive will definitely change something in this matter. But other industries that can benefit from our solutions, such as energy and telecommunications, remain in our area of interest.

And you don’t have any worries about overregulation in these industries…

We have to deal with many obstacles, and probably more will appear. I have heard about the idea of imposing ZUS contributions on AI – I hope that this will not happen, although on the other hand I wonder what it would look like.

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TECH world because of problems with finding sense and sufficient stimulation in the real world. It is very real, and it is already happening, because today we can influence the way people think; what they should buy, where they should go, who to vote for in elections. And they are not aware that they are, in fact, being manipulated.

THE AI TOUCH

AUTOMATION IS SWEEPING ACROSS INDUSTRIES, DELIVERING EFFICIENCY BUT ALSO CREATING JOB LOSSES. WHAT ARE THE SOCIAL CONSEQUENCES OF ROBOTS REPLACING PEOPLE AND ARE WE PREPARED FOR THEM? ZOFIA DZIK, THE FOUNDER OF THE HUMANITES INSTITUTE, SHARES HER VIEWS ON THE DILEMMAS THAT A WORLD WITHOUT WORK MAY PRESENT INTERVIEW BY JOANNA RUBIN

WBJ:

Do you think we need protection from technology?

Zofia Dzik: Technology has no ethics. It is neither good nor bad until it is implemented. It is us who give it an ethical marker, depending on the purposes for which we use it. What I have in mind is the advanced use of big data and self-learning systems and any devices or solutions which could be installed in human beings and which would allow control over them. Impulses to the brain will make us even more susceptible to influence and manipulation.

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Artificial intelligence will take control over us and will consider us to be the weakest link and we may not be able to stop this process, or the love of comfort and an easy life will prevail; we will increasingly choose friendship with a machine rather than with another human being. This is what we discussed, among other things, at the Humanites foundation’s conference “Leader in 4.0 Revolution. Leadership and Human and Technology.” As much as 65 percent of conference participants pointed to the risk of mankind retreating into the virtual

That sounds like science fiction.

It is said, however, that it is a future that is not so far away. There are certainly many projects like CA going on in the world, especially in countries where there are less stringent rules regarding the extensive use of behavioral data and influencing people’s subconscious. Ethics and greed will always clash with one another.

That is why new regulations are needed urgently. Technological changes are inevitable, and they are occurring more and more rapidly. At present we are in a dormant period when we think we are in control of the situation.

However, automation processes have started transforming virtually all industries, and in every sector of the economy investments are being made in this area. The time will come when we will see the effects of automation and more significant layoffs.

SHUTTERSTOCK, ZOFIA DZIK PRIVATE ARCHIVE

This is evidenced by the Cambridge Analytica (CA) scandal.

It shows the power of influence.

Based on, apparently, 50,000 Facebook profiles at the beginning (there was talk of 50 million profiles in the final version), various psychological profiles were created – what affects whom, what moves people, what makes them emotional, what they respond to and who is indifferent to what.

You can imagine what power that implies if such stimuli are placed directly in the human body, in an individual’s brain.

INTERVIEW

What will the benefits and effects be?

From a business perspective, we will gain more effectiveness in automation processes (cost savings), reliability and better results. The possibility of an error being made in many activities by a human being is much greater than the possibility of an error being made by AI. It is a question of reliability. Robots do not get sick, they do not take time off, they do not need motivating, they do not get depressed, they do not get distracted. There are no HR challenges. This is tempting businesswise. But are we prepared for the social consequences of that process? Is mankind today ready for a life without work which, apart from being a source of income, is also an essential element which gives many of us a sense of purpose in life?

Do you think we are prepared for this?

According to the report quoted at our conference, employers are focused on internal processes like restructuring, and they can see that today’s market is an employee’s market. They do not invest much in projects aimed at retraining employees. Unfortunately, without the chance to retrain, more than 20 percent of the people who lose their jobs may remain without sustainable employment opportunities.

What will happen if so many people suddenly lose their jobs?

Research shows that losing one’s job is one of the most traumatic life experiences. This experience is on a par with losing a loved one.

This will give rise to anxiety that could foster populism and violent political change. You have to stop, notice the problem and think about who can solve it or who can contribute to solving it.

How should we put this into practice? Where should we start?

Choose awareness, start with yourself. If you are a leader and you manage teams of people or a company, ask yourself if you are ready to lose your job overnight.

What could you do for yourself now if you knew that you were going to be out of the job market the next day? Would you be afraid?

Would you feel lost and confused or, on the contrary, would it be an opportunity to make a change?

What would have to change in the way you live your life so you would not be afraid in such a situation? All of these conclusions and reflections must then be translated into the people we manage. We must prepare them for changes so that they can use their own internal resources; so that they have a life outside work; so that they have their own social ecosystem in which they will feel loved and which will support them, but also with reciprocation, so that they will be able to contribute to this system.

Why do you think that the struggle for humankind is so important?

Because today it is often reduced to consumption; people live in a culture of too many choices.

It is obvious they cannot keep up, they are lost and confused and increasingly lonely. This is something that is already being talked about and not only in psychotherapists’ offices. Testimony to this, among other things, is the fact that loneliness was one of the most important topics at the latest World Economic Forum in Davos, which showed that in many Western civilizations more than 30 percent of the population already feel the lasting effects of loneliness. The creeping phenomenon of loneliness in young people is also generating a huge cost for the

global economy. This is also discernible in Poland, for example in the growing number of cases of depression. In 2018, even the Supreme Audit Office took an interest in this phenomenon when it was found that the number of suicides in Poland is greater than the number of casualties in car accidents.

What benefits will we gain if we all come together in the discussion about humans and technology?

We will strengthen our responsibility and influence. Let me quote a passage from the book titled Man’s Search for Meaning

by Viktor Frankl: “Freedom is only part of the story and half of the truth. (...) That is why I recommend that the Statue of Liberty on the East Coast be supplemented by a Statue of Responsibility on the West Coast.” We need to join forces, and not just compete, but also cooperate for higher values, to discuss and share reflections.

ZOFIA DZIK

Innovator and businesswoman, investor, founder of the Humanites foundation combining the subjects of Leadership and Human and Technology.

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TECH

WBJ:

BEAUTY GOES DIGITAL

SOME INDUSTRIES CAN BE SOMEWHAT RESISTANT TO INNOVATION. THIS CAN BE SAID ABOUT THE HAIR AND BEAUTY MARKET. HOWEVER, WITH THE RIGHT IDEA, A SMALL START-UP FROM BIESKO-BIAŁA IS ON ITS WAY TO BECOMING A GLOBAL LEADER IN TRANSFORMING THE BEAUTY INDUSTRY INTERVIEW BY BEATA SOCHA

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What exactly is Versum’s innovation?

Versum is a software (SaaS) for efficient management of hair and beauty salons and spas.

The system helps manage staff, carries out automatic marketing activities, monitors resources and product inventory and is a CRM system. But we don’t provide just software. We help our clients to grow their salon businesses by providing professional customer service, training and a knowledge base.

In connection with Versum, we run Moment – a marketplace for hair and beauty services. Moment allows customers to discover great salons and book appointments through a mobile app as well as via a website. It’s the market leader in Poland but also the biggest marketplace in Central and Eastern Europe. It will also be launched in other countries across Europe and the Americas in the next two years.

SHUTTERSTOCK

You’ve managed to build a global business in Bielsko-Biała without any seed funding at the beginning.

Where did you get the money to start your business?

Sebastian Maśka: At the very beginning, we invested our own money, and this was a big lesson for young start-up owners, which we were at the time. The fact that you spend your own cash on the business forces you to invest wisely and to think twice before any decision you make. Our parents also lent us some money.

INTERVIEW

How big is the company now?

How many clients use your product?

Today we have a team of over 160 employees. In terms of clients, we have over 37,000 professionals who use Versum worldwide, especially in Poland, the UK, Mexico and Brazil.

How did you realize there was a niche for your product?

The story about how we started is quite simple. My wife had a hairdresser’s appointment scheduled but when she went to the salon it turned out that there was another lady who had booked in at the same time – the curse of paper notebooks. As my wife came a moment after the other woman, she was the one who had to leave without a new hairdo. Seeing her so upset because of such a silly misunderstanding, we, with Paweł Kantyka, came up with the idea of an electronic calendar.

That’s how the idea for a salon system was born.

When you first presented your product to a client, was it ready to be launched? How quickly after setting up your business did you do that?

When we presented Versum for the first time it wasn’t ready. It was during one of the biggest beauty trade fairs, where all big industry players were present.

Our goal was to get as much feedback as possible to improve the system and equip it with the features that salons really need. Even today we divide each implementation into several steps and release the first one onto

the market as soon as possible.

It’s our philosophy to constantly improve Versum based on our clients’ suggestions.

How did you find your first clients? Was the beauty market difficult to get ahead in?

We found our first clients at trade fairs. At first, we were trying to reach hair and beauty business owners who were open to something new, and there was no better option than industry fairs. It was definitely not easy to get into the market – it was a time when the internet wasn’t commonly available or used, especially in beauty salons. And even though today we cannot imagine life without the internet, paper notebooks still remain our main competitor.

When did you decide it was time to scale up and go global?

It was 2015 when Versum became a leader on the Polish market.

We knew the product was good and desirable. We knew it was well prepared for easy scale up and implementation on foreign markets. There was nothing to wait for! Today Versum is present in nearly 100 countries around the world.

Have you ever considered moving your company to a larger city or even abroad?

Versum is a perfectly shaped SaaS, which means it can be run from any place on the globe. And even though we considered other locations in the beginning, we chose Bielsko-Biała as our HQ. But we also have our teams in Sao Paulo, Mexico City and Guadalajara.

When did you eventually decide to look for investors? How did you find them?

The first round we raised in 2015 from Hedgehog Fund and business angels like founders of Grupa Pracuj associated with the TCV fund, which previously supported brands such as Spotify, Airbnb, and Zillow. The funds were allocated in global expansion and development of marketplace Moment. Today we’re about to close up the A series round. With 4.2 million businesses worldwide, the hair and beauty industry is a vast market ripe for digital transformation.

While online bookings are standard across many industries, hair and beauty salons are only beginning to realize the advantages of going digital. We’re aware of this potential and we want to become a global leader in the hair and beauty industry.

SEBASTIAN MAŚKA

co-founder and CEO of Versum

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Latest news from Poland’s real estate market

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2020 forecast

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Interview with Scott Dwyer of Atrium

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Commerz Real’s Warsaw plans

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Place-making projects

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Interview with Marcin Sadowski and Izabela LepleMigdalska of JEMS Architekci

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Interview with Kinga Nowakowska of Capital Park

Investment market CPI TO INVEST €800 mln in Warsaw offices Real estate investor CPI Property Group expects to acquire over €800 million worth of office assets in Warsaw in the final quarter of this year and in early Q1 2020. The company has identified eight properties in the city totaling more than 235,000 sqm and has signed exclusive letters of intent regarding the acquisition of assets valued at over €700 million. The properties in question can be characterized as “core plus” and are in central locations, the investor revealed. The planned transactions will range in value from €30 million to more than €200 million. The first two agreements – for the purchase of the Green Corner A and Equator IV buildings – are to be signed in the coming days. >>>

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58

Luxury residential real estate market

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Office fit-out

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Interview with Maciej Wójcik of TDJ Estate

Investment market (continued) CEREIT acquires office buildings in Poznań, Kraków Cromwell European Real Estate Investment Trust (CEREIT) has completed its acquisition of the Business Garden office park in Poznań from developer Vastint Poland, with the value of the transaction amounting to €88.8 million. CEREIT’s sponsor, real estate investor Cromwell Property Group, will manage the property. The buildings total over 42,000 sqm of GLA and are currently fully leased out to tenants such as CapGemini, GSK, MAN Group and Santander Group. CEREIT has recently also finalized its purchase of the Green Office and Avatar office buildings in Kraków from Brassa SP for a total of €80 million. Green Office comprises almost 23,000 sqm of GLA and is currently fully leased out to Motorola Solutions Systems and UBS Kraków. Avatar offers more than 11,300 sqm of leasable space. The building is now fully let to BGŻ BNP Paribas.

BRIEFS ASIAN INVESTORS INCREASINGLY ACTIVE IN CEE – REPORT The total volume of Asian capital (from Singapore, the Philippines, China, South Korea and Malaysia) invested directly in the real estate markets of Central and Eastern Europe since 2013 has already reached €7.7 billion, according to a new report by Skanska, Colliers International and Dentons. By comparison, German property investors invested €8.6 billion in CEE in the period in question, the study said.

“Investors from Asian markets have already made purchases in Poland, the Czech Republic, Slovakia and Hungary, with other markets potentially within the scope of their interest. Typically

targeting long-term income, they have emerged as major competitors to Germanydomiciled funds, which have been market-makers in the region for years,” said Luke Dawson, managing director, head of capital markets, CEE, at Colliers International.

David Dixon, a partner at Dentons in Warsaw with a focus on cross-border real estate transactions, noted that South Koreans in particular have made their presence known in CEE over the last year. “Favorable exchange rate considerations and higher yields in CEE, coupled with the availability of first-class office buildings and logistics developments should continue to stimulate Asian investment in the coming months,” he argued.

courier company DHL Parcel Polska, which has signed a ten-year lease agreement there.

DEVELIA SELLING WARSAW’S WOLA CENTER COMPLEX OXENWOOD MAKES FIRST POLISH LOGISTICS ACQUISITION Real estate investment management firm Oxenwood has acquired a newly developed logistics facility located in Radzymin near Warsaw from a joint venture between Panattoni Europe and Bluehouse Capital. The value of the transaction, which marks the buyer’s entry into the Polish warehouse property market, amounts to €13.5 million. The property comprises 8,500 sqm of space and is occupied by

Developer Develia (formerly LC Corp) has signed preliminary agreements for the sale of the Wola Center office complex in Warsaw to Gisla, a company controlled by the Hines European Value Fund. The value of the transaction, which was brokered

by Knight Frank and Dentons and is expected to be finalized by the end of this year, amounts to €101.9 million.

The Wola Center complex is located in the Rondo Daszyńskiego area of the Polish capital and consists of four buildings offering a total of 31,000 sqm of space

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LOKALE IMMOBILIA | NEWS

Office Contractor chosen for Gdańsk airport offices Gdańsk Lech Walesa Airport and general contractor Hochtief Polska have signed an agreement regarding the construction of the first of seven office buildings that will be developed within the Airport City Gdańsk project, with the value of the contract amounting to almost PLN 66 million. Called Alpha, the building will comprise 8,500 sqm of leasable space and will be commercialized by JLL. The entire Airport City Gdańsk scheme is expected to offer 120,000 sqm of usable area. The Alpha building is to be ready in Q3 2021.

BRIEFS SPACEFLOW EYING POLISH MARKET Proptech start-up Spaceflow, which offers a “tenant experience platform” that is already used in the Czech Republic and Hungary, will soon make the platform available in Warsaw. The demand for this kind of product from both investors, owners, asset managers and employees is strong, marketing manager Petr Boruta told WBJ during the recent

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Expo Real property fair in Munich. He noted that office buildings are now competing for tenants, and their classification and location are no longer enough to give them a competitive edge.

Additionally, as we spend a significant part of our lives at work, there is a growing belief that office buildings should offer a quality that we know from our homes.

There is a clear trend towards implementing digital solutions in office proper-

ties, including community apps that make our business life easier, Boruta said. This is about community building, organizing company events and offering additional services to tenants, as well as – in advanced cases – about providing a whole range of AI analytical insights.

AVESTUS OPENS ŁÓDŹ OFFICE COMPLEX Investor Avestus Real Estate has officially opened its

Imagine office complex in downtown Łódź. The property, which was built by general contractors Eiffage Polska Budownictwo (two office buildings) and Goldbeck (an above-ground parking lot), comprises 17,200 sqm of leasable space, including 14,800 sqm of office space and 2,400 sqm of retail and service areas. Its tenants include EY, Asseco Poland, New Work Offices, Bluerank and Kids&Co.

able such options as a booking platform and online payments. “Our latest opening in Galeria Młociny has received great reviews, was featured in Elle and has already won an award for the most modern office meeting room space,” Rączkowski said. The design of that office is very industrial and features concrete and wooden elements.

Rączkowski pointed out that it is not only in Warsaw that the market for coworking has exploded in recent years.

All major cities in Poland have seen unprecedented growth in the sector.

“We have had an occupancy of over 90% since we opened offices in Wrocław, Gdańsk and Katowice,” Rączkowski revealed. “We see great potential for expansion in all major Polish cities – right now our focus is on Łódź as a Poland’s flexible office space market will continue its fast growth in great BPO hub where the talent pool the coming years. CitySpace is planning further expansion in the sector, still has not been exploited as much as in other cities,” he added. says the company’s managing director Sebastian Rączkowski The predictions from agencies about

BY MORTEN LINDHOLM the market’s development in the coming years are that the business model of co-working is sustainable and we olish serviced office space a timeless design offering our tenants will see further expansion of the sector. operator CitySpace, which convenience and hospitality, combined However, according to Rączkowski the is owned by developer Echo with core values needed for effective WeWork issues and the huge internaInvestment, has recently and scalable solutions,” said Sebastian tional economic uncertainty raise quesopened two new locations in Warsaw: in Rączkowski, the managing director at tions about whether you can build real the Galeria Młociny shopping center in CitySpace. value when you are an office operator the Bielany district and in the Moje MieWarsaw is in the third place in acting in the traditional fashion. jsce office and residential complex in Europe in terms of flexible space’s “When WeWork entered the Warsaw the Mokotów district. The company has share in the total office stock. The mar- market, obviously a large new supply just also increased the amount of space ket has been growing fast – by 25% of co-working space suddenly became that it occupies in the O3 Business Cam- annually over the last few years – and available. Nevertheless, we strongly pus complex in Kraków. experts predict that flexible space could believe in the quality of our product.

CitySpace currently has ten locations by end of the next decade account for Although we had to take a hit in occuin Warsaw, Kraków, Wrocław, Gdańsk up to 30% of all office stock. Warsaw is pancy for a short period when the supand Katowice, which offer a total of a great testing field for many of the key ply in the market grew, we are now approximately 17,000 sqm of space. players. back to before they entered. We have The operator, which has been strength“The models are changing and adapt- made corrections to our design and we ening its position in Poland’s flexible ing to market needs. We have been in are constantly adjusting and improving office space market, still sees considthe market for five years and are now the options that we offer to our tenants. erable growth potential in the fastlaunching ‘city space 2.0,’ focusing on We are now also thinking about addgrowing sector with its plans including quality, size, comfort and flexibility,” ing other products to the market, but a debut in Łódź. “Our aim is to deliver Rączkowski said. He added that the that’s a little further out in the future,” flexible workspace in top locations, with company would shortly make availRączkowski concluded.

A SUSTAINABLE MODEL

P

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LOKALE IMMOBILIA | 2020 FORECAST

POSITIVE OUTLOOK

Poland’s property market should continue its strong performance next year

BY ADAM ZDRODOWSKI

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T

his has been a good year for the Polish real estate market, with both the residential and the commercial property sectors having seen solid supply and demand levels.

Developers have remained active, working on and planning a number of new spectacular projects.

Experts predict that the market will continue to grow steadily in 2020. Even if it is still too early to forecast exact sales and take-up levels, there are no signs that the performance of any of the sectors could be seriously threatened in the coming months.

SPECTACULAR OFFICES More than 320,000 sqm of new space was completed in the office sector in the first half of 2019, while H1 take-up reached

We can expect changes on many levels, but the general condition of retail will remain good

over 710,000 sqm (Q3 data for the whole of Poland was not yet available as we went to press). In Warsaw, this has been a year of records. Q3 tenant activity in the city (284,000 sqm) represents the highest quarterly volume in history, while the Q3 vacancy rate (8.2%) hit the lowest level in many years. In July, the biggest office lease deal to have ever been signed in Poland (45,600 sqm) was finalized in the Polish capital.

Almost 1.6 million sqm of new office space is currently under construction, including approximately 780,000 sqm in Warsaw and around 800,000 sqm outside the city, said Šukasz Dziedzic, a senior market analyst at JLL. Some 750,000 sqm of new office area is scheduled to be completed in Poland’s main office

markets next year. Several very large schemes are set to open for business in the Polish capital in the coming months, including Mennica Legacy Tower and The Warsaw HUB. Dziedzic noted that the Polish office property market is the most mature market in Central and Eastern Europe and as such it is defined by its growing differentiation. On the one hand, there has been demand for big developments that allow tenants to expand within one location.

On the other hand, the changing nature of office work has been generating growing interest in flexible office space, including from large companies. The latter trend will continue next year, with more locations expected to be open by operators such as WeWork, Spaces and New Work.

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LOKALE IMMOBILIA | 2020 FORECAST

CHANGING RETAIL

The retail property market has witnessed stable growth in recent months, with a total of more than 290,000 sqm of new space having been completed across Poland in the Q1-Q3 period. The largest cities account for as much as 69 percent of the newly delivered shopping center space. In 2020, the supply of new retail space should be similar to this year’s supply and should amount to some 300,000-350,000 sqm.

However, the structure of the supply will change, said Katarzyna Michnikowska, director, research and consultancy, at Colliers International.

No shopping center sized more than 30,000 sqm will be completed in Poland next year. The new supply will be dominated by small and medium-sized convenience centers located in cities with

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populations of less than 100,000.

The different supply structure will correspond with the current trends in demand, which is now mainly driven by discount retailers. Retail will also grow within larger mixed-use projects, which will be predominantly located in large cities.

Potential risks in the sector are associated with the anticipated global economic slowdown and the legal changes in Poland. 2020 will be the first year with a total ban on Sunday trade and could also see the introduction of the socalled hypermarket tax on retail sales. However, Michnikowska pointed out that retail is a rather flexible and innovative industry that adapts relatively easily to external changes. “We can expect changes on many levels, but the general condition of retail will remain good,” she claimed.

STABLE RESIDENTIAL

Unwavering demand for new apartments has defined the situation in the housing sector in recent quarters. JLL data shows that developers active in the six largest markets – Warsaw, Kraków, Wrocław, the Tri-City, Poznań and Łódź – sold a total of 16,100 units in Q3. This represents a 6.3 percent increase q/q. The sales results for the last four quarters (64,200 apartments) were admittedly down 4.5 percent compared to Q3 2018, but developers’ margins have remained attractive as apartments prices continue to go up.“The value of the market is not going down,” said Katarzyna Kuniewicz, head of residential research at JLL. By and large, buyers seem to have accepted the growth in prices and developers do not expect a serious deterioration of the market situation in

the next two years. Development activity is still intense – the number of units put up for sale in the last four quarters stands at 65,700 (down 1.4 percent q/q, up 3.8 percent y/y) and the figure for the whole of 2019 is expected to look similar.

Potential risk factors in Poland’s residential property market include a possible global economic slowdown that would negatively affect the labor market and dampen demand for rental apartments, and planned regulations aimed at restricting shortterm rentals. JLL experts point out that buy-to-let purchases now account for some 30 percent of all transactions in the market. However, they stress that the market remains resilient, which is evidenced by both the high sales levels and the low level of developers’ indebtedness to banks.

SAFE LOGISTICS

The warehouse and industrial market has been growing at a fast but sustainable pace this year. According to Savills data, the existing stock of modern space increased by almost 1.1 million sqm in H1, with the total supply of new space in 2019 likely to reach a record 2.5 million sqm. Gross take-up amounted to over 1.8 million sqm and approximately 60 percent of the space that was under construction at the end of June had already been leased out. While a mild decline in leasing activity could be recorded in H2, the overall outlook remains positive.

“In respect of supply, we expect a trend for more speculative space being built within the leading city borders and a focus on smaller last mile space that is currently lacking in the market,”

When the European slowdown does come, Poland will be affected but also in some way protected as internal consumer demand is growing

said John Palmer, head of industrial investment at Savills Poland.

“Landlords will also be looking to build out further phases on existing parks that have expansion land as the market has a limited risk element at present with low vacancy and strong demand,” Palmer added.

When asked whether he can now see any major risk factors that could negatively impact Poland’s logistics property market next year, Palmer pointed out that the market is, to a large extent, driven by increasing domestic demand, rather than just foreign direct investment. “When the European slowdown does come, Poland will be affected but also in some way protected as internal consumer demand is growing and likely to do so in the next few years,” he argued.

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LOKALE IMMOBILIA | RETAIL

MARKET REFLECTIONS Consumers’ tastes are changing, and the retail industry has to adapt to stay in the game. WBJ speaks to Scott Dwyer of Atrium, a leading owner, operator and developer of shopping centers in CEE, about the changing face of Poland’s retail landscape INTERVIEW BY ALEX WEBBER

WBJ:

How is the market going to remember 2019?

Scott Dwyer: In my view, history will look on 2019 as a year of reflection. Taken as a whole, the market has experienced big changes this year: retailers have rethought their strategy while landlords have sought to stabilize their assets. The unknowns have made people a little more conservative than usual, but I think it’s very clear that those players with a good strategy have continued to march on. We’ve seen shopping centers open, we’ve seen extensions delivered. Further, there’s been a lot of positive leasing activity and we’re

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Landlords are definitely having to think harder to make their businesses work

starting to understand the point that retailers want to reach. Irrespective of the shadows cast by e-commerce and the Sunday trading ban, retail sales have grown. And while supply has dried up somewhat, that’s meant that, on a macro level, this growth hasn’t led to cannibalization of the market. Essentially, the market has matured in a number of ways, and the decrease in supply is a tell-tale sign. Of course, there’s bound to be winners and losers, and landlords are definitely having to think harder to make their businesses work, but this is where we find ourselves in a fantastic position.

All is good at Atrium then?

In physical terms, there hasn’t been much output from us, but we had a fabulous 2018, with highlights including the opening of three extensions in one city within the same month. We’ve been digesting that this year to ensure those schemes stabilize and season well, and we’ve seen that with an increased footfall of between 20 and 25 percent. Now we’re using this year to prepare for the next wave of extensions in 2020 as well as looking outside of the country to reposition our core schemes in Prague, as well as further afield in Russia.

One of the words we’ve heard more of over the past years is differentiation…

Landlords want to diversify away from fashion while consumers are looking to branch away from their basic needs. That’s led to changes in tenant mix and that takes time. If you want to be a successful landlord, you need to get ahead of the curve and make these changes first. In our case, we’ve been expanding and rethinking our F&B offer for several years while simultaneously working on our internet resistance and increasing the size of our anchor fashion stores – that way, when they look to consolidate, they’re looking to consolidate in our shopping centers rather than concentrating on their periphery stores that don’t meet their requirements.

What more can landlords do?

In our case, we’ve got medical centers, gyms and cinemas and we’re continually looking to add to our F&B. But this year we’ve also started to really explore the value of community spaces that offer different types of classes and courses throughout the day – things for the elderly, mothers, or children after school. This is not to make money but to build loyalty.

Online retailers are looking to establish a more physical presence as they’re increasingly aware that without one they risk getting lost in the forest

You mentioned previously that the Sunday trading ban hasn’t had the negative effect that some analysts had originally forecast. Even so, the legislation stands to get even tougher next year…

Generally speaking consumers have already recalibrated their habits to shop six days a week so I don’t see any major issues.

Many retailers are finding they’re saving on direct costs and that’s the same with landlords. Our centers aren’t closed though, and we still enjoy strong cinema patronage and suchlike, especially in high-density, urban loca-

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and how much money we want to spend. This is a year of retooling and part of that has meant establishing what we want and can do with Wars Sawa Junior. What we will do is respect the heritage of that wonderful site – we are committed to working with the city and revitalizing and upgrading an area that has, to all intents and purposes, been neglected for a couple of decades. We’re sure that with the right investment it will become a real anchor to the pedestrian high street.

tions. That does influence the tenants we have, and likewise, some retailers need to be open seven days a week rather than six.

Clearly, those need to be switched out, but that’s the nature of the business.

How is your tenant mix changing?

Looking at our top ten tenants seven or eight years ago they were predominantly hypermarkets, DIY stores or others covering basic needs. Now it’s LPP, CCC, H&M, etc. Shoppers have become more aspirational. Despite that, we’re working on increasing our leisure and gastronomy and right-sizing our fashion offer. A lot of people comparison shop in our bigger schemes, so having all the big fashion brands is essential, but in the smaller ones the fashion component is decreasing. If fashion once represented 50 percent of our offer, today that figure is closer to 40 percent. What we’ve realized is that security of cash flow isn’t rooted in having big international tenants but about growing your sales – if a big ten-

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A lot of noise has been made about mixed-use schemes such as Hala Koszyki, etc. More such schemes are set to open, especially in Warsaw. What is Atrium’s take on them?

We don’t see them as directly competitive but complimentary.

They’re doing a wonderful job of maturing the market and testing out food and beverage concepts.

On top of that, they’ve helped change Poland’s entertainment culture. Compared to western countries, we’re still spending less than half on F&B than we should, so these developments must be credited for being at the forefront of developing that market.

ant isn’t working then there’s no long-term benefit, so instead we’re looking to focus on fundamentals of footfall which in turn drives sales.

How is e-commerce impacting Atrium’s strategy?

Retailers are driving the move towards omnichannel sales and we need to balance our offer to their needs – once we understand their strategy then we can react accordingly. We’re definitely seeing many online retailers looking to establish a more physical presence as they’re increasingly aware that without one they risk getting lost in the forest. We’re particularly excited about Wars Sawa Junior as that will have an estimated 60 million people passing through it every year, which is obviously a tremendous marketing opportunity for a business.

Speaking of Wars Sawa Junior, what’s the status of the project?

On the record I can’t say much, but we have set a five-year business plan in motion and we know the scope of what we want to do

Landlords are definitely having to think harder to make their businesses work

In terms of outlook, what does the next 12 months hold for you?

Our normal day-to-day business doesn’t go away, so we’ll sign approximately 800 leases covering 160,000 to 170,000 sqm, And we are working on a number of repositioning and redevelopment opportunities throughout our core portfolio . In the longer-term, we will focus on densifying our urban locations. We own a lot of land around our real estate, so we will be looking to potentially introduce more mixed-use elements, whether they be residential housing, offices, etc. We have the team and we have the expertise so that’s something we’ll be looking at exploring.

LOKALE IMMOBILIA | OFFICE

THE RE-INVESTMENT RECIPE

Warsaw’s office market is both hot and challenging, says Jens Böhnlein, global head of office at Commerz Real

BY MORTEN LINDHOLM

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nvestment management company Commerz Real will on November 14 hold an official event marking the re-launch of its Tulipan House office building in Warsaw. The interior of the property has been re-modeled, with the design having been prepared by the BVN Architects Australia studio. The building has been provided with new features and amenities, including a tenant experience application (created by Space OS), electric car sharing (Innogy Go!) and bike (Revelo) and electric scooter sharing.

Tulipan House, which is located in the Służewiec business area in the Mokotów district of the Polish capital and was completed in 2008, comprises approximately 18,000 sqm of office space and is currently around 54 percent leased out. Jens Böhnlein, global head of office at Commerz Real, told us during the recent Expo Real property fair in Munich that the company sees Warsaw’s (and Poland’s in general) office property market as interesting, but also rather challenging.

While there is continued high demand for office space in the Polish capital and the city offers a talent pool that is very attractive to international companies (which not only open their back offices, but also research and development centers there), growing competition is exerting pressure on the owners of older office buildings. “Warsaw is not an easy market to be in; there are a lot of new products coming to the market,” Böhnlein said. This trend is visible in such places as Mokotów, which used to be a pearl on the office map of Warsaw, and in the Wola district.

“As tenants love the new, the big supply of new space has driven monthly rents down dramatically in ‘older’ office buildings and B-class business areas, from the previous level of €14 per sqm to the

Warsaw is not an easy market to be in, there are a lot of new products coming to the market

current €6-8 per sqm,” he revealed. In his opinion, another challenge is the relatively short length of lease deals in Warsaw (often signed for three to five years), which often makes it difficult for investors to have a decent return on investment. The question is how sustainable the trends will be and how the market will adapt to them.

As for Commerz Real, instead of running away, the company has decided to act responsibly and invest more in the Tulipan House building in order to make the property more attractive to tenants.

In Warsaw, Commerz Real is also involved in a major project located in the very center of the city. Called Widok Towers, the high-rise scheme is being developed by S+B and will be the headquarter of Millennium Bank. The final shape of the development and the range of the products that it will offer are still being worked on, Böhnlein said. Commerz Real has also acquired two buildings which are part of the “Lixa” office complex in Warsaw, currently under construction on ul.

Kasprzaka. Building A is already leased in full for ten years to the Polish subsidiary of BNP Paribas Bank, BGZ BNP Paribas Bank Poland, which will relocate its headquarters there.

Asked about the main issues on the company’s agenda at the moment, he mentioned sustainability as another reason for Commerz Real’s reinvestment in existing buildings. “These products need to live for generations,” he argued. The investor is now also focused on digitalization, which helps improve processes and offer new services to tenants, and hospitality, understood as making office buildings destinations in themselves; places where employees like to spend their time.

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MAKING PLACES

Projects that are destinations in themselves are springing up in Poland’s biggest cities

BY ADAM ZDRODOWSKI

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number of large mixed-use projects that will combine several functions and will transform entire neighborhoods are now under construction or in the pipeline across Poland. Such schemes are challenging, but their popularity is set to grow. By definition, these so-called place-making developments are meant to be kind of micro-cities, almost self-sufficient locations in which people can work, live and spend their free time, enjoying access to a broad range of amenities.

PROJECTS GALORE

Vastint's Gdynia Waterfront project is scheduled to get under construction next year

Developer Vastint Poland will next year launch construction work on its Gdynia Waterfront project in the Tri-City agglomeration, which will be built in two phases and will transform an attractively located plot lying just next to Gdynia’s prestigious President’s Wharf.

The scheme will combine a whole range of functions. Its first phase will consist of residential and office buildings, while the second phase will mainly comprise hotel and conference space, but will also include office, retail, entertainment and cultural areas.

The same investor is currently preparing a large-scale development in Poznań, which will revitalize a post-industrial site located in the center of the city that previously housed a meat processing plant. Up to 100,000 sqm of residential and commercial space will be built there. Several investments of this kind are now under construction or in the pipeline in Warsaw, where Liebrecht & wooD’s and BBI Development’s Centrum Praskie Koneser has already regenerated a major plot of hitherto neglected post-industrial land in the Praga Północ district.

Capital Park is currently working on its Norblin Factory project in the Wola district, which will also see the renewal of a brownfield site. Approximately 40,000 sqm of office space and around 26,000 sqm of cultural, entertainment and retail areas will be built within

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the scheme. Echo Investment is developing the Browary Warszawskie investment in the same district, a complex that will turn a historic brewery site into a mix of various commercial and residential functions and will include almost 16,000 sqm of new public areas.

Also in Wola, the developer is currently preparing its huge Towarowa 22 development, which will bring together almost all the possible functions; from residential, through resi for rent, offices and convenience retail to culture and entertainment. In Łódź, the company is building the Fuzja investment that will entail the redevelopment of 7.7 hectares of post-industrial land and will offer a total of approximately 90,000 sqm of residential, office and retail space. It will consist of 20 (including 14 historic) buildings.

BROWNFIELD BOOM

The notion of “place-making” was born in the 1960s in the US and it is only relatively recently – after the economic transformation of the 1990s – that it became popular in the Polish market, said Magdalena Frątczak, head of retail at CBRE in Poland. She explained that the notion denotes a multidimensional approach to planning urban space, managing public areas and activating local communities, and she noted that it has much to do with industry’s retreat from the centers of big cities in recent decades.

As factories moved to the outskirts or even beyond the administrative boundaries of big cities, they vacated large, centrally located areas with good transport connections and interesting buildings. Such sites offered a lot of potential for redevelopment and adaptation to new uses. Their attractiveness has become more evident of late as the availability of other plots of land in city centers becomes more and more limited and projects entailing the refurbishment of historic buildings become increasingly popular.

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Polish cities still offer numerous post-industrial sites that can undergo revitalization processes

The real estate market in Poland is maturing and the renovation and modernization of industrial properties, as well as the creation of projects that are meeting points, are the natural results of this, said Anna Górska-Kwiatkowska, a partner at Cushman & Wakefield.

More and more often, developers are also building place-making projects from scratch, in cooperation with cities. “Cities should support the creation of such areas, as good public space means higher property values and a better quality of residents’ lives,” Frątczak argued.

Her colleague, Marcin Wołoszka, client solutions manager at CBRE Poland, pointed out that placemaking schemes boost the image of the areas they are built in and help build local communities as residents identify with new highquality public space. Such developments reflect the lifestyles of today’s city dwellers, the changing standards and expectations of employees and consumers. At the same time, place-making is seen by owners as a magnet drawing people to the places that they want to promote.

Big, neighborhood-transforming developments bring benefits for all the parties involved in them. Developers like to have an opportunity to participate in the creation of urban fabric on a large scale. Office tenants get access to unique, prestigious locations, which allow them to stand out from the crowd. Retailers appreciate the footfall that large-scale, mixed-use schemes generate and they get access to a group of clients that helps them achieve the desired level of turnover.

CHALLENGING SCHEMES

Admittedly, investors deciding to launch large-scale, mixed-use projects face serious challenges, especially when those schemes entail the renovation of historic properties in downtown areas or the revitalization of post-industrial

areas located close to city centers.

Such developments are legally and technically complicated and time-consuming, and they require major financial outlays. Planning and dialogue are the key, noted Sylwia Wiszowata-Łazarz, an associate director at Cushman & Wakefield.

A number of analyses are needed to make sure that a given investment will not only look good but will also be functional. Mediation is often part of the investment process, as inhabitants want to have more and more influence on spatial policies in their neighborhoods. When a historic site is to be redeveloped, conservation officers are involved in the investment process, which usually makes the process longer. Obtaining all the permits required to start construction can take several years.

According to Wołoszka, it is imperative that the developer ensures a proper mix of functions that respond to a whole range of users’ interests and needs, and that the complex is properly managed so that it attracts and retains people and thus remains a vibrant place. Despite their complexity, more place-making projects are to be expected in the coming years. Polish cities still offer numerous post-industrial sites that can undergo revitalization processes in the near future, Górska-Kwiatkowska said. Much has already been achieved.

“Investments completed in recent years and those which are planned have been changing and will continue to change Polish cities into modern European metropolises where interesting contemporary architecture is intertwined with renovated historic buildings,” she argued.

“Thanks to these positive changes, Poland has become a place that is not only attractive to inhabitants and tourists, but also to investors and companies interested in leasing prestigiously located office and retail space of the highest quality,” Górska-Kwiatkowska concluded.

Echo Investment's ongoing Browary Warszawskie (top) and planned Towarowa 22 (bottom) schemes in Warsaw's Wola district

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‘THE TIMES OF EASY PROJECTS ARE OVER’ Serious urban planning mistakes have been made in Poland in the last few decades, but things are improving as the country’s real estate market matures and Poles’ expectations with regard to the quality of public space grow, argue Marcin Sadowski and Izabela LepleMigdalska, architects at the renowned JEMS Architekci studio INTERVIEW BY ADAM ZDRODOWSKI

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There was the belief that the free market itself would regulate everything, that it would shape cities in a natural way

WBJ:

Large-scale, place-making projects that feature a mix of functions and help revitalize whole neighborhoods are now gaining in popularity in Poland, but just a decade ago such schemes were rather rare in the country. How did the trend start?

Marcin Sadowski: Globally, one of the first impulses came in the 1990s from the US. In that decade it became obvious that the time of the typical American mall was over and that the centers of big cities needed new urban fabric and urban renewal, with Philadelphia having been one of the first American cities to launch the process of revitalization. Of course, urban planning mistakes were also made in many places outside America and they are often the negative effects of 20th-century modernism.

In the 1990s and the 2000s, Polish cities saw the creation of entire districts with an office or a residential monoculture, which we are now increasingly seeing as examples of bad urban planning…

Izabela Leple-Migdalska: I would say that the roots of what we now view as examples of bad urban planning are mainly to be found in the US. It is in the big American cities that the clear division of urban space into office, retail and residential zones was first introduced on a big scale, leading to the process of suburbanization and the creation of monocultures. The idea of walking distance between one’s home and one’s workplace or shopping and leisure destinations basically did not exist there. In many European cities, these urban planning mistakes have never been made.

Sadowski: After the political and economic transformation of the 1990s, Poland began to copy many of the bad urban planning solutions. Some of them are still being copied in such places as the Middle East and China. On the other hand, at the beginning of the 1990s, there was hardly any proper urban planning in Poland. Instead of regulations, there was the belief that the free market itself would regulate everything, that it would shape cities in a natural way.

There was very little modern office space in Warsaw at that time and demand for offices was huge. Many developers only wanted to build offices as they gave them a very quick return on investment. However, that boom was not matched by the municipal authorities’ investment in transport infrastructure and it soon turned out that the new office hubs in the city are hard to get to. It is hard to

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blame developers or architects for what happened in places such as Warsaw’s Służewiec. Most of the blame rests with urban planners and city officials.

What was the impulse that helped change the approach to urban planning in Poland?

Leple-Migdalska: The current trend towards building mixed-use projects shows very well how much has changed in Poland over the last three decades and how the expectations and needs of Poles have changed since the 1990s. Poles now travel a lot, visit European capitals and have a better idea of what well-planned cities should look like. The current generation of young people is interested in much more than owning an apartment and working in a glass office building. The quality of public space matters a lot to young people today.

Will the trend towards building place-making projects continue in the coming years?

Sadowski: If you look at recently completed and under-construction mixed-use, place-making projects in Poland, it seems that this is a concept that

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has a great future. Developers do not seem to have any major problems with the commercialization of such schemes. Admittedly, they are usually developed by very experienced companies with the necessary know-how and sufficient financial resources.

Importantly, nowadays many of these developments are built on land zoned for mixed-use projects, which means that cities want to have them.

Leple-Migdalska: Mixed-use, place-making projects will certainly remain popular with developers, tenants and apartment buyers in the coming years.

However, today we cannot say with certainty that such projects are the ultimate urban planning solution, a winning formula that will be successful for decades. This is because today’s world is changing so fast that we are simply not able to predict exactly how the current trends will evolve. It suffices to look at the labor market – who knows, maybe in the future people will not need offices at all?

What are the main challenges that you encounter while designing such projects?

Leple-Migdalska: Despite their large scale, such

The current trend towards building mixed-use projects shows very well how much has changed in Poland over the last three decades

schemes are often built in just one or two phases and completed within a relatively short period of time. From an architect’s perspective, one of the main challenges is making sure that a given complex looks as if it grew in a natural way, just like most cities do, rather than being designed by one person and built all at once. The complex has to be coherent, but its components should be differentiated.

Sadowski: We ensure this by assigning the particular buildings to different architects or teams within our studio.

You are now working on one of the biggest schemes of this kind in Poland – Gdynia Waterfront in the Tri-City agglomeration, which will be built by developer Vastint Poland. How advanced is the design work on the planned development?

Sadowski: The project is the result of an architectural competition organized by Gdynia City Hall and the developer, which owns a very attractive site located near Gdynia’s waterfront. The scheme will be developed in two phases. We have finished designing its first phase, which has already got a building permit and construction is scheduled to begin in the first half of next year. We are currently starting design work on the second phase of the investment.

What will be built within the project?

Sadowski: The Gdynia Waterfront project will boast of a whole range of functions. The first phase will deliver residential (dominant function, approximately 75 percent of the total area) and office space.

The second phase will comprise hotel and confer-

ence space as the dominant function and will also include office, retail, entertainment and cultural areas. The entire complex will be integrated with the surrounding urban tissue and will feature a publicly accessible square.

We believe in so-called “quiet presence,” which is the rule which says that new buildings should not become too dominant in the areas where they are built, but rather fit in with the existing architectural context. We made sure that the scheme corresponds well with the nature of the neighborhood and respects its architectural, historic and cultural heritage. For example, it has been designed in such a way that it does not obstruct the view of the historic Polish Navy Command building. We will also preserve a historic fishermen’s cross that stands on the plot.

How has the project been received by Gdynia’s authorities?

Sadowski: We got a lot of support from Gdynia’s mayor. We often talk to mayors of big Polish cities and we can see their growing interest in place-making projects and the quality of public space in general. However, the problem is that despite municipal officials’ support for such schemes, it usually takes a lot of time before they can actually be launched.

To be honest, this pertains to all kinds of real estate developments in Poland, irrespective of their location and scale.

The process of securing permits for the Gdynia Waterfront project was lengthy, but this has nothing or very little to do with the project itself or with the city of Gdynia. Unfortunately, there is still much room for improvement when it comes to the granting of building permits in Poland. The political will may be there, but when you start discussing detailed issues it often turns out that there are many systemic legal and administrative problems which are very difficult to solve. The whole process is still too complicated and too time consuming.

This does not seem to put developers off planning more and more ambitious projects…

Sadowski: We now have a situation in the market where competition is growing and most new projects have a similar technical standard. In order to stand out from the crowd and ensure successful commercialization of their investments, developers today need to offer something more, their developments need to bring additional value. The role of high-quality architecture in giving a competitive advantage is growing, even if this often means more work and higher costs. The times of easy projects are over.

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LOKALE IMMOBILIA | MIXED-USE other rapidly growing trends in the real estate market: the drive towards sharing and the drive towards sustainability. In a properly planned city, people should have relatively easy access to everything they need, which means that the distance between your apartment and your workplace and shopping destinations should be reasonably short. You should be able to cover the distance within 10-15 minutes – on a bike.

Developing mixed-use brownfield projects can be very challenging, but such schemes have a unique value, says Kinga Nowakowska, board member and operations director at Capital Park, the investor behind the ongoing Norblin Factory investment in Warsaw INTERVIEW BY ADAM ZDRODOWSKI

WBJ: What is the reason for

the growing popularity of mixeduse real estate projects?

Kinga Nowakowska: In a sense, the mixed-use concept marks a return to the roots. Mixed-use projects feature a natural mix of functions that has always been typical for well-planned cities.

Admittedly, at some point we forgot about this obvious thing and started to design entire districts with an office or a residential monoculture. It is only in the last few years that we realized that neighborhoods can be shaped in a different, more balanced and more sustainable way.

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Capital Park was one of the first developers in Warsaw to launch a mixed-use scheme. When we were starting the commercialization of our Royal Wilanów development, which offers both office and retail space, agents from the biggest international real estate services firms were asking us how we planned to combine the two functions in terms of the different service charges and the different security requirements of office and retail tenants. Today, such a combination of functions is no longer a surprise to anyone.

Importantly, the mixed-use concept corresponds well with two

Developments of this kind tend to be unpredictable in terms of the costs they generate. Has the historic nature of Norblin Factory had a major impact on the investment’s budget?

We knew from the very beginning that the historic nature of the project would mean higher construction costs. We provided for this while planning the project’s budget, but it is still too early to say whether we will be able to keep to it or we will exceed it. So far, we have not encountered any major snags on the construction site. At the moment, we estimate the construction costs at approximately PLN 700 million. The

PHOTOGRAPHS COURTESY OF CAPITAL PARK

POST-INDUSTRIAL CHARM

You noted that combining two functions was until recently seen as difficult. Meanwhile, your Norblin Factory project, which is one of the largest ongoing mixed-use schemes in Warsaw, combines even more functions and also features historic elements…

Indeed, due to its historic elements, this development has been very challenging – it took us approximately ten years to obtain all the necessary administrative permits. The restoration of the historic buildings and machinery of the former Norblin factory alone will cost us around PLN 100 million. Yet it is those historic elements that make this project unique and are one of its main assets. Post-industrial areas are perfectly suited to housing the retail and lifestyle functions.

property will be valued at more than PLN 1.3 billion after completion.

Were there any problems with securing bank financing for this project?

No, but the project is so large that we needed financing from a consortium of banks, rather than a single lender. Norblin Factory is the first private real estate project in Poland to have obtained co-financing from the European Investment Bank, which grants preferential loans for brownfield schemes that contribute to the revitalization of urban areas. Of course, this is a very prestigious thing for us.

The development is also being financed by one of Poland’s largest banks, Bank Pekao S.A. How is the commercialization of the investment going?

In order to obtain bank financing, we needed to achieve a certain pre-let level – in this case, it was 35 percent of the future net operating income that the property will generate. We are surprised by the amount of tenant interest the project is attracting. Even though in this part of Warsaw a lot of new projects are now being built, we actually have the comfort of selecting tenants that we want to have in Norblin Factory.

Which areas have seen the most demand?

We have already leased out almost all of the restaurant space available in the project.

The commercialization of the office areas is also proceeding apace. The office tenants that we talk to are companies which have chosen Norblin Factory very consciously. Those companies are ready to pay slightly higher rents to be in a unique, place-making project with a distinctive post-industrial atmosphere, rather than lease space in one of the new glass office towers that all look much the same.

The Norblin Factory site now and after the project's completion

Who will be some of the major tenants?

Norblin Factory will comprise approximately 40,000 sqm of office space and around 26,000 sqm of cultural, entertainment and retail areas. Apart from the almost 3,000-sqm food court that will accommodate about 30 restaurant concepts, our tenants will include co-working space operator Rent24, boutique cinema OH Kino and a BioBazar (which existed in the location until conThe restora- struction work on the project was launched). The complex will also tion of the house an Open Museum of the historic buildings and former Norblin factory. machinery of the former Norblin factory alone will cost us around PLN 100 million

How advanced is the construction process?

The construction process here is very complicated because of the historic and mixed-use nature of the project. We needed to temporarily move whole buildings to be able to accommodate new functions. The preserved historic structures are in bad shape and will require a lot of renovation work. We are still working on the underground floors, which take the most time to build, and we expect to reach the ground level towards the end of this year

or at the beginning of 2020. The investment will be completed in the first half of 2021.

Are you going to sell Norblin Factory upon its completion?

It is possible in the long-term; we are a development and investment company. We have already had a few offers. However, we think that a project like this should first be stabilized in terms of the generated revenues. Its real value will be known once it has been finished and has opened for business.

Will you focus on mixed-use projects in the future?

Since the spring of this year, Capital Park has had a new owner – Madison International Realty – and we are still in the process of devising a new business strategy for the coming years. We could still go in several different directions. To date, we have been an opportunistic investor, which means that we have been investing in properties with the potential to add value. It seems that we will continue to invest in office projects. We are now also considering entering the residential property market.

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LOKALE IMMOBILIA | RESIDENTIAL

PARTNER HIGHLIGHTS

THE PERKS AND PARKS OF HIGH-CLASS LIVING A new upscale project from Dom Development offers apartments in one of Warsaw's most prestigious locations

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lready recognized as Poland’s largest developer and lauded as a leader on the capital’s residential market, Dom Development S.A. is about to deliver its latest investment, an elegant apartment project by the name of Apartamenty Dolny Mokotów.

In line with the real estate mantra of “location, location, location,” the prestigious investment can be found on ul.

Jana III Sobieskiego. As part of what is widely known as the Royal Route – the ancient route that monarchs would take as they entered Warsaw and made their way from Wilanów to the Royal Castle in the Old Town – the apartment complex is located in an enviable area bristling with celebrated green areas such as the intimate Sielecki Park, picturesque Arkadia Park and the graceful spaces of the stately Łazienki Park.

The area

Dolny Mokotów is loved by citizens of Warsaw for many reasons, including its proximity to the center, its attractive surroundings, flourishing restaurant scene, buzzing cafes and a choice of parks that are primed for morning jogging and weekend strolls. The feeling is of a city within a city, a fact underlined by the rich array of stores, fitness clubs, trendy eateries, historic tenements and state institutions.

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That these are all contained in a district that feels vibrant yet simultaneously quiet and family-forward has elevated it to become a suburb quite like no other.

And in a society that is increasingly committed to looking after personal wellbeing, Mokotów excels in providing a wealth of recreational distractions such as the Energy Fitness Club Palace (featuring swimming, saunas, fitness facilities), Holmes Place Premium inside the Hotel Regent (featuring a stunning pool and gym), pilates at the Core Studio, the highly reputable Atol Tennis Club, and the fabulous Warzawianka-Wodny Park complex. Neither are cyclists forgotten – a number of bike paths connect Mokotów with the city center as well as Wilanów in the opposite direction. One of the city’s best bicycle service stores is located right next to the investment.

The area around the estate also has a well-developed service and commercial infrastructure, and highlights include the Panorama shopping center, a Rossmann drug store, as well as several restaurants, patisseries and cafes in which to start the day – of the latter, Coffee Behind the Wall and Café Chełmska are entrenched as firm local favorites.

Yet while Dolny Mokotów can often feel almost like an autonomous area, its well-developed communication network ensures that downtown Warsaw never feels far

away. Well-connected by bus lines, inhabitants of the investment will be able to reach the center within minutes.

Elegance and modernity

Dolny Mokotów Apartments are defined by their modern, tasteful architecture and high-class finishes. This alone can be seen viewing the facades, which are composed of subdued colors and utilize premium materials such as wood, natural stone, glass and steel. Large windows with natural wooden frames feature in all apartments, while apartments on the higher floors have a ceiling height of three meters. Entered via a beautifully illuminated lobby on ul. J. III Sobieskiego, the hall includes a wall of plant life standing opposite the reception and will connect the entrance to the apartments with the common areas and courtyard.

Adding to the investment’s livability and overall aesthetics will be a fountain and a secure playground, as well as an underlying style that combines both contemporary architectural trends and Mokotów’s tradition of modernism.

“Dolny Mokotów Apartments are a modern, elegant development with sophisticated architecture,” concludes Jarosław Szanajca, President of Dom Development S.A. “This is clearly visible in the finishing of the buildings, and in its form and style which refers to the best of Mokotów’s

historic tenements and enables it to harmonize with the character of the immediate surroundings. Furthermore, Dolny Mokotów is an ideal investment for active people – those that live for the rhythm of the city, but who also value the opportunity to relax among numerous parks and squares.”

Containing 148 apartments (and five commercial units) in two buildings of six and eight floors respectively, the development’s slated delivery date has been set for the fourth quarter of 2019. Designed by the acclaimed HRA Architekci studio, the Dolny Mokotów Apartment complex seamlessly blends state-of-the-art features with the modernist style of the wider area.

As part of the offer, functional and spacious apartments have been designed to cover various floorplans with sizes ranging from 35.3 sqm to 204.6 sqm. Encompassing everything from comfortable studio apartments to penthouses that are ideal for families with children, the development is well-suited to professionals of all ages.

On the penthouse front, Apartamenty Dolny Mokotów will feature nine in all, each with generous balconies, loggias, terraces or ground-floor gardens.

Due to popular demand, the Interior Design Department at Dom Development is also offering a turnkey house finishing program.

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LITTLE ROOM FOR SPECULATION

Investment in luxury residential property pays off, but it usually requires patience

BY ADAM ZDRODOWSKI

D Ghelamco Poland's Foksal 13/15 in Warsaw

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emand for high-end apartments and houses in Poland has been on the rise in recent years.

While global sales in this sector go up by several percent every year, the Central and Eastern Europe region remains one of the fastest growing markets. The luxury residential real estate sector is said to be less affected by economic cycles and economic fluctuations than the other segments of the housing market, but does investment in this kind of property bring profits for the buyer?

The vast majority of residential investors buy apartments in order to rent them, also hoping for moderate increases in those apartments’ value, said Paweł Sztejter, head of living services at JLL in Poland. Speculative buyers become active in times of fast increases in home prices. However, the market for the most expensive units has its own specificity. What is more, it remains relatively tiny. JLL data shows that slightly over 130 apartments valued at more than PLN 3 million were sold in Warsaw last year, 53 of which were second-hand apartments.

Generally speaking, investment in luxury residential property is of a long-term nature, Sztejter

Amstar's and BBI Development's ZÅ‚ota 44 in Warsaw

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LOKALE IMMOBILIA | RESIDENTIAL Powiśle BJK's Dobra 32 in Warsaw

As a way of allocating capital, well-located luxury apartments will continue to be in demand argued. Asked about profitability, Bartosz Turek, chief analyst at HRE Investments, maintained that the scale of the market is still too small to make definitive statements. In his opinion, in this sector the buyer’s profits mainly come from properties’ growing value, rather than rental revenues, which are moderate.

Besides, in some luxury buildings renting is not allowed by internal regulations.

Those buying high-end apartments mainly acquire them for their own purposes, often with their children or even grandchildren in mind. “These are the clients we want to attract the most,” revealed Bartosz Kuźma, management board president at developer Powiśle BJK. The company is now working on a boutique luxury residential project in Warsaw called Dobra 32. Kuźma explained that the most demanding clients expect to have privacy and good neighbors, so shortterm rentals are not an option that is suitable for this segment.

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GROWING VALUE

While many buyers acquire luxury homes to live there, some do see them as a form of allocating capital. “Among my clients, around 30 percent of individual buyers see the purchase of a luxury apartment as an investment,” said Artur Mogielnicki of Poland Sotheby’s Realty. According to him, the properties that return to the market are usually put up for sale after two to four years, depending on the market situation. In his opinion, some of the apartments bought several years ago that have already been re-sold have given their owners double-digit returns.

Smaller apartments tend to be easier to re-sell and thus tend to be more liquid assets than large apartments. Their potential to bring the desired return on investment also depends on the location, and here buyers’ preferences can change a lot within several years. Mogielnicki cited the example of Warsaw’s Wola, where demand for luxury units has been growing of late. The district, which now features new subway stops and one of the city’s biggest office hubs, is today perceived very differently than just a decade ago.

Developers usually point out that the prices of luxury apartments and houses in Poland are much lower than in many other European countries, and they argue that there is still much potential for price growth in the Polish market. Kuźma pointed to the limited supply of sites for high-end schemes and the higher and higher standard of such developments required by today’s increasingly demanding buyers, which is likely to continue to put an upward pressure on the prices of the most prestigious homes.

Mogielnicki said that prices have indeed been on the rise in recent years and while they are expected to stabilize in the near future, one can still count on minor increases. As a way of allocating capital, welllocated luxury apartments will continue to be in demand, he claimed.

Investment in luxury residential property can be successful and brings relatively high returns in the long term, but both the building and the apartments in it have to be of the highest quality and they need to be in one of the best locations, Sztejter concluded.

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

BUYING PRESTIGE

The luxury apartment sector is a niche segment where attention to detail is key – both in terms of customer expectations and in choosing the right time to enter the market

I

n the premium apartment segment, the vast majority of purchases – and we are talking about transactions valued at more than PLN 1 million – are financed with cash. Residential property remains an attractive investment alternative – in the long-term perspective, it always allows you to make a profit. It’s enough to look at how apartment prices in Warsaw have changed over the last 10-15 years. We saw a major crisis a decade ago, but the prices have since rebounded, with current levels exceeding those recorded in 2007.

Buying a premium property is about emotions, snobbery and prestige. Most of our clients are affluent Poles who either want to safely allocate the capital they have accumulated over years or are looking for high-quality living space for themselves. Of course, clients in this market know what they want, are very demanding

and have high expectations.

Making a stronger presence in the premium sector is part of our business strategy for the coming years. We have always had a vision of what an upscale residential project should look like, but the market has not always allowed us to build what we wanted to build. We feel that now is a good time to start premium schemes in Warsaw as the market here has matured and there are more and more potential buyers ready to pay PLN 15,00020,000 per sqm for a high-quality apartment in a prestigious location.

Premium projects will not dominate in our portfolio and they will not be huge schemes.

Of course, this segment of the residential market will never be as large as the market for affordably priced apartments, but that is not a problem for us. We are not a big listed company which

has to sell thousands of apartments annually to please investors. We are a mid-sized family business and want to develop quality investments that give satisfaction to us and our clients.

We are now working on the Cristal Park Residence project, which is located in the Park pod Skocznią green area of Warsaw’s Mokotów district. The scheme will consist of nine low-rise buildings, with the first phase to comprise 20 apartments. We have already bought a site for another premium development in Mokotów and we are constantly looking for land for more such investments in the city. We expect that construction work on the new Mokotów project will launch in the coming months.

Andrzej Sychowicz, President of the management board, APM Development

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LOKALE IMMOBILIA | OFFICE FIT-OUT

FOUR COLORS FROM TÉTRIS Avon has recently moved into its new premises in the Celebro office building in Warsaw. The international producer and distributor of beauty and personal care products occupies a total of approximately 4,500 sqm on four floors in the building. Interior design solutions provider Tétris was responsible for the partial design of Avon’s new office and carrying out all the construction, installation and fit-out work on the company’s space, with the entire project having taken three months to complete.

The circle, which symbolizes dynamism and also refers to the circular shape of the packaging of Avon’s cosmetics, was chosen as the leitmotif of the design, exemplified by office elements such as mirrors, lighting equipment and decorative wall panels. Distinctive features of the fit-out also include Tétris-designed display cases showcasing Avon’s products. Each of the four floors features a different vivid color – violet, blue, green and pink – that reflects the nature of the brand.

The Celebro building, which is owned by developer White Stone and is located in the Włochy district of the Polish capital, was completed in the third quarter of this year. Avon occupies more than half of the space available in the property.

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LOKALE IMMOBILIA | OFFICE

UNDISCOVERED POTENTIAL The office property market in Katowice will continue to grow in the coming years as the city continues to attract business services sector companies, argues Maciej Wójcik, managing partner at TDJ Estate, which is now starting construction work on the second phase of its .KTW project in the center of the city INTERVIEW BY ADAM ZDRODOWSKI

WBJ:

Katowice is the fifth largest regional office market in Poland. What are the market’s growth prospects for the coming years?

Maciej Wójcik: According to the latest ABSL report (Business Services Sector in Poland 2019), the existing stock of modern office space in Katowice exceeds 500,000 sqm. Year by year, we are seeing a continued increase in employment in the business services sector, which generates demand for new office areas for expanding companies and their new employees. There are no signs that this trend could be reversed in the coming years.

The main assets of the metropolis undoubtedly include the avail-

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ability of a well-qualified labor force (over 40 percent of those employed in the business services sector work in IT-related fields), very well-developed transport infrastructure (motorways, three airports, so-called fast regional railway) and the relatively higher quality of life than in Warsaw, Kraków or Wrocław.

The activities of local government, including the Katowice Special Economic Zone (which ranks first in Europe according to fDi Magazine) contribute to the international promotion of the metropolis’s attractiveness. This has already allowed Katowice to attract tenants such as Fujitsu Global Delivery Center, IBM, Honeywell and DAZN.

More than 70,000 sqm of office space is currently under construction in Katowice. Is that a lot as far as the market’s ability to absorb new supply is concerned?

In my opinion, this is a safe new supply level that testifies to the stable growth of the market. We also need to remember that this volume includes office areas of various classes and areas offered within phased projects.

At TDJ, we have been witnessing tenants’ growing consciousness in recent years, with companies now thinking long-term and planning their offices years in advance. They look for prestigious, centrally located, highquality space. The ecological aspect is also important to them.

Hence our decision to launch the second phase of the .KTW project, which will deliver 42,000 sqm of modern office space, in the first half of 2022. Since May this year, when we launched the tender procedure, we have been in talks with potential clients. In some cases, the talks are very advanced, which shows that despite the relatively large amount of new supply in the market and the fact that .KTW II will be ready in two years, tenants are ready to wait for the best high-rise scheme in the region’s capital city.

Almost 30,000 sqm of office space was leased in Katowice in H1 2019, a 24 percent increase y/y. Who is driving the office demand in the city?

It is mainly companies that have been present in the city for years.

Those companies keep developing their structures and competences (servicing new markets, industries and processes), which means that they need to offer comfortable working conditions to all their employees. It is not

surprising then that the hottest deals of this year include Unilever’s renewal of its agreement for 7,300 sqm in Nowe Katowickie Centrum Biznesu and DAZN’s pre-let of 6,400 sqm in Face2Face Business Campus I, as well as Capgemini’s renewal of an agreement for 5,600 sqm in Atrium and new agreement for 2,200 sqm in the Brema building. We also have to mention the .KTW I building in which EY – after less than one year of its presence there – decided to expand its leased area to over 1,300 sqm. Also, our biggest tenant, Fujitsu Global Delivery Center, has taken up two more floors (a total of nearly 3,000 sqm).

Have you already finished the process of commercializing the first phase of the .KTW development and have you signed any tenants for phase II? The process of commercializing .KTW I is still underway, but thanks to the ongoing talks the phase should be 90 percent leased out by the end of the year. When it comes to the second phase, which will be twice as big as the first phase, we are in advanced talks with several potential tenants. Although the phase will be completed in over two years, some clients already want to get to know our offer and book the best possible location in the center of Katowice. It is worth stressing that .KTW II will be the tallest office building in the region, offering unrivaled views from its top floors, including two with unique terraces.

.KTW II will be the tallest office building in the region

The project was a huge challenge for us, but thanks to the team of experts that we have created as well as the partner approach of architects from the Medusa Group studio and general contractor Strabag, we have managed to develop such a large and demanding investment located in the very heart of Katowice. Due to our unconventional approach to commercialization, consistent pursuit of the set goals and punctuality, as well as the high quality of the investment, we have secured major tenants who have already been working in the unique areas of .KTW I for over a year now. We believe that when it comes to the Do you want to sell the .KTW second building, the situation will complex in the future? look the same, especially since As a family investment company, we are no longer a company that TDJ aims to build on the long-term is only associated with residential value of its projects. The .KTW projects. As long as the .KTW comoffice complex is TDJ Estate’s plex is under construction, we will first flagship office investment. not consider selling it.

We are not ruling out the possibility of starting a new commercial development in Katowice

Are you planning any further office projects in Katowice?

Last year the TDJ Group adopted a new development strategy.

When it comes to the real estate market, the strategy provides for a focus, over the next four years, on not only Katowice, but also other large cities such as Kraków, Wrocław and Warsaw. We are now actively looking for new sites for office and residential projects. In Katowice alone, we are currently developing three residential schemes (including one premium investment – Pierwsza Dzielnica) with a fourth one to be launched soon. We are not ruling out the possibility of starting a new commercial development in Katowice or some other city of the Silesia-Zagłębie Metropolis. We know that the potential of Katowice has not yet been discovered and the city has a lot to offer to those who dare to reach for it.

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Life + Style

School of fun The Experience Economy is booming as people increasingly prefer to spend their disposable income on creating memories and learning new skills rather than accumulating possessions. WBJ talked to Alex Blanc, co-founder of CulinaryOn, who has created a global business based on exactly that concept

BY KRZYSZTOF MACIEJEWSKI

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Life+Style

WBJ:

tations. Every company in the world is facing the challenge of how to hire and retain talent, and Warsaw – with its low level of unemployment – is experiencing this just like London and other places. And every Alex Blanc: We chose Poland because we company needs to sell its product. We’re insee a unique combination of the interest strumental in both of these areas. We proand growth in curiosity of gastronomic vide the perfect platform where a company and other experiences in the Polish market can fulfil a need and take advantage of the now. People want to learn and have new 5,000 events that we run each year, so they experiences. We see this in the number of can get ahead of their competitors and be festivals and new places that pop up on the involved in something that has been done market in terms of concepts. Also, Poland very successfully on international scale but is the largest market in Eastern Europe, and that is still a novelty for Poland. for us it is the gateway to Central Europe And we’re uniquely positioned to benefit as we’re planning to open new premises in from the situation since we’re the first such Vienna and Milan in 2020 or 2021. international chain. That means we don’t have any direct competitors in Poland with How does cooking together integrate teams a unique model and background like ours.

Your “edutainment culinary studio” is something completely new in Poland. Why did you choose the Polish market? Do you see any particular current or future barriers?

ting the uninterrupted attention of people who have paid for premium experiences for four hours when they are listening and ready to learn is really something. And if there is a new producer on the market they have to fight to get noticed, For example, how can a new alcohol producer who has some special flavor or some kind of liquor or Polish gin – which is big trend now – compete with Bombay or Wyborowa?

Are CulinaryOn studios all over the world managed in the same way or are there any significant differences between Singapore, Moscow or Warsaw in terms of management?

We’ve built tools and systems, including top-class international IT systems. The CRM system that we’re using is one of the top five in the world according to Gartner. and families, and how does it make birthOur training system, client management day parties more attractive?

There are few activities in general in our and everything else is very standardized, lives that are basic and universal and that so we ensure that in every market we enter you can take pleasure in practicing with we’re achieving the same level of customer friends, family and relatives. For example, satisfaction. We’re in the top position. We’re if you like baseball, your grandmother number one on TripAdvisor and we’re in might not fancy joining in. If somebody the top three on TripAdvisor in terms of the experience that we’re delivering. likes fishing, I bet not everyone in the The difference is in the people: 99 family would like to grab a rod and try to percent of the team in every country is fish. But cooking is a basic universal need local. There are people who come to help that unites everybody. The only thing to open the studio from zero and transfer missing in many aspects of current society, especially for Millennials, is engagement. their knowledge, then after six months they Moreover, we see society becoming more leave. So, the difference is primarily in how isolated with home delivery solutions like Do you plan to include Polish cuisine in the our experience and the way of thinking of Uber Eats – people no longer need to go to CulinaryOn menu?

CulinaryOn is interpreted, because having a restaurant or shopping mall; they can just In every country we have local cuisine a fun event in Singapore is not the same sit at home and have their food delivered. as a part of the offer and we actually see as one in Warsaw. St. Petersburg is also But this optimization also frees up time for that only a small minority of people are different in that respect from e.g. Moscow. new experiences. And this is why you see interested in cooking local cuisine. When St Petersburg’s people start much slower the Experience Economy blossoming. This I go to a cooking school or if we speak and about an hour and half later they end about cuisine, I compare the local food concept was set out by Harvard professor up dancing and having fun like in Moscow.

Joseph Pine. When he came to Moscow he to the pierogi and the soup that my mom But if you compare the first 30 minutes it’s made, and nothing will be ever be as good. different and it builds up differently. It revisited us and gave a speech. After that we So, typically we look at more international flects every country. We have the privilege came up with the idea of CulinaryOn. cuisine. In terms of our wine appreciation of being able to compare it.

What kind of clients are you focusing on? events, we’re planning to add some Polish About 80 percent of our business in Warwines. The goal of our platform is to eduAre you focused on competition with any saw will be B2B clients, and 20 percent will cate and there are producers of wines or particular kinds of companies? come from private individuals celebrating hard liquors in Poland that have so much We compete primarily with how people birthdays with their families or putting quality to offer. But we need to explain and spend time. We don’t compete with existon events for kids. It will be mainly in the clients have to experience it and get their ing players in art schools or wine acadareas of client entertainment, employee hands on it. In today’s very cluttered world emies or the intellectual games providers teambuilding sessions and product presen- in terms of messages and information, get- or culinary schools or cocktail schools

“Poland is the largest market in Eastern Europe, and for us it is the gateway to Central Europe”

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because there’s no other company that provides them all in one place. Since we’re the largest provider and we can put on an event for 150 or 200 people at the top level, we compete with hotels. If anything, we’re not actually competition but we help all the players on the market, because we invest a disproportionate amount of money into market education.

After entering the Moscow market, which was our first, we’ve seen the market grow tenfold. We’re the leader, with over 40 percent of the market share, but the total market has become ten times bigger than it used to be. Dozens and dozens of schools have opened and more are opening all the time. There are new players out there and we look forward to collaborating with them by providing them with a platform. If you have a cooking school and you can do an event for 20 people, how and where you are going to run an event for 100 people if your clients ask for it? You can run it at CulinaryOn. We plan to create thousands of events in Warsaw and it doesn’t mean it will be at the expense of existing players. I would argue that three years from now the market will be much bigger. Our desire is to create platforms. We create Ferraris for the Schumachers of this market.

Do you have a specific ROI target and when are you planning to achieve it?

We think that we’ll get a return on our investment in Poland within about four years after opening.

What are your future plans? Are you thinking of entering other Polish cities?

And how many CulinaryOn studios could eventually be created in Poland?

We think that for 2019 and 2020 our activities will be mainly targeted at Warsaw, so in the first 24 months we’ll focus on the capital. And 2021 might be the year when we roll out this concept to cities like Kraków, Poznań or Gdańsk, where we think the market size will allow us to do 200 or 300 events per year. We have built a platform for expansion; our IT systems, our experienced team and our products mean it’s easier for us to roll out our concepts to new markets.

M E N S S HO E S ECCO Splash Down In The Men’s High-End Shoe Market!

At the beginning of October, the premiere of ECCO VITRUS ™ MONDIAL took place in 11 selected stores in Europe. This prelaunch introduced a breakthrough in the world of exclusive formal shoes for men.

ECCO VITRUS ™ MONDIAL is a collection of 10 models that combine elegant design with innovative technology for an even higher level of comfort.

Aimed at the modern gentleman who values quality and innovation.

With its slim silhouette and a sophisticated upper, fashioned from luxuriously rich ECCO leather, the ECCO VITRUS™ MONDIAL is premium in every respect.

Accepting no compromise, the new line presents an iconic and traditional style while emphasizing core elements such as comfort, fit and feel.

ECCO ul. Złota 59 (Złote Tarasy), ul. Wołoska12 (Galeria Mokotów), ecco.com

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EVENTS

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

24TH BOOK OF LISTS GALA

The 24th annual Book of Lists Gala welcomed 150 guests – top-level executives across all industries.

Like each year, the gala focused on major players operating in various sectors in Poland and awarded them with distinctions for their successes. The WBJ Group handed out three Spotlight Awards: Ghelamco Poland received the statuette for the “Business Achievement of the Year,” Cavatina Holding S.A. was awarded the “Office Developer of the Year” title, while Atrium Poland Real Estate Management took home the “Shopping Center Refurbishment Of The Year” prize. In addition to Spotlight Awards, a Lifetime Achievement and a Rising Star Award were presented. TFLS Testing & Foreign Language Services Szkoła Języków Obcych was handed a Lifetime Achievement Award as the “Trendsetter in Language Education,” while Sygnis New Technologies Polska went home with the Rising Star Award as “Pioneer in New Technologies.”

WBJ also awarded 36 companies that performed the best in their respective industries with first place certificates. The Gala was held in Hotel Polonia Palace on September 24. The annual event marks the issue of the Book of Lists, a Polish-English publication compiling data about major players in the Polish market in all sectors of the economy. It consists of ranking lists divided into categories such as corporate services, advisory, financial, HR and legal services, construction and real estate, education, automotive industry, as well as IT and telecoms. The lists present the top players in each sector ranked by key business indicators such as revenue, total GLA or number of employees.

PARTNERS

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EVENTS

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

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1. Marc Burrage, Managing Director, Hays Poland 2. (Left) Anna Augustyniak-Hoffman, PR & Marketing Director, Valkea Media (Right) Renata Kobas - Komorniczak, Partner, Rödl & Partner Tax Adviser 3. Sebastian Świstak, Leasing Director, Cavatina Holding S.A. 4. Tomasz Spalik, Business Development Director, Tétris Polska 5. Cezary Maciołek, Vice President, Grupa Progres Sp. z o.o. 6. Paweł Kunat, Key Account Manager, KRUK SA 7. Magdalena Bartkiewicz-Podoba, General Manager, Liebrecht & Wood Poland 8. (Left) Robert Grudzień and (Right) Marcin Gawroński, Sweco Consulting 9. Monika Kerleau, Business Development Menager, Mazars 10. Radosław Górecki, Communication Manager Ghelamco Poland 11. Andrzej Burgs, CEO and Chairman of the Board, Sygnis New Technologies 12. Anita Zajączkowska, Key Account Director, TFLS 72

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BOOK OF LISTS

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TÉTRIS POLAND IN THE BOOK OF LISTS 2019/2020 RANKING DESIGN & FIT OUT COMPANIES

Publisher of Warsaw Business Journal Group

Book of Lists Project&Research Manager

Morten Lindholm

Dominik Grudziński

Tétris Poland Plac Europejski 1, 00-844 Warsaw, Poland Tel: +48 223 07 49 83 www.tetris-db.com

EVENTS

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

EFNI: WHAT TOMORROW BRINGS The ninth edition of European Forum for New Ideas has reached its conclusion. Over 1,200 people who care about #WhatTommorowBrings joined us for over 80 panels, workshops, Night Owl meetings and dialogue discussions. EFNI 2019 hosted 130 journalists from 70 publications and the #EFNI2019 hashtag peaked in Twitter’s top five trending topics. “In ‘EFNI’ the most important letter is the N, those ‘new’ ideas – that’s what makes this conference stand out. We aren’t afraid to talk about the challenges we will face in five, ten, twenty, thirty years: ecology, artificial intelligence, the impact of technology on democracy… The ‘new’ ieas are our trademark,” said Maciej Witucki, President of the Polish Confederation Lewiatan, organizer of the event. EFNI 2019 was titled #WhatTommorowBrings and divided into three thematical blocks: society and Europe; economy and the future of market; technology and the future of jobs. Each topic was tackled during dedicated panels including: “Europe after the elections,” “How to feed the world,” “Big Data revolution,” “Who benefits from disinformation” and “What’s next after #MeToo and #PayMeToo? On the road to Diversity.”

“We need more equality both in politics and in business. Multiple experiences and points of view help creating innovative solutions – highlighted Henryka Bochniarz, Chairwoman of the General Board of Polish Confederation Lewiatan.

SOPOT DECLARATION EFNI was concluded with the Sopot Declaration accepted by all participants and read by Henryka Bochniarz, Jerzy Buzek and Maciej Witucki at the closing gala. The Declaration states that the EU is the second strongest economy of the world, one of its biggest markets and a leader in terms of democratic rules, human rights, working standards, quality and availability of services, fairness in income share, fighting poverty and environmental protection. This means that we have to face the modern challenges in all these sectors.

During the closing gala Michał Kiwerski from Youth Climate Strikes reminded us: “The topic of climate crisis can’t be a part of ideological disputes – we have to be united when facing it,” he told the participants. He also highlighted the importance of media in rising awareness related to the dangers of the climate crisis.

BUSINESS INSIDER TRENDS FESTIVAL The second edition of Business Insider Trends Festival, one of the largest conferences in Central and Eastern Europe, has come to an end. The conference has attracted twice as many participants as in the previous edition. It was also the largest event organized under the Business Insider brand. During two days, 120 speakers from all over the world, on four stages, discussed the most important events and trends related to the economy, marketing communications and new technologies. Almost 3,000 participants took part in the event.

During the Business Insider Trends Festival, several dozen lectures, debates, workshops and discussion panels were divided into four thematic stages – Business 4.0, Global Economy, Life Science and Media and Marketing. During the event, special thematic blocks were also organized – China Session (within the Global Economy stage), Leadership Session (Life Science stage), PropTech and Women Power.

Among the keynote speakers at the conference were Hannes Schmid, world-famous photographer and philanthropist, founder of Smiling Gecko; Henry Blodget, founder of Business Insider; Marieme Jamme, businesswoman and social activist, creator of iamtheCODE; Haiwen Chen of Alibaba Group; Zev Siegl, co-founder of Starbucks; Pascal Kaufmann, founder of Starmind and Mark T. Hofmann, criminologist and business psychologist.

Business Insider Trends Festival is an event where trends on the global market are discussed. During the meeting world-class experts talk about how the modern world of finance, media, new technologies, medicine and health will change the way we live in the years to come. It is also one of the most important events concerning business trends in the region of Central and Eastern Europe.

The next edition of Business Insider Trends Festival will be held on 14-15 October 2020.

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EVENTS

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

8TH INNOVATIVE MANUFACTURING FORUM What really is a modern business? How is production changing? In what directions should the changes go? What is today’s manufacturing sector afraid of? These questions and more were answered by participants of the 8th edition of the Innovative Manufacturing Forum. IndustryTech. The autumn edition of the event took place on September 23-24, 2019 at the Arche Hotel Krakowska in Warsaw.

Representatives of the largest production companies and experts from Poland and abroad discussed the future of modern business and trends related to the sector. During the two days of the congress, there were five thematic sessions, ten speeches, five debates and twelve tables were held in the roundtable session. Some 50 speakers and 500 participants took part in the event.

The first day of the Innovative Manufacturing Forum. IndustryTech was held with the AI & Big Data Congress. The opening of both events was presented by the Chairman of the Innovative Manufacturing Forum. IndustryTech Advisory Board, Dariusz Piotrowski, Director General, CEO, Dell Technologies Poland.

Debates focused on the broadly understood concept of change in Polish enterprises, ways of introducing innovation, advantages and disadvantages of implementing new technologies, and the impact of a new generation of employees on how companies function. The discussion was followed by a presentation on Industry 4.0 and a panel discussions on innovative approaches to data.

During the second day of the Innovative Manufacturing Forum. IndustryTech, speakers focused on key megatrends. Experts presented the most important issues related to the sector with the help of practical case studies.

The event ended with the debate on “How to incorporate ecology in a business model” during which participants discussed the latest solutions in robotic factories related to the green factory trend and energy efficiency, as well as the situation on the energy prices market. The event agenda also featured an ElixAir Show Presentation – NANOsystem on improving air quality in buildings and Company transformation 4.0 open workshops.

11TH AI & BIG DATA CONGRESS On September 23-24, 2019, the AI & Big Data Congress took place at the Arche Hotel Krakowska. For the 11th time, leading representatives from the world of business, administration, media and science met to discuss progressing digitization and solutions using artificial intelligence, automation and processing of large amounts of data. The autumn edition of the congress was held at the same time as the Innovative Manufacturing Forum. IndustryTech and brought together more than 500 participants.

The opening ceremony of both congresses was led by the Chairman of the Innovative Manufacturing Forum. IndustryTech’s Advisory Board, Dariusz Piotrowski, VP, Director General, Dell Technologies Poland.

There was a debate on modern enterprises, a presentation on industry 4.0 and a panel on an innovative approach to data based on new solutions. During the congress, great emphasis was placed on the acquisition, collection and analysis of data, the redefinition of a modern business and the practical use of 5G in the context of the future transformation of organizations. On the first day, there were also roundtable sessions. Discussions in small groups of experts were an excellent opportunity to network and exchange experiences. At each of the 12 tables, participants and moderators conducted in-depth discussions on current topics related to AI, big data and data science.

On the second day, the AI & Big Data track focused on the use of artificial intelligence and the evolution of intelligent enterprises. There were also topics related to building competitive advantage based on data and effective robotization of business processes. There were also issues related to cybersecurity, behavioral analysis mechanisms and data ownership issues. During the presentation of practical use cases, business representatives presented specific implementations that participants can use in their own enterprises.

The AI & Big Data Congress is an event during which participants have the opportunity to learn about the latest trends and practical ways to implement the latest technologies.

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EVENTS

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

SUNNY DAYS CONTINUE IN POLISH REAL ESTATE

The residential real estate market – while already in a slowdown phase – is doing superbly. Although developers, faced with a shortage of plots for development, are reducing supply, demand is not weakening – rising prices are not putting off buyers yet. The situation in the office real estate market looks just as optimistic – the good condition of our economy is reflected in tens of thousands of meters of leased office spaces.

Conferences in the “Polish Residential Market 2019” and “Office Buildings in Poland” series, this year held on October 21-22 at Warsaw’s Hilton Hotel are the biggest and most prestigious meetings for the Polish real estate industry.

They are attended every year by nearly 500 major market players: developers, consultancies, representatives of banks, investment funds, general contractors, producers of construction and finishing materials, architects, analysts, industry journalists and many more. It was no different this time around – a total of more than 540 people turned up at the Hilton on Monday and Tuesday. As is always the case with events organized by Nowy Adres S.A., they could make use of the innovative IT system Match Maker, designed to arrange business meetings with other conference participants. Around 250 such meetings were arranged during both days of these events!

THE HOUSING SECTOR: NO DOMESTIC RISKS According to the experts participating in PRM, the housing needs of Poles are still far from being satisfied. Three million people will move from small towns to big cities within 15 years, and there is an immigrant wave on top of that – Poles who will be returning as well as those who will be arriving here from abroad. A shortage of apartments is likely. “In 2008, the market was thriving, everyone was happy and had it not been for the subprime crisis in the United States, we would have likely continued to steadily develop by another year or two, reaching the current price levels.

Now we will keep our good frame of mind as long as nothing bad happens abroad.

This is where to look for potential crisis outbreaks,” predicted dr. Jacek Furga, chairman of the Real Estate Financing Committee at the Polish Bank Association.

OFFICES: BPO CONTINUES TO GENERATE HIGH DEMAND Office market participants also have reasons to be happy. Last year, the total volume of lease transactions was more than 1.5 million sqm – an all-time high for our market. The high popularity of our offices comes partly from the fact that Poland’s star in the global BPO/SSC map keeps shining – in regional cities, investors from the business services sector account for 50-70 percent of total demand. The good condition of our economy also translates into tens of thousands of square meters of offices leased by domestic companies and institutions. And as tenants and demand are there, developers are building – according to consultancy Colliers, more than 1.8 million sqm of modern spaces is under construction. This is much to the delight of foreign investment funds, which eagerly buy office buildings and not only in prime locations.

“Polish Residential Market” and “Office Buildings in Poland” are not just conference lectures and discussions or business meetings – it is also an opportunity to have great fun. On Monday evening, the participants in both events enjoyed themselves until late into the night at the PIĘKNO club at 8A Szpitalna Street. In an informal banquet atmosphere, not only real estate was discussed – after all, there is a lot more to life than work.

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LAST WORD

C

hange seems to be the prevalent sentiment these days. The times when people lived their whole lives in the same way and could plan for decades ahead are long gone. Will we still have to work 10-15 years from now? If so, what skills will be the most valued? How many more industries will be disrupted by technology? Is there a way to prepare for it?

It’s not only technology that is changing the way we live.

The rapid transformation taking place before our eyes has forced our ways of thinking to evolve as well. Two decades ago, we were talking about limiting pollution. Today, we’re at a stage where we’re trying to mitigate the effects of the changing climate, fully aware it will only get more precarious over time. In fact, “climate change” already generates four times as many hits in Google than “environmental pollution.”

In the short term, global economic shifts seem to be on everyone’s radar, with unrelenting US-China tensions and creeping slowdown in some of the largest economies. We also keep waiting for the future shape of Europe to crystalize.

The latest elections in Poland brought few surprises,

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maybe except for the fact that the turnout was the highest in 30 years, since the first democratic election after the fall of communism. Poles seem to be increasingly engaged in their country’s politics, but also increasingly polarized. The next four years could see the continuation of the growth path Poland has been following or it could very well prove to be a challenging period.

There’s always been those who welcome change, as well as those who dread it. “Taking a new step, uttering a new word, is what people fear most,” as Fyodor Dostoyevsky wrote. But without challenges, there would be no progress.

Winston Churchill once said that change is improvement and that, “to be perfect is to change often.”

With this, it’s time for me to sign off. After seven years of writing and editing for WBJ, it’s time to take on new challenges, discover new opportunities and explore new possibilities. Thank you for your input and continued readership and here’s to hoping the changes that are coming will continue to bring as many successes as the past seven years did. – Beata Socha

SHUTTERSTOCK

Changes