WBJ Observer 2014 #09

20 PAGES 20 PAGES

OCTOBER 2014

Number 09

OF REAL ESTATE N EWS

REAL EST A NEWS TE

PLN 24.50 (VAT 8% included) ISSN 2353-3714 INDEX-RUCH-332-127

FOR DAILY NEWS VISIT US AT

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EXPO REAL 2014

BEACONS OF HOPE A POLISH COMPANY WANTS TO CHANGE OUR LIVES WITH BUTTON-SIZED DEVICES > 51

+

MARKET FOR RISK-LOVERS

STYLING AND PROFILING

POLES AND THEIR GROWING APPETITE FOR ALL THINGS LUXURY > 38

Mr Tusk

goes to Brussels

IN REAL ESTATE > 60

BITCOIN IN POLAND A FLASH IN THE PAN OR A HUGE SUCCESS? > 34

What does the Tusk nomination mean for Europe and Poland

JERZY BUZEK:

OCTOBER 2014

THE EU IS NOT AGAINST OUR EXPLORATION OF COAL > 21 ALSO IN THIS ISSUE:

• S m a r t C i t i e s • C i t y s c a p e • C o m m e n t a r y • N ew s • R a n k i n g

lll IN THIS ISSUE Try these:

4

lll NEWS

4-12 In Review Latest News 13 Time Machine 14 Dateline 14 Who’s News Latest appointments 16 Macroeconomy

17

lll COMMENTARY

17 Legal Agricultural subsidies 18-19 Legal Mobbing in the workplace 20 Accounting Real estate investments

26-32

21-24 Interview Jerzy Buzek

POLITICAL CHANGES

34

lll FEATURES

34-37 Bitcoin Cryptocurrency in Poland 38-41 Luxury Market Poles with aspirations

49

lll ENTREPRENEURS

49-50 BASF Interview with Dirk Elvermann 51-54 Ifinity Everyday beacons 76-77 Cityscape Warsaw 78-79 Ranking Franchisors

80

43-48

SMART CITIES SUPPLEMENT

55-75

LOKALE IMMOBILA

lll LIFESTYLE

80-81 Gadgets 82-83 Events Economic Forum 84 Events Shopping Center Forum 86 Restaurants 88 On a Final Note

WBJ OBSERVER • OCTOBER 2014

1

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OCTOBER 2014 • WBJ OBSERVER

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3

NEWS

lll INREVIEW News highlights of the past month

E

wa Kopacz, nominated as the successor of Donald Tusk as prime minister, presented her government on September 19. The cabinet was sworn in three days later.

Kopacz was named the new head of government after the resignation of Tusk, who was chosen president of the European Council (see story, page 26) Compared to the previous cabinet, changes have been made in the foreign affairs, interior, justice and infrastructure ministries. Apart from that, Defense Minister Tomasz Siemoniak has been named deputy prime minister.

Grzegorz Schetyna, a former interior minister and well-known Civic Platform politician, will succeed

4

OCTOBER 2014 • WBJ OBSERVER

Radosław Sikorski as minister of foreign affairs. Sikorski has been designated as candidate for Sejm speaker. “It’s a promotion,” Kopacz stressed.

Cezary Grabarczyk, a former infrastructure minister and a close associate of the new PM, has been named minister of justice. He will succeed Marek Biernacki.

Teresa Piotrowska, a member of parliament, will be the new minister of interior. She succeeds Bartłomiej Sienkiewicz, who was one of the main figures in the recent tape scandal.

Andrzej Halicki, another MP, will succeed Rafał Trzaskowski as minister of administration and digitization.

Maria Wasiak, a former deputy voivode

and deputy CEO of railway group PKP, has been named infrastructure and development minister. Her predecessor Elżbieta Bieńkowska will soon assume the post of EU internal market commissioner.

Contrary to earlier speculation, Bartosz Arłukowicz will remain health minister. Other members of the Tusk government also retained their jobs.

Kopacz also said that in a month’s time the government would review the composition of ministry leaderships and may name new deputy ministers then.

“This is a cabinet of strong personalities,” the new PM said. “The most difficult and most important task will be to rebuild Poles’ trust.”

Image: Grzegorz Rogiński KPRM

Poland with new government

Shorts POLAND FORMS MILITARY UNIT WITH LITHUANIA AND UKRAINE

GRENDOWICZ DISMISSED FROM STATE-RUN PIR The supervisory board of state-owned investment firm Polskie Inwestycje Rozwojowe (PIR) dismissed the company’s CEO Mariusz Grendowicz in mid September. No reasons for the decision were disclosed.

The PIR management board will include only two members, Michał Lubieniecki and Przemysław Sztandera, until a new CEO is chosen in a competition.

In a statement issued after the dismissal, Grendowicz wrote that the end of his mission as CEO “happened sooner than I could have expected.”

PIR was established as one of two operators of the government’s Polish Investments program in 2013. The company has finalized one investment deal so far and it has several more in the works.

6

Gazprom sends less gas than PGNiG orders In the first half of September, Poland’s natural gas distributor PGNiG issued several statements saying that Russia’s Gazprom was sending less gas than the Polish company had ordered. On September 10, influx was 45 percent lower than orders.

PGNiG added that the lower inflows were compensated with gas flowing through other entry points. “There is currently no need to start obtaining gas from underground caverns, which have been filled before the winter season,” the company added.

Gazprom continued to assure that it did not change the level of gas exports to Poland.

PGNiG admitted that it had simply increased orders, which was in accordance with its contract with the Russian firm.

New NATO unit to be based in Poland NATO’s new rapid response force will be headquartered in Poland, NATO Secretary General Anders Fogh Rasmussen said on September 5, the second day of the alliance’s summit in Newport, Wales.

UK Prime Minister David Cameron said that his country would commit 3,500 personnel to the unit.

The forces would be capable of being placed anywhere in the world within two to five days. The headquarters will be in Poland and four other bases would be located in other countries on the alliance’s eastern frontier.

“As Russia tramples illegally over Ukraine, we must reassure our eastern European members we will always uphold our Article 5 commitments to collective self-defense,” the British PM said.

Leaders of the alliance also decided that the next NATO summit, in 2016, will take place in Warsaw

OCTOBER 2014 • WBJ OBSERVER

€60-70 million

IS THE ESTIMATED LOSS OF THE POLISH LONGDISTANCE GOODS TRANSPORTATION SECTOR, RELATED TO RUSSIA’S EMBARGO ON POLISH FOOD.

Images: Shutterstock

The defense ministers of Poland, Lithuania and Ukraine signed an agreement creating a joint military unit on September 19.

The Lithuanian–Polish–Ukrainian Brigade (LITPOLUKRBRIG) will be used during operations under the auspices of the UN, EU and NATO and in other operations that are in line with the UN Charter.

Polish President Bronisław Komorowski, who was present when the agreement was signed, said that the accord shows the countries’ involvement in providing security in the region.

The idea of creating a common military unit by the three countries has been a subject of talks since 2009, but its creation had been postponed so far.

NEWS

36.93% was the year-on-year decline in passenger car and van production, recorded in Poland in August, according to data from Samar.

EC suspends support for farmers The European Commission has suspended financial help for EU farmers suffering from the Russian embargo, the Commission announced on September 11. It is now considering a different scheme.

According to Agriculture Commissioner Dacian Cioloş, the Commission has received motions for an inflated amount of money. Some were even higher than the average annual value of EU exports to Russia. Therefore the €125 million subsidies have been suspended.

Member states now have to revise the motions in order to detect irregularities.

Unofficial sources report that Polish

motions constituted 87 percent of all motions filed with the European Commission.

The ceiling amount of subsidy, €82 million for apples and pears, and €43 million for the other fruit and vegetables has been reached, what constitutes another reason for the motions’ suspension.

The Russian embargo was imposed as of August 1, 2014 and encompasses EU perishable fruits and vegetables, including tomatoes, carrots, cabbages, sweet peppers, cauliflowers and headed broccoli, cucumbers and gherkins, mushrooms, apples, pears and plums.

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WBJ OBSERVER • OCTOBER 2014

7

NEWS

“MY MIND, HEART, THOUGHTS AND FEELINGS WERE AND WILL BE RED AND WHITE. Prime Minister Donald Tusk, after his resignation was accepted by the president, assuring that he will remain concerned about Poland during his term as president of the European Council.

PLN 570 million IS THE VALUE OF AXA’S ACQUISITION OF BRE TUIR, THE NON-LIFE INSURANCE UNIT OF POLISH LENDER BRE BANK.

EU and Ukraine ratify Association Agreement On September 16, in simultaneous ceremonies, the EU-Ukraine association agreement was signed in Kiev and Strasbourg by Ukrainian and EU officials, respectively.

Ukrainian President Petro Poroshenko said that the agreement was a “first step, an important step” toward membership in the EU. He added that the simultaneous approval represents a “historic moment” that will define his country’s westwardlooking future.

The pact will not be implemented until the end of 2015 as both the EU and Ukraine agreed to delay it in concession to Russia. Moscow feared that the Russian market would be flooded with goods from the EU, and have attempted to insert amendments to the agreement that would prevent this.

The economic part of the agreement was signed back in June.

Polish soldiers will not take part in any military operation against the Islamic State, Defense Minister Tomasz Siemoniak said in midSeptember. Poland is, however, considering political support for the anti-IS coalition and humanitarian aid for Iraq, he added.

“There is no doubt that the issue of what is happening in Iraq and Syria has become the focus of attention of NATO and the leaders of the western world,” Siemoniak said.

He added that Poland already has experience in sending humanitarian aid to Iraq. A batch of aid was sent in mid-August.

A week earlier, during the NATO summit in Newport, Wales, the US invited ten countries, including Poland, to join a “core coalition”

8

OCTOBER 2014 • WBJ OBSERVER

against the Islamic State.

US Secretary of State John Kerry spoke to a gathering of foreign and defense ministers from the United States, the United Kingdom, France, Germany, Canada, Australia, Turkey, Italy, Poland and Denmark.

“We need to attack them in ways that prevent them from taking over territory, to bolster the Iraqi security forces and others in the region who are prepared to take them on, without committing troops of our own,” he was quoted by Reuters as saying.

“This group here this morning is the core coalition,” Defense Secretary Chuck Hagel said at the same meeting. “It is the core group that will form the larger and extended coalition that’s going to be required to deal with this challenge.”

Images: Shutterstock, Civic Platform

Poland won’t take part in strike against Islamic State

NEWS

WBJ OBSERVER • JUNE 2014

9

NEWS

PROSECUTORS DROP CASE AGAINST SIENKIEWICZ AND BELKA

10

Szczurek proposes EU investment fund The European Union needs a joint investment fund, Poland’s Minister of Finance Mateusz Szczurek told at the annual meeting of Brussels-based economic think-tank Bruegel in early September.

The fund would be governed by the European Investment Bank and its capital leveraged via borrowing in the financial market. Then, the money would be directly invested in selected infrastructure projects, especially energy, transportation, IT and defense. The desired amount of capital would be €700 billion, said Szczurek.

After a sitting of the Economic and Financial Affairs Council (Ecofin) in midSeptember, where he presented his idea, Szczurek said that EU member states and the European Investment Bank would use the next one or two months to assess investment projects and consider whether any additional financial instruments are needed.

“The Ecofin has recommended that EU member states and the EIB prepare a list of sensible investment projects,” Szczurek was quoted as saying by the Polish Press Agency.

“Depending on that list and on how big it is, we must look over possible existing mechanisms and instruments, which could be used to finance and implement those projects,” he added.

“If they are insufficient, then we will consider new instruments, including the one that I have proposed.”

OCTOBER 2014 • WBJ OBSERVER

Image: Shutterstock

Prosecutors have decided to discontinue investigating the case of Interior Minister Bartłomiej Sienkiewicz and National Bank of Poland President Marek Belka, who were illegally recorded last year discussing the future of the government.

In recordings published

by Wprost weekly earlier this year, Sienkiewicz and Belka were recorded discussing the dismissal of Jacek Rostowski from the post of finance minister in exchange for support in financing the budget deficit. Later in 2013, Rostowski was replaced

by Mateusz Szczurek.

The prosecutors said that they have found “no evidence” of an informal accord aimed at infringing the autonomy of the NBP. Neither of the public officers was found to have crossed their scope of competence.

NEWS

WBJ OBSERVER • JUNE 2014

11

NEWS

The Polish national volleyball team won the FIVB World Championships held in the country. The Poles triumphed 3:1 against Brazil in the final game.

The previous time that Poland had been world volleyball champion was 40 years ago.

The Polish team lost only one game during the championship, to the US in the second round.

Brazil lost its champion title, held for three consecutive tournaments. Germany won third place this time.

PZU

‘Gods’ with main prize at Gdynia Film Festival The jury of Poland’s main movie festival, held in Gdynia last week, handed out the main prize, the Golden Lions, to “Gods” directed by Łukasz Palkowski. The film was also a favorite with the festival’s audience.

The movie tells the story of Zbigniew Religa, a famous Polish cardiac surgeon, who performed the country’s first heart transplant in 1985.

Tomasz Kot, who plays Religa in the film, was recognized as Best Actor. The Best Actress award went to 19-year-old Zofia Wichłacz for her perfomance in “Warsaw 44.”

Other movies appreciated by the jury included “The Mighty Angel” by Wojciech Smarzowski (Silver Lions), “Jack Strong” by Władysław Pasikowski (Best Cinematographer) and “Hardcore Disco” by Krzysztof Skonieczny (Best Debut).

Investing in Poland available October 2014 * voivodships * special economics zones * trends 12

OCTOBER 2014 • WBJ OBSERVER

featuring

2015

Images: Shutterstock, Gdynia Film Festival, PZU

Poland wins world volleyball championship

NEWS

TIMEMACHINE From our pages . . .

15 years ago

10 years ago

5 years ago

October 1999 The Treasury picked Swissair as a strategic investor in LOT Polish Airlines. Swissair is expected by many to play a somewhat passive role. Swissair’s bid is rumored to have almost doubled the bids of German carrier Lufthansa and British Airways, which amounted to about $100 million.

October 2004 Domestic internet portal O2.pl is about to launch the first voice-over-broadband service in Poland that can make calls to fixed-line phones and it’s cheaper than traditional fixed-line. “All you need is an internet connection and a headset. Users can even get a traditional phone number, which costs PLN 5 a month, but otherwise, start-up is free,” said Jacek Świderski, co-owner of O2.pl.

October 2009 Polish businesspeople appear to be leaning away from Ukraine as the country grapples with the financial crisis. The value of Polish exports to Ukraine fell by almost 50 percent y/y in the first seven months of 2009 to €1.36 billion, while imports fell by over 60 percent to €364.9 million.

October 1999 The Treasury Ministry is pressing ahead with plans to privatize the 25 ailing Polmos vodka distilleries, but potential investors think that any sale will be hampered by the overall shrinking market.

Consumption slid 12-13 percent in 1998 and many in the industry said excise taxes hammer yet another nail into Polmoses’ coffin. u

October 2004 Polpharma’s generic Viagra copy, dubbed Maxigra, is set to hit Poland’s pharmacies and provide a cheaper impotence treatment. This could bring millions – but not if Pfizer has anything to do with it. “EU law states that no generic drug may be launched in the EU markets for 10 years following the drug’s registration in 1998,” said Pfizer spokesman Adam Linka. u

October 2009 After a decade of acrimonious disputes and several near reconciliations, the Polish Treasury and Eureko have agreed to a compromise over PZU ownership. The deal will see Poland regain full control of PZU. Eureko will get PLN 3.55 billion as part of the dividend payout as well as a further PLN 1.55 billion when Poland sells its 5 percent stake in PZU at a later date. u

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WBJ OBSERVER • OCTOBER 2014

13

CALENDAR

OCTOBER EXPO REAL 2014

ECONOMIC FORUM Event:The European Forum for New Ideas is organized for the fourth time. This year’s theme is – Secure and Competitive Europe – realistic goal or unattainable dream?

Business perspective.

Location: Sopot Web: efni.pl/en

1-3

6-8 OUTSOURCING FAIR

PRCH RETAIL AWARDS

16

Event: The Polish Council of Shopping Centers will hand out its awards for best shopping center, retail chain and marketing campaign.

Location: Teatr Capitol, Warsaw Web: prch.org.pl

Event: The biggest B2B trade show for property and investment in Europe offers optimum conditions for efficient networking and extensive opportunities for market orientation and analysis.

Location: Messe München, Germany Web: exporeal.net

16-17

Event: The only event of its kind in Poland, with workshop sessions, panel discussions with industry leading outsourcing companies.

Location: EXPO XXI Center, Warsaw Web: outsourcingtargi.pl/en/

WARSAW WHISKY FEST

25-26

Event: Masterclass sessions, exhibitors from all over the world and discount prices on many, hard-to-find bottles. Organizers promise that “all the whisky lovers and collectors looking for an unconventional offer will really feel in their element. “ Location: New City building, ul. Młynarska 15, Warsaw Web: warsawwhiskyfest.com

INVESTING IN POLAND 2014

27

Event: Launch conference and gala of Warsaw Business Journal Group’s Investing in Poland annual publication. The event will feature discussion panels, a business mixer and an award ceremony honoring last year’s investments in Poland.

Location: Warsaw Stock Exchange, ul. Książęca 4 Web: wbj.pl/investing-in-poland-2015

Agnieszka Wasilewska-Semail has been named CEO of Rafako, a construction company based in Silesia. She will be replacing Paweł Mortas who held the post for two years. Before joining Rafako, Wasilewska-Semail had worked at PKO BP, which was Rafako’s main lender for years. Prior to PKO, she had worked for numerous banks in Poland and Belgium. She was also involved in the restructuring process of Polimex-Mostostal and in financing and finalizing major energy schemes in Kozienice, Opole and Jaworzno.

Ewa Szlachetka was named a partner at Wierzbowski Eversheds law firm, where she will head the law firm’s Mergers & Acquisitions practice. Szlachetka is an attorney at law with years of experience conducting significant transactions, for which she provided legal support while working with prominent law firms. She specializes in corporate law, legal support for mergers and acquisitions, including acquisitions of public companies, and restructuring of capital groups. She also handles private equity and venture capital fund transactions..

The supervisory board of state-owned investment firm Polskie Inwestycje Rozwojowe has dismissed the company’s CEO Mariusz Grendowicz. In a statement issued after the dismissal, Grendowicz wrote that the end of his mission as CEO “happened sooner than I could have expected.”

The new CEO will be chosen in a competition.

14

OCTOBER 2014 • WBJ OBSERVER

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NEWS / ECONOMY

FACTS AND FIGURES

Data overview overview Data overview

463 463 463

WARSAW STOCK EXCHANGE AS OF AUGUST 2014 WARSAW STOCK EXCHANGE Number of listed companies AS OF AUGUST 2014

1.9%

was the y/y drop in industrial output in August. industrial August. y/y drop in industrial output in August. was the y/y CPI deflation in Poland in August. y CPI deflation UNEMPLOYMENT in August. was the y/y CPI deflation (August) in Poland in August.

UNEMPLOYMENT remains the National (August) UNEMPLOYMENT Bank of Poland’s (August) the National reference interest rate.

Poland’s remains the National e interest rate.

Bank of Poland’s reference interest rate.

%

%

1.9% 0.3%

Number of listed companies

Trade volumes Trade volumes Trade volumes 11.7% PLN 156.94 billion

0.3% 2.5%

Number of listed companies

Shares

11.7% 11.7%

Shares

Shares PLN 156.94 billion Bonds PLN 156.94 billion PLN 694 million Bonds

2.5%

BondsFutures PLN 694 million PLN 6946.9 million PLN billion Futures

Futures Growth of main index (WIG), ytd PLN 6.9 billion 1.14% PLN 6.9 billion Growth of main index (WIG), ytd

3.3%

3.3%

was Poland’s y/y GDP growth in Q2 2014. as Poland’s y/y GDP rowth in Q2 2014. was Poland’s y/y GDP Monetary easing ahead growth in Q2 2014.

1.14%

3.3%

Growth of main index (WIG), ytd

1.14%

€171.3 mln € 171.3 mln € 171.3 mln

Following signs of a weaker-than-expected recovery, Poland’s Monetary Policy Council (RPP) is widely expected to cut the National Bank of Poland’s reference interest rate at its October sitting. Minutes of the meeting in September revealed was Poland’s foreign that a majority of the RPP’s members were in favor of cuts. trade deficit in Factors that could speed up monetary policy easing include January-July 2014. a drop in industrial output recorded in August and the secondwas Poland’s foreign trade deficit in January-July 2014. consecutive month of deflation. was Poland’s foreign trade Citigroup economists expect the RPP to reduce rates by 50 deficit in January-July 2014. basis points in October and then follow with a 25-point cut in November. BZ WBK analysts also expect rates to fall by 75 bps, in three moves.

Apr. ‘14

May '14

Mar. '14

Feb. '14

Jan. '14

-2

Dec. ‘13

Mar. '14

Jan. '14

Feb. '14

Dec. ‘13

Oct. '13

Nov. '13

Sep. '13

0

Jul. '14

Jun. '14

Aug. '14

Apr. ‘14

Mar. '14

Finance Minister Mateusz Szczurek on the macroeconomic framework for the 2015 state budget.

Jun. '14

Jan. '14

Feb. '14

Oct. '13

Nov. '13

Dec. ‘13

Sep. '13

2

Aug. '13

Aug. '14

Jul. '14

May '14

Jun. '14

Apr. ‘14

Mar. '14

Aug. '13

4

-2

OCTOBER 2014 • WBJ OBSERVER

-2

Sep. '13 Jun. '14

Jul. '14

Aug. '14 Feb. '14

Jul. '14 Jan. '14

Jun. '14 Dec. ‘13

May '14

Apr. ‘14 Oct. '13

Nov. '13

Mar. '14 Sep. '13

Jan. '14

Feb. '14 Aug. '13

Dec. ‘13

Oct. '13

Sep. '13

Nov. '13

16

0

6

2 0

0 -0.5

Aug. '14

Jun. '14

Apr. ‘14

May '14

Mar. '14

Jan. '14

Feb. '14

Dec. ‘13

Oct. '13

Nov. '13

Sep. '13

Aug. '13

0.5

2

8

4

Apr. ‘14

-0.5

Aug. '13 May '14

1

4

6

May '14

8

0

Oct. '13 Jul. '14

0.5 01.5

Nov. '13 Aug. '14

Year-on-year CPI inflation in Poland, 1 August 2013 – August 2014

Aug. '14

Poland’s industrial output 8 growth in y/y terms, August 2013 – August 2014 6

01.5

Jul. '14

Below zero

Deflation continues

“Compared to what was expected in June, it is now clear that economic growth next year will be more disappointing.”

Data source: Warsaw Stock Exchange, Central Statistical Office

%

WARSAW STOCK EXCHANGE AS OF AUGUST 2014

COMMENTARY / LAW

ANNA WOJCIECHOWSKA LL.M. LEGAL COUNSEL AND HEAD OF THE GERMAN DESK AT WKB WIERCIŃSKI KWIECIŃSKI BAEHR LAW FIRM

Agribusiness in Poland – an attractive market for foreign investors Due to economic and demographic changes, now more than ever European-inspired agribusiness can awaken the breadbasket plains of Poland

P

Images: Shutterstock, Ministry of Finance

oland has been at the forefront of foreign investments in the CEE region for a few years.

Recently, a survey of a group of over 1,400 investors with German capital conducted by the German-Polish Chamber of Industry and Commerce revealed that Poland beats the Czech Republic and Estonia in attracting foreign investors. In addition to EU membership, qualifications, commitment and productivity of employees, as well as availability of local suppliers are factors determining the choice of investment location.

Cornucopia of plenty Polish food has attracted recognition in Europe and the rest of the world, placing in the top ten of food exporters in the EU. The main export products of this sector include meat, dairy, cereals, vegetables and fruit. For many years, the main market of Polish agricultural products was Germany, which is a major consumer of poultry, fish, baked goods as well as milk, cream, frozen raspberries, strawberries, apple juice, wheat and rapeseed oil. Great Britain, France, the Czech Republic and Russia round out the top markets for Polish agricultural products. Polish wheat also travels to Saudi Arabia, Egypt, Zimbabwe and Sudan. The meat industry is the largest sector in Polish food production with over 100 thousand employees, with Animex Group and Sokołów as the main meat packers.

Eco around the corner The number of organic farms boosted by national subsidy programs is systematically growing in the last 10 years. Experts point out that Polish agriculture is predestined to use organic methods of food production due to the relatively low use of chemical means of production, good organic quality of the soil and biological diversity. In 2013, more than 80 percent of Polish organic food was exported to Western Europe and the USA. Healthy Polish food has also reached Japan and South Korea.

The number of organic processing plants is increasing as well. At the beginning of September 2104, a group of vegetable producers, Primavega, opened a modern facility for storage, packaging and distribution of certified vegetables.

Competition on this market is still small and the field for expansion of new organic processing plants remains open. Development of organic produce processing is a way to increase sales, as the majority of farms are located in agricultural areas, while consumption of such products - in large agglomerations.

Despite interesting investment prospects, foreign investors have to deal with the imperfection of the Polish legal system, in particular with the instability of tax legislation. However, the attractiveness of Polish agribusiness makes it worthwhile to take up this challenge.

WBJ OBSERVER • OCTOBER 2014

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COMMENTARY / LAW

AGATA SOBCZYK AUTHOR: AGATA SOBCZYK, LEGAL TRAINEE, KANCELARIA PRAWNA NOWICKI I ZIEMCZYK ADWOKACI I RADCOWIE PRAWNI SP. P. IN WARSAW

Help! My employer is mobbing me In 2012, some 452 employees sought compensation for a health disorder suffered due to mobbing.

How to protect yourself against such a turn of events?

H

ave you heard him yelling at me at the last meeting? I bet everyone could hear that!”

“I don’t get it. Why do I have to sign an attendance list every single day to be later forced to justify via an official email even the slightest 5-minute tardiness?” “I have a feeling that he sees everything I do – I can see him in my dreams correcting my reports, every single night.”

Office drama Not very surprised? Well, such situations happen in all companies and I bet that many can recall the feelings that a victim or a witness of such office drama might have.

How to tell the difference between a manager who simply controls the workflow and a boss whose supervision starts resembling the behaviour of an aggressor – a mobber?

OCTOBER 2014 • WBJ OBSERVER

Psychological state Employees are often unaware of the fact that mobbing might have a significant impact not only on the working climate, but also on interactions with family and other social relationships. Mobbing in the workplace might influence one’s psychological state so much that a mobbed employee might decide to take their life. Based on the statistics prepared by Heinz Leymann, a Swedish researcher and scientist, it appears that approximately 15% of suicides committed in Sweden every year might be directly related to mobbing in the workplace. According to Leymann, victims of mobbing in the workplace might suffer from post-traumatic stress disorder (PTSD), same as victims of war or a labor camp. Mobbed employees demonstrate an acquired tendency towards alcohol and drug abuse as well as violence. There were even some instances of mental disorders (paranoid complex).

"IT’S NEARLY IMPOSSIBLE TO ESTIMATE THE SCALE OF REPUTATION DAMAGE TO A COMPANY CHARGED WITH SUCH ACCUSATIONS.

Workplace bullying The term ‘mobbing’ has its origins in England, where ‘mob’ means crowd or rabble, but also harassment.

In the UK, such terms as ‘workplace bullying’ or ‘workplace harassment’ are used to precisely define the mobbing of an employee or a co-worker in the workplace. However, in Poland the word ‘mobbing” entered legal jargon with the reform of the Labor Code in 2004. This is when the term and its definition was officially introduced to define situations which should be classified as ‘mobbing’ under the country’s

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legal provisions and to serve employees, employers and courts.

Consequences The underlying reason for many companies to implement preventive procedures are health risks on the side of an employee and potential implications of

COMMENTARY / LAW

mobbing for the employer. Let’s imagine that some employee is found dead in his flat (overdose of sedatives). However, he had left a letter precisely describing the hardships that he had to suffer from his superior in the form of continuous criticism regarding his work, appearance or intelligence. The police and the prosecutor address the case, conducting an in-depth investigation inside the company which takes several months. All employees, including the CEO, are questioned about the circumstances that led to such a dramatic end. There is no surprise that law enforcement authorities are involved in the case, especially as the superior of a deceased employee might be charged with imprisonment from 3 months up to 5 years for the crime of employee abuse. It’s nearly impossible to estimate the scale of reputation damage to a company charged with such accusations nor the impact it might have on its employment market posi-

tion. Not to mention the fact that any news posted online by frightened and confused employees might overwhelm all anti-crisis measures implemented by PR specialists hired by a company.

Zero tolerance The first place is to ensure that each employee knows who to turn to in the event of mobbing, and how to recognize a mobbing case. An employee should, first and foremost, be aware of zero tolerance for mobbing in the workplace. Meaning that an employer will immediately remove a mobber from work or force him to undergo specially designed recovery programmes. It should come as natural that modern companies not only care for a proper work-life balance of their employees, but also notice alarming tendencies occurring inside the office and nip them in the butt.

WBJ OBSERVER • OCTOBER 2014

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COMMENTARY / ACCOUNTING

TADEUSZ ROBINSKI PARTNER & CEO AT KR GROUP

Real estate investment - an accountant’s perspective

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oland is the largest and the most dynamically developing real estate market in Central and Eastern Europe. The greatest advantages of Poland as a location for investments in the commercial real estate sector include: a stable economy based on a strong foundation, transparency, a large internal market and a good investment climate. Furthermore, growth in GDP and purchasing power (which is especially important for investments in the retail segment), as well as Poland’s location on the border of the EU and the Commonwealth of Independent States (important for industrial investors and developers) are also proving to be important for investors.

The capital invested in the office segment comes mainly from Germany, the USA and Austria, the capital invested in the retail sector - from France, Israel, the UK, the USA and Germany. The limited activity of Polish investors stems from the lack of adequate regulations in Polish law that would allow pension funds to invest directly in real estate.

The Polish property market is set for big changes – in the next two years the amount of space in all the major cities in our country will skyrocket by 20-25 percent. In Warsaw alone, up to a million square meters of offices could be delivered within the next 24 months.

Taking into account the interest of foreign investors in the Polish market and the ongoing transactions in all commercial real estate segments, it is expected that the total volume of transactions by the end of 2014 should be on par with or even higher than in 2013.

Some of the key factors determining investors’ choices relate to the taxation system: the level of tax burden connected with the planned investments and transparent practices of the local tax authorities. Investors take into account effective taxation (CIT, VAT, RET and CLAT) of the financing of the purchase of the properties, their further operation and of the potential exit scenarios. Investors also count on how

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quickly and efficiently they can receive a return of VAT paid on the purchase of real estate. Recently, we have noticed a change on the part of the tax offices with extensions of the VAT refund terms on sizeable property transactions. This may limit investors’ further commitment to invest in the local real estate market.

Investors cannot forget that due to the capital-intensive nature of investments in the real estate market, the issue of financing such projects is one of the key factors determining the investment's success. Financing institutions demand increasingly quick and high quality financial information on the status of the investment project, therefore the relationship with the accounting team on the side of the investor is of growing importance. Reporting to a variety of stakeholders each with different requirements: multinational foreign investor, local statutory accounts, financing institution with specific compliance needs, requires flexibility, quick responses and a well-implemented accounting system that gives required reports directly. u

INTERVIEW / JERZY BUZEK

I N T E R V I E W B Y E WA B O N I E C K A

WBJ OBSERVER TALKS WITH JERZY BUZEK ABOUT EU ECONOMIC RECOVERY, BUILDING AN EU ENERGY UNION AND THE NEED FOR INNOVATION AND REINDUSTRIALIZATION OF THE EU ECONOMY

Moving forward Photos: Bartosz Bajerski Images: European Parliament, KR Group

WBJ Observer: Considering the entry of some radical and anti-European parties, what do you consider to be the most important issue to deal with in the new term of the European Parliament?

Jerzy Buzek: For all in the European Union – politicians, economists, citizens – recovery from the economic crisis is the most important issue. This is regardless of what political parties they belong to or whether they are against the EU or for it. The committee I am chairing has become the most

important group in dealing with ways of recovering from the crisis. We have cured the most severe economic problems, but we are still in the convalescence phase.

What should be done to fully recover from the crisis and provide economic growth?

There is a scarcity of highly qualified jobs, which is troubling EU citizens, most of all young people. My committee is dealing with these problems.

I want to stress that it is not only young Poles who are

>>

WBJ OBSERVER • OCTOBER 2014

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INTERVIEW / JERZY BUZEK

leaving their country in search of work. One and half million Germans are looking for more attractive jobs elsewhere and also the citizens of the UK, a country where many Poles are seeking jobs, are circulating around Europe in search of the right job. The motives for migration of young Europeans looking for work could differ, but the root of the matter is the lack of attractive and innovative work in Europe. For instance young, educated Spaniards are migrating to South America in search of better employment.

In what ways could the EU economy raise its competitive capability?

First, we must have a stable and reliable supply of energy, because today, everything depends on having gas, oil, electricity and having them delivered at reasonable prices. The higher the costs of energy, the higher the cost of production and services. If the price of gas in Europe and Poland is higher than elsewhere, we cannot compete with many of our products on the world market. The second crucial element is to secure innovation and technological sophistication in European production. The third

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thing is to strengthen the common European market, because on such a common market the capacity for competition develops. The last aspect I want to point out is the need for re-industrialization of the EU economy and introducing innovation to our smaller and medium firms.

Could it be avoided at all?

As the recent economic crisis has shown, the EU countries which preserved and developed a significant industrial sector and did not base their economy mostly on the service sector – had overcome the worst crisis in stride. While in Germany, Sweden and Poland, 24, 20 and 20 percent of the GDP, respectively, comes from industrial production, in Southern European countries industrial production contributes only 8-10 percent to the nations’ GDP and these countries were hit the most during the crisis.

What is the role of your committee and the European Parliament in the process of negotiating the Transatlantic Trade and Investment Partnership – TTIP between the European Union and the US?

“THE EU COUNTRIES WHICH PRESERVED AND DEVELOPED A SIGNIFICANT INDUSTRIAL SECTOR AND DID NOT BASE THEIR ECONOMY MOSTLY ON THE SERVICE SECTOR – HAD OVERCOME THE WORST CRISIS IN STRIDE.

Images: Shutterstock, European Parliament

INTERVIEW / JERZY BUZEK

The TTIP negotiations are of particular interest to the Committee on Industry, Research and Energy and I was also elected as a permanent representative of my committee to the Committee on Trade, where talks with the Americans are taking place. TTIP negotiations are aiming to create a free Euro-Atlantic trade market, which will be the biggest such agreement in the world and will offer enormous opportunities for economic growth in the EU. However, due to the character of existing trade and investment barriers between the EU and the USA, the conclusion of such an ambitious and comprehensive agreement and its full implementation will take time, both due to the difficulty of the process itself and the need for gradual changes in some sectors of trade and investment on both sides of the Atlantic.

I want to turn now to the Polish proposal of building an EU energy union. In your view, what are the chances of implementing such a project?

In building the energy union, we will have one serious difficulty – the agreement for a common purchase of energy. But some elements of common energy policy are already under construction. The process of creating a European energy community has been realized in the last four years. While we were not able to apply the idea of a common energy purchase, some other provisions are in place.

We coordinate the purchases being made and the European Commission is protesting against some of the transactions done by big European energy companies with outside providers, especially from the East.

Do you think that the current situation in Ukraine could speed up the process and convince those who are still opposed to this idea?

The idea of building an energy union, as presented

by Poland, came at a time when members of the EU are even more aware of the importance of common energy policy. The infrastructure groundwork is done. We now have some regulations regarding the security of gas provision. We know from which

directions, on which conditions and from which reservoirs we can provide gas for a member state lacking supplies. As much as â‚Ź6 billion was provided from the EU budget for building gas connections. Poland now has 12 such connections with Germany, the Czech Republic and Slovakia.

Additionally, we have common research in new energy technology. In my opinion, the conditions are perfect for further steps in the implementation of an energy union.

Yet there is no agreement for conducting a common purchase of energy and, for instance, Poland is paying much more for the delivery of energy from Russia than other members of the EU, like Germany. So the particular interests of the members are still prevailing, regardless of the recommendation of the European Commission. Is this a deadlock in building an energy union?

Yes, the political leaders of many member states are not following the obligations which they have made on the EU level. I have no doubt that we will push the matters forward due to the Polish proposal presented in the European Council and also an awareness of the crisis in the East of Europe, which may possibly effect the delivery of gas from that direction.

In EU institutions, also in the Parliament, there is strong support for building a common energy market. When I presented such a report one year ago, 90 percent of deputies voted for creating such a common market, so now the main obstacle is the position of the governments of EU members.

Poland has some problems with conducting exploitation of shale gas on its territory because of EU opposition to shale gas extraction, which is conflicting with the goals of our authorities and the firms involved. How do you evaluate that problem?

The situation with exploitation of shale gas in the EU is entirely different than it was four years ago, when Poland discovered it had huge resources.

At that time in the EU, there was definitive op-

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WBJ OBSERVER • OCTOBER 2014

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INTERVIEW / JERZY BUZEK

Jerzy Buzek

I

Image: ntpr.pl

n the 1980s, Buzek was an activist in the Solidarity trade union and later on joined the political party formed on the base of Solidarity (AWS – Solidarity Electoral Action). Between 1997-2001, he was the Prime Minister of Poland. His cabinet was responsible for four political and economic reforms: educational, health care, local government and the pension system. In 2004, he was elected into the European Parliament and reelected five years later.

Both times, he received a record number of votes. In July 2009, he was named President of the European Parliament, a post which he held until January 2012.

Currently, he is a member of the Civic Platform. The location is also close to the A2 highway and not far from Poznań-Ławica international airport. The company will launch construction work on the site in the autumn of 2014. Production is scheduled to start in 2016.

position to exploitation of shale gas, which could have possibly ended with a formal prohibition.

I am really surprised that it is not widely pronounced in Poland that the EU has changed its position and that we can proceed with shale gas exploration without any problems for the coming 2.5 years. Granted that there are still some questions linked with the technology of such exploration among people dealing with it.

The EU withdrew its opposition against exploitation of shale gas for a specific period, but what will happen next?

The EU postponed its opposition for 2.5 years and I am convinced that the experiences we’ve gained will allow us to prolong that period, especially since some other EU members – the UK, Romania support such exploitation, so we are not alone.

Hypothetically, the introduction of new regulations in the field will be linked with decisions taken by the European Council. Poland should intensify its exploration of shale gas and decide whether it will be feasible, due to our geological conditions. We must decide whether exploitation of shale gas will significantly improve our

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energy balance. It is still a new technology and let’s remember that not every innovative project has proven itself to be efficient in every country.

Our production of electricity is based on coal and coal mining is also under many EU restrictions. This adds to our own difficulties in mining, where many mines still work with outdated technology, so the costs of production are high and our coal is not competitive on other markets. What should be done in such a situation?

First of all, nobody in the EU is against our exploitation of coal. The matter is how to do it and at the same time reduce emissions of CO2. Poland has spent a lot of money on reducing such emissions, so I do not see any restriction imposed by the EU on our coal mining. Reduction of emissions of CO2 and developing technology towards this end is necessary, not because the EU advocates it, but because it is necessary for preserving our ecological environment and human health. I think that our political class and managers should look at some EU restrictions and recommendations not as obstacles, but rather as a common need. u

“REDUCTION OF EMISSIONS OF CO2 AND DEVELOPING TECHNOLOGY TOWARDS THIS END IS NECESSARY, NOT BECAUSE THE EU ADVOCATES IT, BUT BECAUSE IT IS NECESSARY FOR PRESERVING OUR ECOLOGICAL ENVIRONMENT AND HUMAN HEALTH.

INTERVIEW / JERZY BUZEK

WBJ OBSERVER • OCTOBER 2014

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DONALD TUSK’S APPOINTMENT AS PRESIDENT OF THE EUROPEAN COUNCIL PUT IN MOTION A COMPLICATED SERIES OF POLITICAL CHANGES THAT WOULD MAKE WRITERS OF HOUSE OF CARDS JEALOUS

New opening B Y JAC E K C I E S N OW S K I

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Images: Shutterstock

COVER STORY / POLITICS

COVER STORY / POLITICS

Even though Donald Tusk’s nomination to his new job in Brussels took many by surprise, it has been talked about for at least a year. His name was often being thrown in the

Image: European Commission

hat by many analysts. Still, until a couple of weeks before the summit no one took such reports seriously. This all changed when UK Prime Minister David Cameron endorsed Tusk a few days before the summit. When asked by the Polish Press Agency, Piotr Serafin, deputy in the Foreign Ministry, said that in his opinion, Tusk realized that he had a chance to replace Belgian Herman Van Rompuy at the EU summit midJune, when the negotiations on what the new EU leadership would look like entered the final phase.

E

The EU leadership and who gets which piece of the pie is a very complicated process. One’s abilities or experience are not the deciding factor when choosing the new President, Commissioners and many others to positions in Brussels.

Geographical aspects are just as important, as all 28 countries need to be represented in the new government. When it was clear that the bloc’s very important foreign policy seat, which Poland hoped would be awarded to Radosław Sikorski, would be given to Italian Federica Mogherina, the highest-profile spot – the EC presidency should be reserved for someone from the CEE region. Tusk fitted that role the most, leading CEE’s biggest economy for seven straight years, with Poland being the only EU member to avoid falling into recession in 2009 amid the global financial crisis.

Shocking nomination Internationally, people where shocked that Tusk was appointed as the new EC president. Many pointed to his lack of language skills. “Nothing is good enough for Europe, including my English today,” Tusk said, adding that he will now “polish his English.”

Domestically, his nomination was also received as a surprise, but for different reasons altogether. His move to Brussels leaves a big hole in the leadership of his Civic Platform (PO) grouping which is trailing in the polls behind the conservative Law and Justice (PiS) party with one year left till the crucial parliamentary elections.

“The main challenge for the next prime minister and the

WBJ OBSERVER • OCTOBER 2014

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COVER STORY / POLITICS

party leader is to reconfigure the party and its leaders in such a manner as to have a realistic chance of winning the next election,” Radosław Markowski, professor of political science told Wall Street Journal.

Tusk, is a very skilled politician. You have to be one if you want to rule not only the country, but your own, partitioned grouping for so long. Over the course of time, he managed to fend off opposition, both internally and externally. But after such a long time in the front seat he could have felt a little burned out, especially that his prospects for a third straight parliamentary victory were getting slimmer with every poll.

Some even had Law and Justice leading by 15 percentage points and bridging the gap in less than a year would be difficult if not impossible.

With both Tusk and Bieńkowska out of the picture, the task of leading the new government was passed onto the Speaker of the Sejm – Ewa Kopacz. The 57-year-old MD is considered to be close to Donald Tusk, having acted as one of his close political advisers. She was a member of parliament between 2001 and 2007, until she became health minister and later on, speaker of the Sejm. Will she be able to lead the PO to a third consecutive parliamentary victory?

“NOTHING IS GOOD ENOUGH FOR EUROPE, INCLUDING MY ENGLISH TODAY.

Images: Mariusz Grzelak/REPORTER

Tusk effect Even though, Tusk’s nomination provided a much needed boost for PO in some of the polls. Tusk’s grouping even surpassed PiS in some of the polls. But the “Tusk effect” won’t last until next year’s election. Civic Platform will be lucky if this wave continues until November’s local elections.

Tusk’s move to Brussels prompted an avalanche of changes in Poland’s ruling party. The former PM took with him Elżbieta Bieńkowska, who in his cabinet was responsible for infrastructure and development. Bieńkowska was seen by many as Tusk’s successor, but he decided that she will be better off in Brussels where she will helm the internal market, industry, entrepreneurship and SME commission.

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COVER STORY / POLITICS

WBJ OBSERVER • OCTOBER 2014

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COVER STORY / POLITICS

False Start The first impression Kopacz made was a clear failure.

From basic mistakes (calling the minister of culture a minister of science), to patronizing both her cabinet and the media (explaining that Mateusz Szczurek is a good candidate for finance minister, because “he doesn’t sleep at night because he’s counting”). Her biggest blunder, however, was when asked if Poland will supply weapons to Ukraine. She went on a confusing rant saying that “she is a woman … and Poland should behave like a responsible woman. Our country, our home and our children are the most valuable things for us.” Edward Lucas, former Economist journalist called Kopacz’s first conference an “utter car crash.” The new PM clarified later, that Poland’s stance towards Russia will change under her rule. “We shouldn’t rush to become part of this military conflict,” Kopacz said.

“When the big European family decides that we want to help Ukraine, then we should take part in providing help, but together with other countries,” she added.

After the speech, the Polish TV station TVN 24, published a behind the scenes conversation between Tusk and Minister of Culture Małgorzata Omilanowska, in which the former PM said that he talked to Kopacz afterwards

and she was “completely devastated.” Still it’s hard to write Kopacz off just after one speech. The next year will give us the answer if she is capable of filling Tusk’s shoes.

The biggest loser The one who was hurt the most in all this reshuffling is clearly Radosław Sikorski. Tusk’s decision cost him not only the EU job, but also the foreign minister’s seat.

Sikorski, who is known for his anti-Russian stance, had thrived in his post in recent months. The Russia-Ukraine conflict allowed him to do what he loves the most – criticize Putin. But such radical position is not something the EU, which is trying to resolve the conflict on its eastern borders, is looking for at this moment. Perhaps Tusk, foreseeing that in his new role he will have to publicly

“GRZEGORZ SCHETYNA’S POLITICAL CAREER, AT LEAST IN THE CIVIC PLATFORM, LOOKED TO BE ENDING WITH THE CURRENT PARLIAMENT’S TERM.

Images: European Parliament

“XXXAND NEEDS TO JOIN TRO ZONE FOR THALUTE CORE OF EUTE CORE OF EUTE CORE OF EUROPE.

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COVER STORY / POLITICS

disagree with Sikorski, decided it would be better if Sikorski took a backseat for a while.

This was definitely not Sikorski’s year. He had been tipped as a possible new NATO secretary-general or as the EU’s chief diplomat and he will end the year outside the cabinet.

Even though, Kopacz said about him being offered the parliament’s speaker role, “he has not been fired. It is a promotion.

It is a strong, sovereign position for a strong politician.” Few people believe that is the case.

Political mastermind The person who replaced Sikorski, however, is the biggest winner here. Grzegorz Schetyna’s political career, at least in the Civic Platform, looked to be ending with the current parliament’s term. Schetyna, who for many years was Tusk’s right-hand, fell out of favor a while back and it seemed that his fate was sealed after he lost the vote to become PO’s leader in 2013. When none of his allies could be found on the party’s candidate lists for the upcoming local elections, it could be seen as a sign that Schetyna’s name won’t be on the candidate lists for next year’s parliamentary election either.

But then two things happened that turned the whole situation upside down. First, President Bronisław Komorowski disapproved of Kopacz’s candidates for MFA, which included former Economy Minister Jacek Rostowski, who in Komorowski’s eyes did not have any diplomatic experience.

Schetyna had been a frequent guest to the President’s Palace

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COVER STORY / POLITICS

in recent months, getting closer to the President and advising him in various aspects and Komorowski pushed for his candidacy for the MFA spot.

Second, soon after Tusk was appointed as President of the EC, Schetyna announced that he will run for the Civic Platform leadership when Tusk will vacate it before his move to Brussels. This meant that the party, one year before the parliamentary elections, would be ravaged by internal politicking with several factions fighting for power. Traditionally, the prime minister is also the party’s leader and Schetyna throwing down his gauntlet would be a challenge to Kopacz’s position both in the party and in the government.

“I wanted a strong government with the backing from the whole of Civic Platform … We have elections next year, and as they say, it’s all hands on deck. That’s why Grzegorz Schetyna is in the government,” Kopacz said. “[This will be a] great challenge, especially with the difficult international situation on our eastern border,” Schetyna said, as he entered the foreign ministry to take up his new job.

For the most part, the Kopacz cabinet is the same as Tusk’s. Besides a new foreign minister, the notable changes include the appointment of Teresa Piotrowska as Interior Minister. Her predecessor, Bartłomiej Sienkiewicz was one of the main actors in the tape scandal, when he was recorded having a private conversation with the NBP head Marek Belka. They were discussing the conditions under which the bank could boost the economy to help the government avoid electoral defeat. Sienkiewicz narrowly lost his job soon after the tapes were published by Wprost weekly. u

“SOME CONTINUITY REGARDING UKRAINE IS PROVIDED BY DEFENSE MINISTER TOMASZ SIEMONIAK, WHO WAS ALSO NAMED DEPUTY PRIME MINISTER.

Image: Ministry of Foreign Affairs

Some continuity regarding Ukraine is provided by Defense Minister Tomasz Siemoniak, who was also named deputy

prime minister. In contrast to Kopacz’s comments, he said that Poland is willing to sell weapons to Ukraine.

RADOSŁAW SIKORSKI (LEFT) AND GRZEGORZ SCHETYNA (RIGHT)

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COVER STORY / POLITICS

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FEATURE / BITCOIN

Bitcoin – A striking global

financial phenomenon comes to Poland B Y S E R G I U S Z P R O K U R AT

It is difficult to say what Bitcoin actually is. It has no single creator. It has no bank. No management board.

Thus, there is no unequivocal answer to its tangible existence. Is it a free currency, a threat or an innovative technology which is about to revolutionize trade?

Even its partisans can’t agree on what consequences a widespread virtual currency will bring, not to mention its critics. Meanwhile, Bitcoin is gaining popularity in Poland

B

Bitcoin is a typical digital era invention. It has everything in one package. It brings together the features of a currency, a commodity and a technology. We can use it as a medium of a payment, it has value as gold or platinum and it is a work-in-progress technology based on open-source and peer-to-peer software, thanks to which the parties taking part in the transactions remain completely anonymous.

There are many virtual currencies on the market, e.g. litecoin, namecoin, PPcoin. But none of these come close to Bitcoin’s popularity. Given the current

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crisis and a lack of trust in the state or the financial institutions, they are becoming increasingly popular, especially among IT geeks, anarchists, libertarians.

If you mine it, they will come Where does virtual money come from?

It is mined in the digital world! A strong computer and a quick graphics card are needed. Such equipment utilizes its processing power and calculates – conducting a very advanced mathematical operation – more digital currency. Each subsequent Bitcoin mining project is harder – the mathematical operation requires more

FEATURE / BITCOIN

1%

of Bitcoin transactions are made with PLN.

6th

The złoty is the 6th most popular currency in the Bitcoin trade.

13 mln

The number of Bitcoins in circulation is constantly growing. It surpassed the 13 mln mark in July 2014.

21 mln Bitcoins will be mined overall. Analysts calculate that the last one will be mined around 2140.

Images: Shutterstock

time in order to successfully acquire the currency. This is why today, in order to mine Bitcoin, you need a complex set of computers which are devoted to calculation. Once the virtual currency is mined, it is transferred to our virtual wallet and we can use it for payment in e.g. internet stores. Currently, micropayments in bitcents (0.01 BTC), and milibits (0.001 BTC) are used. These can be sold, traded (and speculated with) on virtual Bitcoin exchanges (e.g. the Polish Bitcurex). Thanks to this, Bitcoin is becoming increasingly popular, although its price is highly volatile.

Cut out the middleman In Poland, Bitcoin is at the peak of its popularity. While the overall worldwide share of Bitcoin transactions using the złoty is about 1 percent, it still makes it the sixth most popular currency in the Bitcoin trade.

“ONCE THE VIRTUAL CURRENCY IS MINED, IT IS TRANSFERRED INTO OUR VIRTUAL WALLET AND WE CAN USE IT FOR PAYMENT IN E.G. INTERNET STORES.

This is due to fertile ground for such a development. A society which doesn’t trust the state or the financial institutions, mainly young people, see it as a means of getting rich on fair exchange conditions, without banks or civil servants. Evidence of this fact is a Bitcoin Embassy on ul. Krucza in Warsaw, created to support the community of local Bitcoin developers. It is only the third establishment of its kind in the world.

Just two weeks after opening its doors, the embassy installed the first Bitcoin ATM. It wants to launch up to 30 such machines by the end of the year. “Bitcoin is the future and Poland has the chance of becoming a leader on this modern market,” says Piotr Hetzig on the embassy’s web page. At the same time, on the streets of Warsaw you can find taxis that accept Bitcoin as a form of payment.

WBJ OBSERVER • OCTOBER 2014

>>

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FEATURE / BITCOIN

>>

Fluid asset Businesspeople strike a similar chord.

“Bitcoin is a revolutionary technology,” says Lech Wilczyński, the owner of the InPay.pl service. For him, the greatest upside of Bitcoin is the anonymity of transactions and limited costs, thanks to which Bitcoin is a competitive alternative to other forms of payment. Sending funds instantly anywhere in the world without commission is an amazing possibility.

InPay.pl is a business based on Bitcoin exchange implementation. Among clients who use Bitcoin, InPay.pl cooperates with the Polish hosting company Data Space and the crowdfunding portal Odpalprojekt.pl.

Poland, which has good IT professionals, is at the very forefront of countries in terms of active Bitcoin nodes. “We feel as if we had received a tool as innovative as the internet itself, in its early stage of development,” said Maciej Ołpiński, the founder of Coinify.io, a community of cyber currency enthusiasts. Thanks to this technology, any company may issue their own currency, shares or create new equity structures and apps. The most known Bitcoin developer community is Ethereum.

BITCOIN USAGE IS BASED ON SIMPLICITY, DIRECTNESS AND CUTTING OUT TRANSACTION FEES

Images: Shutterstock, Ambasada Bitcoin

Growing pains Bitcoin is treated with suspicion by states and regulatory institutions.

Financial institutions and credit card companies are very skeptical of virtual

BITCOIN EMBASSY ON KRUCZA STREET IN WARSAW, CREATED TO SUPPORT THE COMMUNITY OF LOCAL BITCOIN DEVELOPERS

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OCTOBER 2014 • WBJ OBSERVER

FEATURE / BITCOIN

currencies because it might lead them to lose their power. Moreover, Bitcoin is ideal for money laundering. The Ministry of Finance in Poland states that among digital currencies, which are legal, Bitcoin isn’t a “means of payment,” nor is it an “electronic money” or “a financial instrument.” However, it is subject to exchange and has an “equity value.” This issue is currently being debated by the European Union. If indeed the exchange of Bitcoin has equity value, then each transaction requires VAT to be imposed and this hinders Bitcoin’s role as currency. Is this justified? What is the most common fear when it comes to virtual currency?

As an investment Many economists think that virtual currencies don’t offer added value, but they have a contractual value, due to trust, just like fiat currency. In the world of internet creativity, Bitcoin is a great line of business, but not for everyone.

Those who enter into Bitcoin at the

“VIRTUAL CURRENCIES DON’T OFFER ADDED VALUE, BUT THEY HAVE A CONTRACTUAL VALUE, DUE TO TRUST, JUST LIKE FIAT CURRENCY. beginning gain the most because they are closest to the currency’s source (they can probably hoard the most Bitcoins). The rest contribute to its increase in power and thus cause its price to rise. Once more units are “mined,” there are more Bitcoins in circulation and less “miners,” who become crowded out by normal users of the Bitcoin wallet. Because demand for Bitcoin is rising, its value is also increasing. This is a great business model for the currency’s creators, who can easily treat the virtual currency as a profit-generating operation.

Fears abound Is this simply an anonymous financial pyramid? The early miners are partners, the later miners are managers and those at the very end (who declare their faith in the currency), are the small fries. When the bubble bursts, it will suddenly come to light that everyone has been hit. This may lead to a similar crisis as that provoked by Ponzi, the author of the first financial pyramid in the US. When his idea was uncovered, Ponzi lost everything, and so did the investors. We don’t know if this is the scenario awaiting Bitcoin.

The flourishing of virtual currencies and the wave of entrepreneurial interest in creating payment systems based on this medium may be slowed down by government intervention. Nonetheless, Wikimedia stated in 2014 that it accepts Bitcoins and governments do have something to fear. The computer trick, which enables people to transact without government knowledge, may soon turn into a revolution. u

WBJ OBSERVER • OCTOBER 2014

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FEATURE / LUXURY MARKET

B Y B E ATA S O C H A

Luxury in demand

The

The number of high-earning Poles is increasing. In 2013, there were 786,000 individuals with incomes exceeding PLN 85,000 a year. Their number should be close to 1 million in 2016, according to projections made by the Ministry of Finance. Whether we can call people earning PLN 85,000 a year (PLN 7,000 a month) “rich” is debatable.

However, there is no denying the fact that the demand for luxury goods is growing in Poland. Last year, the value of the luxury market stood at PLN 10.8 billion (a 5.9 percent bump compared to 2012), whereas in 2016, the market should

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OCTOBER 2014 • WBJ OBSERVER

be worth nearly PLN 13 billion, according to consultancy KPMG. “Despite the fact that purchasing power in Poland is lower than in Western European countries, it has continued to increase over the years as the Polish economy is developing. Hence, Polish consumers will have increasingly higher disposable income, and will therefore be able to pay for luxury goods and services,” said Michael Phan, associate professor at EMLYON business school (France) specializing in luxury management & marketing and the editor-in-chief of the Luxury Research Journal.

Images: Shutterstock

A red Porsche and a 200sqm apartment on the 50th floor of a residential tower, the classic symbols of luxury living, are getting popular in Poland. So are designer clothes and premium spirits.

Still, Polish top-earners do not always shop at home and increasingly see some luxury goods as a form of investment

FEATURE / LUXURY MARKET

High life

4.5 bln

How much do Poles spend on luxury goods? (in PLN, data for 2013)

0.5 bln

Cars Clothing and accessories

1.8 bln

1.2 bln

Hotel and spa services Apartments and residences Spirits and cigars

1 bln

0.7 bln

Jewelry and timepieces Source: KPMG WBJ OBSERVER • OCTOBER 2014

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FEATURE / LUXURY MARKET

A TASTE OF LUXURY

“The

Image: Shutterstock

market for whisky is growing in Poland. Over the past 10 years, sales of whisky have increased at an average rate of 20 percent annually and the growth is picking up pace. The market grew by 39 percent in volume and 37 percent in value over the past year. In 2013, 26.7 million bottles of whisky, worth a total of £60 million, were imported into Poland, placing the country 11th in the world, according to Scotch Whisky Association.

There is an increasing interest in the premium segment. The import of single malt increased by 100 percent in value and 50 percent in volume over the past year. This means that more expensive brands are purchased. For the past four years, we have also observed declining imports of bulk blend, which means that Poles buy less of the inexpensive lower quality brands.

Exclusive brands of whisky are often bought to be consumed, but also increasingly as a form of investment.

Clients who invest in whisky usually buy two bottles of the same type: one for the palate, the other for the collection.

We’ve had a new record this year in terms of whisky price in Poland. A client purchased Bowmore 50 Year Old, one of only 50 bottles released this year worldwide, and paid over PLN 60,000 for it. Towards the end of the year, the oldest expression of the Glenfarclas distillery will be released on the market. The 60-year-old whisky has been priced at £14,000 a bottle and we know of three bottles that have already been pre-ordered.

Jarosław Buss, an expert on whisky and a co-organizer of the Warsaw Whisky Fest

The real question that luxury goods producers are asking themselves is not whether Poles are buying luxury goods, but where they are buying them. Even though 69 percent of global luxury brands are available in Poland, mostly Italian and French brands, it doesn’t necessarily mean that Poles will buy them at home. “Luxury goods are always cheapest in the home market of that brand,” said Phan. One of the biggest issues luxury brand retailers face is how to persuade wealthy Polish consumers to buy at home, and not go to Paris or London to shop for better prices.

The Fifth Avenue experience The fashion segment seems to be the most susceptible to “shopping tourism.” Wealthy Poles prefer to buy luxury garments in Paris or Milan in-

stead of in Warsaw or Kraków, not only because of the lower prices, but mostly because of the wider selection of highend stores. They also crave the experience of high street shopping. Polish high streets are still a far cry from their European counterparts, which is why luxury brands are still wary of opening their stores in Poland.

“In emerging markets, stand-alone stores might not be the best option for luxury brands if there are no suitable shopping streets that can reflect the positioning of the brands, such as Avenue Montaigne or Faubourg SaintHonoré in Paris,” Phan explains. “The option for luxury brands would be to open stores in luxury shopping malls that have the right market positioning (high-end buildings, well-maintained inside and outside, a good location in the city, traffic of the right type of

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OCTOBER 2014 • WBJ OBSERVER

consumers, easy access, car parking facilities, etc.).”

The fact that Poles shop for luxury goods abroad may blur the picture in most product categories. The data for the car segment is much more reliable, though, since vehicle registration is necesarry. Data from automotive research firm Samar show that in the first six months of 2014, the number of Porsches registered in Poland increased by 78.17 percent (408 cars were registered in H1 2014 compared to 229 cars in the corresponding period of 2013). The number of Maseratis, Bentleys and Ferraris driven on Polish roads also grew in year-on-year terms, but the figures are still too small to offer statistical value (20 Maseratis, 12 Bentleys and 9 Ferraris were registered in January-June 2014).

THE NUMBER OF INDIVIDUALS WITH INCOMES EXCEEDING PLN 85,000 A YEAR IN 2013.

FEATURE / LUXURY MARKET

Luxury living The size of the luxury housing segment is not as easy to estimate, as most of the luxury residences are built by the investors themselves rather than by a developer. Their market value thus remains unknown, unless they are sold later. According to KPMG data, the value of all luxury residences and apartments sold, both on the primary and secondary market, stood at €900 million in 2013. Including the individually-built residences, the figure would far exceed €1 billion, the firm estimated.

In Warsaw alone, ten prime residential projects were completed in the past four years, altogether offering over 900 units with prices around PLN 20,000 per sqm, according to data from real estate consultancy Knight Frank.

“The market for luxury goods in Poland is doing well, as evidenced by the fact that we managed to find buyers for luxury apartments in our Rezydencja Foksal development three years ago, when economic conditions were far worse than today,” said Rafał Szczepański,

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vice president of BBI Development.

The developer has recently purchased, together with US real estate fund Amstar, the unfinished luxury residential tower Złota 44. The iconic tower was bought from Orco Group for €63 million. The sale of Złota 44 apartments has thus far proven quite difficult, mostly due to the previous owner’s steep pricing policy and delays in project development. However, the new owner expects to sell all the

“THE VALUE OF ALL LUXURY RESIDENCES AND APARTMENTS SOLD, BOTH ON THE PRIMARY AND SECONDARY MARKET, STOOD AT €900 MILLION IN 2013.

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remaining units (80 percent of the 266 apartments have yet to be sold) within the next few years.

Not only consumption One of the luxury goods segments with the strongest growth figures is alcohol.

Poles are buying more prime quality wine, cognac and whisky than ever before.

“There is increasing interest in the premium segment. The import of single malt increased by 100 percent in value and 50 percent in volume over the past year. This means that the price of imported bottles grew – we import more and more of the expensive brands,” said Jarosław Buss, a whisky expert and co-organizer of the Warsaw Whisky Fest.

Poles are interested in wines and whisky not only for their taste value. “Exclusive brands of whisky are often bought to be consumed, but also increasingly as a form of investment. Clients who invest in whisky usually buy two bottles of the same type: one for the palate, the other for the collection,” Buss added. u

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FEATURE / LUXURY MARKET

Emerging markets open to luxury Interview by Beata Socha

Michael Phan: The answer is definitely yes! Despite the fact that the purchasing power in Poland is lower than in Western European countries, it has continued to increase over the years, as the Polish economy is developing.

Hence, Polish consumers will have increasingly higher disposable incomes and will therefore be able to pay for luxury goods and services. However, a key question remains: how are luxury brands going to persuade wealthy Polish consumers to buy at home, and not go to Paris or London to shop for better prices? (luxury goods are always cheapest in the home market of that brand).

luxury product categories are fashion (ready-to-wear), followed by shoes, and spirits such as whisky and cognac.

However, other product categories such as cosmetics, cars and luxury properties are also on the increase in Poland.

Where do luxury brands venturing to Poland (and other emerging markets) originate from? Are they mostly European, American or both?

Which luxury goods market segment is developing most rapidly in emerging countries?

There is no strict rule about which product categories develop best in emerging markets. Each country is different and consumers in those markets are very different in their adoption of luxury goods. In Poland, the first

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OCTOBER 2014 • WBJ OBSERVER

Dr. Michel Phan is an associate professor at EMLYON business school (France) specializing in luxury management & marketing. He is also the editor-in-chief of the Luxury Research Journal

The luxury industry today is dominated by European and American brands. So, naturally, as the luxury market is developing in Poland, those same brands are the frontrunners to enter Poland. Brands from the major groups such as LVMH, Richemont, Kering, Hermes, L’Oreal, Estee lauder, Ralph Lauren, Tiffany&Co. are definitely the major players.

What is the market strategy of a luxury brand entering a country like Poland? How do they prefer to operate, in multi-brand upmarket stores or do they open their own brand stores?

There are a few “luxury streets” in Poland such as: ul. Długa in Gdańsk, and ul. Świdnicka in Wrocław. In Warsaw, you have ul. Chmielna, ul.

Nowy Świat and ul. Bracka streets as well as Pl. Trzech Krzyży. In Kraków, there are ul. Floriańska and ul.

Grodzka. These are suitable locations for luxury brands to open their stores in Poland.

Alternatively, if there are no “luxury streets” in a city, brands will likely look for high-end/luxury shopping malls (which could be newly built) such as Vitkac in Warsaw to open their stores. u

Images: Shutterstock, Bluesky PR

Is Poland an attractive market for luxury brands? After all, the purchasing power is significantly lower in Poland than in the leading Western European countries.

A thinking city

– It’s time to go smart Intelligent technology, coordination, thrift: thinking about the Polish city of the future.

Supplement partnership

SMART CITIES

Smart City, Poland Orange Polska is looking to harnesses its telecommunications network to provide intelligent solutions for city planners. In the midst of this is M2M technology and its ability to teach machines to communicate. Polish cities are eager to jump on the smart city bandwagon B Y M AT T H E W C Z A JA

S

eldom ever is there an opportunity to define a path for a city, a country almost from scratch. Warsaw as well as Poland’s regional cities like Kraków, Wrocław, Poznań, Łódź, the Tri-City and the Silesian conurbation have had the opportunity to develop their own face. In the last two decades, infrastructure within the cities is catching up as well, but it’s not going to happen overnight. Road networks are trying to keep pace with the rapid increase in car ownership. New motorways, airports, concert halls are being built. EU funding & support is proving to be an incentive in the shaping of the new Polish city. There is a lot to be done here.

Developing soul The Polish Metropolises are a unique hodge-podge of modern apartments and shopping centers mixed with post-industrial space, rural suburbia and communist-era planning. A flat country with a growing economy and good IT people, this is a city planner’s dream.

Indeed, the country is at a pivotal point where the experiences of Europe’s advanced urban centers can serve as a catalyst for new solutions in the Polish urban space. On the other hand, much inspiration is drawn from far off places like Bogotá or Middle Eastern smart cities, which have shown that ecology, technology and a little bit of creativity can go a long way. Most likely, the Polish city of the future will be a fusion of citizen input combined with the latest solutions in smart technology, which the following pages will present in further detail.

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Challenges ahead Our development in the new millennium is not without its challenges. The European Community has outlined an Energy end-use efficiency and energy services directive, which has been the reason for implementation of smart metering in many European countries. In the works is a carbon storage atlas for Europe and cities like the ones making up Poland’s Silesian coal-mining district are getting on board with green energy.

Smart is already here According to a report published in 2013, “The Future of Cities: Cities of the Future” by THINKTANK Centre for Dialogue and Analysis, smart solutions are already present in Poland. Besides the obvious, like surveillance systems and wifi networks, smart solutions are popping up all over the place.

Multi-functional city cards, utility network management systems, bike rentals, and public transit management systems all rely on smart technology, geolocation devices and a systematic approach to data analysis.

Of course, as with all new solutions, some systems have had their pitfalls. Not all intelligent system solutions have been as intelligent as expected. A steady approach is ideal when complimented with feedback from the city and its citizens. Using existing GSM mobile phone networks may prove to be costefficient and limit the risks connected with greenfield projects.

Images: Shutterstock

SMART CITIES

What is M2M? Many of today’s smart technologies rely on M2M. Simplified, this means Machine-to-Machine communication. When devices communicate in a network, this resembles human communication. Like with a human, to socialize a machine, you need to educate and train it first.

M2M’s origins lie in telemetry, an automated transmission process for communicating vital measurements. Its application has been used for decades in meteorology, space exploration, motor racing and many other fields.

The entry of microprocessors onto the market has made M2M less expensive and thus opened the doors to a plethora of M2M applications, using technology as common as the mobile phone or tablet. In addition, the microchips used in this technology are energy-efficient. In some cases, the devices communicate using radio waves. In the case of mobile phone networks, SIM cards communicate with one another and are a great source of vast amounts of data for studying mobility patterns.

The Power of Data Analysis It’s important to note that smart solutions have been on the market and are already used in homes and in enterprises. Smart devices turn home appliances on or off or monitor energy usage in production halls. The depth of data analysis coming from

smart technology is truly amazing. Take the elastic electricity tariff implemented in Germany.

Thanks to energy consumption data, electricity providers are encouraging consumers to use power at specific periods of the day. Consumers can do their laundry, wash their dishes or turn on their heating during periods when the cost of running appliances is lower. All this thanks to microchips “reading” the machines and communicating data from the electric grid to a server.

The benefit of such a system is mutual, because power plants are able to produce electricity only when it is needed. The result is thrift, cost savings to all parties involved. Of course similar applications can be implemented for heating, gas and water usage.

Growth of the M2M market Experts from Ericsson predict that by 2020, fifty billion devices will be connected to one another. Poland’s M2M market is forecast to grow heartily as well. In 2012, it was worth over PLN 600 million. Telecommunications companies serviced 1.5 million SIM cards at the time. IDC analytical firm published the Poland M2M Market 2013-2017 Forecast and Ecosystem Analysis, which states that the M2M market in Poland will grow at a annual pace of 24 percent. There are few branches that can boast similar forecasts.

WBJ OBSERVER • OCTOBER 2014

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SMART CITIES

CASE STUDY 1 Solution: Remote Water Usage Monitoring Smart City: Środa Wielkopolska

T

he Municipal Heating, Water and Sanitary Authority in Środa Wielkopolska increased revenue from water utility provision by 11 percent. The city was plagued with a lack of system failure detection, illegal drawing of water and old meters.

Smart water metering was installed in 1,100 out of a total of 5,500 homes. Collected data is sent through the mobile network to a central server for analysis.

Each household’s meter is furnished with a SIM card attachment which can identify flow amounts and monitor for system failures.

Smart water meters are the creation of GPM, a company working closely with a consortium of Orange and Pronal. Costs of implementing the system were spread out and paid for by a utility fee included in the water bill.

Water metering around the world Intelligent counters are currently used by 30 million households in Italy, as well as hundreds of thousands in countries like Sweden, Finland, the Netherlands, the US and Canada, according to Maciej Kocięcki, Director of M2M and Partnership Development at Orange Polska.

In France, a partnership between Veolia Water and Orange has set up m2oCity, which provides municipalities with remote management of intelligent water, gas and other utility systems. The devices used do not need electricity and communicate through radio waves. In Paris alone, there are a half a million intelligent water meters.

In accordance with the EU directive, 80 percent of households are to have intelligent energy counters by 2020. Poland is aiming to surpass this and implement the chips in 100 percent of households.

SMART CITIES

CASE STUDY 2 Solution: Streetlight Control Systems Smart City: Gdańsk

Images: Wikimedia/Maciejw, Shutterstock

T

his solution brought annual savings of PLN 250,000 in street lighting costs for the city of Gdańsk, thanks to intelligent lighting (based on M2M transmissions).

CPAnet by Rabbit, an intelligent lighting system, controls about 60 percent of Gdańsk’s street, park and public space lighting. Control devices are mounted on lampposts and a web-based application for management of the system is used to oversee the operations. The CPAnet device has a built-in GPRS modem.

The main idea is that lighting which is not needed is turned off and the strength of lighting varies according to the given situation. Thanks to this system, emergency power outages are identified quickly and crews can service a problem without delay.

The entire system is based on M2M data transmission signals. A central server is able to steer various parts of the system.

The major benefit is that CPAnet uses existing infrastructure of Orange’s mobile phone network.

The project manager, the Road and Greenery Authority of Gdańsk, is in charge of the street and public space lighting in the city and on adjacent motorways.

WBJ OBSERVER • OCTOBER 2014

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SMART CITIES

The city talks WBJ Observer speaks with Maciej Kocięcki, Director of M2M and Partnership Development at Orange Polska about the growing importance of M2M technology and its role in bringing Polish cities up to speed

nology. This project shortened the average travel time within the city by at least 10 percent.

Another example can be found in Upper Silesia, where an intelligent transportation system watches the Diametral Motorway between Katowice and Gliwice. The system channels vehicles in appropriate directions according to the current volume of traffic flow. Traffic updates are sent out to the public even through social media. All of these solutions require the utmost cooperation between authorities of various cities, which is often not easily done.

How to make sure that M2M-based Smart City solutions Many intelligent solutions are already in place in various will develop in a way that will benefit companies, municipaliEuropean cities. Can you bring up an example of a European ties and the citizens alike? city that has successfully implemented an M2M project that M2M system implementation in the public sphere is subject to Pofunctions very well and has been acclaimed by the public? land’s national development strategy, within the National Spatial DevelFirst of all, let me explain the notion “M2M.” opment Concept 2030. This document It is an acronym for the “Machine-to-Machine” gives guidelines regarding civic func“Each city has its own concept, i.e., transmission of data among electionality in areas such as public transit, tronic devices: meters, controllers, etc., mainly via road infrastructure, accessibility, power unique urban needs. cellular networks. The city of Copenhagen can and water management. All these things Solutions should serve as an excellent example. A policy of lowerare taken into account when a telecombe catered to these ing emissions fits ideally into the Danish nationmunications company, such as Orange, particularities. wide strategy of promoting green technology. cooperates with the local governments to The city authorities want to be carbon neutral by implement an M2M solution. Intelligent 2025, through implementation of low-emission technology is not intelligent unless it proheating and electricity sources. One of the most motes balanced city development and efinnovative solutions is a project that uses seawafective investment practices. ter as a building coolant. Wind or wave-powered electric plants are used as well. By 2015, 50 percent of the city commutWhich Polish cities have already integrated smart soluers will use bicycles to get around. M2M technology allows to collect in tions and how are they used? What M2M project has the best real time all of the distributed data like energy consumption, pollution chance of being implemented in the nearest future? levels or wind changes which, after suitable processing, allow desired It might be surprising to hear that smart city solutions have already decision-making. been implemented in different Polish cities regardless of their size or budget (e.g. Łódź, Rzeszów, Kielce, or the Tri-City). Oftentimes, users One of the biggest problems cities grapple with is increas- of city amenities don’t even realize that an integrated M2M system is ingly high street congestion. How can M2M technology in place. Security surveillance systems, wifi networks, intelligent traffic change the lives of regular people commuting from place to management, multifunctional city cards for citizens, waste management place? systems, utilities networks, city bike rentals or “park and ride” zones, all Irrelevant of whether we are commuting via public transit or our own of these have become a part of our daily routine. mode of transportation – traffic jams impede us all. Experience shows Due to increasing traffic problems, it looks like intelligent transport that the average driving speed in a city is around 36 km/h. A solution and traffic management systems will be widely implemented. Although, facilitating fluid movement on a city street grid is therefore a top priority. cities should not rush into projects. Each city has its own urban speciWe have the example of Gdańsk and Gdynia, where the two cities ficities and needs. Solutions should be catered to these particularities, in developed Tristar, an intelligent mobility project based on M2M tech- order for the technology to truly work for the good of the community.

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OCTOBER 2014 • WBJ OBSERVER

Images: Orange Polska, BASF

What is the role of a telecommunications company in the development of smart cities?

Telecommunications companies, such as Orange, are the ideal partner for building smart cities, mainly due to their know-how in dealing with big amounts of data, having the city-wide telecommunications infrastructure needed to transmit the data as well as experience in such projects around the world.

For example, the statistical data available from base stations to which mobile devices are subsequently logging in provide all necessary information regarding vehicle movement.

ENTREPRENEURS / BASF

HOME BASE BASF Polska was established in 1992, but the German chemical giant had been exporting its products to Poland since the 50's. Currently, the company employs some 430 employees in its Warsaw headquarters and four facilities – a chemical admixtures plant in Myślenice, a construction chemical logistics center and a polyurethane plant in Śrem, and a recently opened catalyst plant in Środa Śląska. WBJ Observer talked with the company’s Managing Director Dirk Elvermann about the Polish branches' place in the company’s worldwide structures I N T E R V I E W B Y JAC E K C I E S N OW S K I BASF Polska has been growing faster than the company's other branches worldwide. In 2013, it grew by 11 percent (compared with 5 percent growth in Europe and 3 percent worldwide). Will this trend continue this year as well?

So far, we are growing in double digits and we see a continuous trend of growth in Poland. In part, we had to catch up with the Polish market. Also, the parameters of the whole market in Poland have been growing despite some macroeconomic risks that we are currently seeing, but fundamentally Poland is on a growth path. It is one of the few European branches of BASF that is growing at such pace and is one of the biggest countries to do so.

What is the Polish market potential, both for your company and the whole sector?

It depends a bit on how much we are enlarging our footprint, i.e. how much we are not just selling what is produced

elsewhere, particularly in our HQ, but also how much we are shifting production here and how much we are attracting our consumers to move here with us. One such example is our recent investment here in Środa Śląska where we have opened a new catalyst factory.

This will definitely generate big growth in our business in Poland. We plan to sell this catalyst both in Poland and in export markets.

How do your Polish operations compare to the rest of the world?

Currently, in terms of numbers,

Poland is relatively small. Although, for us, it’s the biggest country in the CEE region and accounts for some one-third of the turnover from the whole region; on a global level, it encompasses a little bit more than one percent of our whole turnover. But it is one of the few European countries with a strong growth trend and it is a country where the prospects for longer growth are very good. Also, it is a country where we feel at home, because the governmental opinion on what industry politics should look like in Europe are much in line with ours. I’d call it an ideal combination of the economy and politics.

WBJ OBSERVER • OCTOBER 2014

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ENTREPRENEURS / BASF

So far, we are selling most of what we produce domestically. But recently, we have expanded our export business, pertaining to, first of all, the so-called [polyurethane] system house, which is located in Śrem, near Poznań. And now, with the new catalyst plant, we plan to increase our exports greatly. A big part of the production will be sold abroad, not only to other CEE countries, but also back to Western Europe. In Poland, growth is driven by the market, by more products coming into the country from Germany for instance, but also from facilities worldwide. Now, with the new plant in Środa Śląska, we will expand our operations here exponentially. This is the next step for us. We will grow with our production and the market will grow with us.

How does the Polish market differ from the rest of Europe. Especially with huge, state-owned companies operating here, which is unusual for Western Europe.

Indeed, there are big domestic companies in Poland. We know them all. Most of them are our partners, we do not encounter much competition from the Polish companies, because we operate in different sectors.

Obviously, we have customer-supplier relations and partnership-like relations which can even end in acquisitions, as was demonstrated last year, when we bought Ciech’s TDI (an organic compound used to manufacture polyurethane foams) business.

Other international companies are also pres-

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POLAND IS ONE OF THE LAST, LARGE INDUSTRIALIZED COUNTRIES IN EUROPE AND HAS A VERY STRONG VOICE TOWARDS THE EU WHICH IS SOMETHING APPRECIATED VERY MUCH AND NEEDED

BY A COMPANY LIKE US

ent, as the market is already quite big here.

Poland is the biggest market populationwise in the CEE, making it very attractive for investors. Because you’re not only coming here to produce and export, but also to sell here. In terms of purchasing power, Poland still has to do a lot of catching up with the West. There is a fine balance in this aspect. On the one hand, we have catching up in purchasing power, which translates into salary increases. On the other hand, preserving the competitive advantage of low labor cost, so the move of Poland becoming more and more of a western market needs to be done at a mild, moderate pace.

Poland is one of the last, large industrialized countries in Europe and has a very strong voice towards the EU which is something appreciated very much and needed by a company like us and we know we can count on the Polish administration when it comes to important issues regarding our sector.

Recently, BASF announced that it will move some 50 percent of its R&D opera-

tions outside Europe. Will it affect in any way, shape or form the activities in Poland?

We do not have any R&D facilities here, as we believe that concentration or critical mass is needed, that’s why we have a big center in Germany and regional centers in different parts of the world: US, China.

We employ some 10,000 people in our R&D centers, while in Poland overall we have just 430 people. It would be too small of a force to engage in R&D activity here.

We do, however, have small application labs and we cooperate with big technical universities in Poland. This is our current level of research cooperation here and it should stay like this for quite a while. That’s why the plan to move some 50 percent of our R&D activities outside Europe, won’t affect Poland so much.

Many international companies are present here, mostly because of low labor costs. However the gap between wages in the CEE region and “old” Europe has been, albeit slowly, closing. What will happen with your operations in this part of the continent, when the gap will be so small it won’t translate into competitive advantage any longer?

It’s not only about labor costs, it’s also about highly skilled staff. You have excellent universities here, where we can find exceptional candidates to fill in positions.

Typically, what we are doing is not just simple mass production. We need skilled and highly educated people - not the cheapest available. Our claim is that “we form the best team in the industry” and to fulfill this claim we need to hire the best people, to whom we have to offer the best pay possible.

Image: BASF

Until recently, your company had a different approach towards Poland than most other international companies present here. The bulk of its production was sold domestically, whereas others treat Poland as a production hub and mostly export what they make here.

}

ENTREPRENEURS / IFINITY

INFINITE POSSIBILITIES B Y K A M I L A WA J S Z C Z U K

PICK UP YOUR PHONE AND LET AN APPLICATION TELL YOU WHERE TO PARK YOUR CAR. USE IT TO GET AROUND THE LABYRINTH OF A PUBLIC INSTITUTION OR A SHOPPING MALL. OR, FOR THE TIME BEING, LET IFINITY DEVELOP THE TECHNOLOGY YOU NEED TO DO ALL THAT

P

oland has been known as one of the world’s IT powerhouses. Over the past two years, it has become home to several innovative companies in the location-based services segment, selling beacons and beacon-based technologies.

One of them is Ifinity.

The company’s founders Adam Jesionkiewicz and Michał Polak have been doing business together for years. They first went into internet technology, in the case of Jesionkiewicz – as early as in the midnineties. Then came mobile solutions.

Their firm dealing with mobile apps was called Inventica and it was there that they first came across the need to use a form of location service in closed spaces.

“It was in a tender for a shopping mall that the need to implement microlocation appeared. We had found that there was no such technology available on the market, so we decided to focus on its development,” Jesionkiewicz said.

After Apple released its iBeacon standard for micro-location devices, a lot of support was made available. That is when Inventica created the first jobs focused exclusively on beacons. “In February

2013, we made the decision to use all of our energy on developing location-based services,” Jesionkiewicz said.

The decision was preceded by months of research. “The problem we encountered at the time was the lack of technology for this type of service. There were QR-codes used by other companies but of course they are very inconvenient for the users,” Polak said. It took them several months to develop a system that used bluetooth connections instead.

More time had passed before the present company was officially registered in July 2014. It was named Ifinity to bring up associations with “infinity,” but also “affinity.” “We see an infinite number of uses for our technologies,” Jesionkiewicz explained.

Shortly after registration, Ifinity received a seed capital injection from SpeedUp Group. After several tranches of financing, the fund will own up to 32 percent in the company. Its capitalization at that point should be at about PLN 38 million.

Negotiations with the fund took nine months. Over that time, the founders invested their own money to make sure their project maintains the right pace.

VIRTUAL WARSAW WON A PRIZE AS WARSAW’S ENTRY IN AN INTERNATIONAL COMPETITION

WBJ OBSERVER • OCTOBER 2014

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ENTREPRENEURS / IFINITY

Challenges ahead They like to stress they are not just a beacon distributor. “We are one of a few, if not the only, company that wants to offer complex, tailored solutions,” Jesionkiewicz said. “We come up with the solutions ourselves and we implement them ourselves.” Other firms in the segment usually just sell the hardware. Ifinity does everything from the idea, through implementation to evaluation.

The company’s first spectacular project was the first stage of a bigger project with the city authorities in Warsaw, dubbed Virtual Warsaw. One of the capital’s offices for the disabled was equipped with a system that helps people, including the visually impaired, get around the place and solve their problems.

This is just one of three pilot projects that Warsaw’s authorities want to carry out. The second one will focus on public transport. The idea is for the application to suggest routes based on location, allowing passengers to forget about timetables and network maps. The third one will be used in culture centers, such as museums, galleries and national heritage sites.

Virtual Warsaw was submitted as Warsaw’s entry in the Bloomberg Mayors Challenge competition this year. It won one of the second prizes, worth €1 million, alongside Athens, Stockholm and Kirklees in the UK. Cooperation with Warsaw was not an obvious choice for Ifinity and the company had earlier planned to first

“WE SEE AN INFINITE NUMBER OF USES FOR OUR TECHNOLOGIES.

}

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MICHAŁ POLAK

OCTOBER 2014 • WBJ OBSERVER

Far and wide Jesionkiewicz and Polak also have scores of other ideas about where they could implement location-based services.

They are working on apps that could help find parking spaces in the city center or locate children who stray too far from their parents in public places.

Beacons could also be used in the logistics sector, to help locate goods in warehouses and optimize their transport.

In hospital wards, a doctor could see all necessary data about patients by making the rounds with his tablet.

“We are building a sort of intelligence for electronic devices, so that they know what to do at a given moment and predict some of our moves and answer our needs,” Jesionkiewicz said. For example, if we drive into a parking lot, the app should suggest where to park before we ask it to do so.

Bartłomiej Gola, Managing Partner of VC fund SpeedUp Group:

PASSIONATE AND EFFICIENT

We have invested in Ifinity because we believe that the company will bring a high return. You may ask why we believe so. First of all, it operates on a growing market, in the Internet of Things technology. It also has a specific product, they have already made their first implementation, for the city of Warsaw. They are also a great team, being both passionate about what they do and having the ability to implement their ideas.

The standard investment horizon we have is five years. In this case, we have the goal of building a large company. After that, we can exit the investment, but I cannot say when exactly this will happen.

The investment is part of a bigger trend. Poland must take on a new perspective. We must look for new technologies and not just implement existing solutions.

Images: SpeedUp, Ifinity, Jan Malinowski

ADAM JESIONKIEWICZ

develop commercial solutions and only then approach authorities with the idea of using similar technologies in public space, Jesionkiewicz said.

However, the company’s founders came across city officials at a conference and it turned out that Warsaw authorities had already been thinking about a system of that kind, which they could use as an entry in the Bloomberg Mayors Challenge. That’s how cooperation between Ifinity and the capital’s authorities got started.

ENTREPRENEURS / IFINITY

[ The future beckons ]

The company had planned to concentrate on selling its solutions abroad. The contract with Warsaw made Jesionkiewicz and Polak rethink that strategy and a lot of new projects are in the works. When it comes to foreign expansion, they are focusing on the United States and mostly the Arab states of the Persian Gulf. “Dubai has vowed to become the world’s smartest city in a span of four years and is absorbing all possible solutions,” Jesionkiewicz said.

Though formally young, the company is no longer at the start-up stage, Jesionkiewicz said. Since it was registered, it has been developing fast and employing

new people. It will soon have to move to a bigger office.

Toward the spectacular As for plans for the near future, Ifinity has to present what Jesionkiewicz calls a number of “spectacular implementations.”

It’s important for the market to verify their ideas, he added.

The Warsaw public transport project will come soon, Polak added, and that should appeal to a great number of people using the system. Several others, in Poland and abroad, should follow, though it is too early to disclose the details.

They are also working on further

The word “beacon” was originally used to describe a guiding light. Over the centuries, its meaning has evolved and with today’s technology advancement, it came to mean a small, electronic object. The devices produced by such Polish companies as Ifinity or Kraków-based Estimote and Kontakt.io are also designed to act as guides. Technically, they are proximity sensors used for micro-location. They connect with smartphones or other devices through applications in order to provide a variety of services. Beacons can also be used to collect data, for example, regarding weather conditions, available parking space and air pollution in public areas. The devices can be designed to react differently depending on where a smartphone or tablet trying to connect with it is.

Some may also react to touch in a specific way.

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ENTREPRENEURS / IFINITY

“YOU SHOULD START YOUR BUSINESS AT A MOMENT WHEN EVERYONE LAUGHS AT YOUR IDEAS. increasing employment and on developing new products. One of the new products may revolutionize retail, Jesionkiewicz claims, allowing the customer to make an electronic payment and avoid queuing up in line.

“What we have done so far was really last minute stuff in terms of getting on the technology train that has already started its journey,” Jesionkiewicz said.

“The money-bringing stage of the company is postponed in our case,” Polak said. “We know that we have to invest large amounts in the coming months, in order to help it grow on the domestic market and abroad. Only then

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will we focus on revenue generation.”

“I am really happy to have a project that allows us to implement anything we come up with,” Jesionkiewicz added.

“We aim to be the first globally visible Polish company associated with innovation and not simply imitation of existing technology.”

The segment will soon develop and the number of companies offering beacon-based solutions will grow, he added.

But it’s the pioneers that win. “You should start your business at a moment when everyone laughs at your ideas.

When the average Joe already knows that it’s a cool concept, it’s too late.” u

LOCATION-BASED SERVICES COULD BE USED WHEN CHOOSING WHERE TO DINE AND WHAT TO EAT

OCTOBER 2014

CORE NO MORE?

POLAND’S INVESTMENT MARKET IS RIPE WITH OPPORTUNITIES FOR RISK-SEEKERS > 60

+

THE OFFICE CHALLENGE

WARSAW DEVELOPERS PULL OUT ALL THE STOPS TRYING TO ATTRACT TENANTS > 66

BECOMING A LANDLORD

SMALL-TIME INVESTORS ARE TAKING TO MICROAPARTMENTS IN APARTHOTELS >70

POLAND OR GERMANY?

WHAT MAKES WAREHOUSE HUBS IN POLAND ATTRACTIVE? >72

20 PAGE

20 PAGES OF REAL ESTATE NEWS

REAL ESTA NEWS

LOKALE IMMOBILIA / NEWS

>LOKALE IMMOBILIA

NEWS

GREEN HORIZON features 33,000 sqm of office space

l OFFICE

Infosys BPO extends lease in record deal with Skanska

I

nfosys BPO Poland has signed a lease agreement with Skanska for more than 21,000 sqm in the Infosys Green Horizon office complex in Łódź. The deal covers new terms for the area already leased by Infosys

and additional office space of 3,800 sqm.

According to Cushman & Wakefield, which represented Infosys, the transaction is the largest in the history of the Łódź office market and

the biggest on the Polish market so far this year.

The agreement extends the lease until 2024. Infosys Green Horizon offers a total of 33,000 sqm office space. It is located in an academic district of Łódź.

l INVESTMENT

PHN to buy properties worth PLN 1 bln tate-controlled real estate group Polski Holding Nieruchomości (PHN) plans office property purchases worth up to PLN 1 billion in its new strategy.

“We will make use of outside financing [in the acquisition processes], so that the use of our funds does not exceed 33 percent,” CFO Włodzimierz Stasiak said at a press conference in September.

PHN published its strategy until 2023 last month. One of the goals is the growth of the company’s net asset value by almost 75 percent. The company plans to complete restructuring by the end of 2015.

PHN recorded PLN 12.7 million of consolidated net profit in H1 2014, against a loss of PLN 16.3 million it saw in the corresponding period of 2013. The firm’s operating profit stood at PLN 3.2 million (a PLN 22.9 million loss last year), while its consolidated revenue stood at PLN 78.5 million for the first six months of the year, compared to PLN 92.20 million in 2013.

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PHN’S INTRACO building in Warsaw

Images: Skanska, PHN

S

LOKALE IMMOBILIA / NEWS

Capital Markets | Poland

WE HAVE BEEN BUSY 2014 has been one of the most active years on record in the Polish Real Estate Market and the number of ongoing and closed transactions will easily exceed recent years.

The CBRE Capital Markets team in Warsaw have grown during this period to become one of the largest and leading advisors in the Central European Market and thanks to the continued support and trust of our clients have been fortunate enough to be involved in the most significant transactions of the year starting with Resolution and ECE’s acquisition of Poznan City Center, Deutsche Asset & Wealth Management’s purchase of Rondo 1, Kronos’disposal of Ambassador and more recently Starwood’s purchase of the Ghelamco portfolio.

Furthermore, we are currently under offer on or in the process of concluding numerous other transactions which will culminate in our team having the most successful and active year ever.

A huge thank all of our Clients for their support and confidence and we look forward to working together in the future.

MIKE ATWELL Head of Capital Markets - CEE Capital Markets

2014 SIGNIFICANT TRANSACTIONS AMBASSADOR WARSAW

STARWOOD PORTFOLIO

POZNAN CITY CENTER

VARIOUS

POZNAN

RONDO 1 WARSAW

Deutsche Asset & Wealth Management R E A L

E S TAT E

CURRENT INSTRUCTIONS PLAC UNII WARSAW

KAPELANKA 42 “A” KRAKOW

MALTA HOUSE POZNAN

SOLARIS OPOLE

FM LOGISTIC PORTFOLIO VARIOUS

IGI

THANK YOU LOOKING FORWARD TO 2015 WBJ OBSERVER • OCTOBER 2014

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LOKALE IMMOBILIA / NEWS

l INVESTMENT

Asbud buys Karolkowa Business Park

PROLOGIS PARK GLIWICE

l LOGISTICS

Prologis buys CEE logistics portfolio sqm in Poland and two properties with 11,600 sqm in Slovakia.

“We are pleased to acquire such well-located logistics facilities at a discount to replacement costs,” said Philip Dunne, head of Prologis Europe.

“These high-quality assets complement our existing portfolio,” he added.

l MIXED-USE

l R E TA I L

BGK to co-finance Hala Koszyki

ECC to build shopping mall in Pruszków

S

tate-owned lender Bank Gospodarstwa Krajowego (BGK) has announced it would co-finance the redevelopment of Warsaw’s Hala Koszyki by Griffin Group.

BGK will provide a total of €81 million, including €60.84 million from the Polish Investments program, a loan from the EU-funded JESSICA program worth PLN 25 million (€6 mln) and a revolving credit worth PLN 13 million (€3.13 mln).

680% y/y

“This is yet another time that we can carry out an investment project with the help of BGK,” said Przemysław Krych, CEO of Griffin Group. “This is a trusted and experienced partner,” Krych explained.

The Hala Koszyki project received a final building permit in August. Erbud has been selected as the general contractor.

The cornerstone-laying is scheduled to take place in several weeks’ time.

was the increase in office space investment volumes in regional cities, according to Cushman &Wakefield 58

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ECC Real Estate is set to launch the construction of a shopping center called Nowa Stacja in Pruszków, a southern satellite city of Warsaw. The mall, set to launch in 2016, will be the first shopping mall in the area. The mall will feature 25,000 sqm of GLA, housing 120 retail and service units.

The ECC group has been present on the Polish market for 20 years. Apart from development, it offers property and project management services.

Images: Prologis, Asbud, ECC Real Estate, Rank Progress

I

ndustrial property investor Prologis has acquired a 230,000 sqm logistics portfolio that includes 23 properties in Poland, the Czech Republic and Slovakia.

Prologis bought 17 properties with a total of 163,000 sqm in the Czech Republic, four facilities with 55,400

Development group Asbud has acquired 50 percent in Karolkowa Business Park in Warsaw from CPI, raising its stake in the project to 100 percent. The value of the deal has not been disclosed.

The project is currently under development and is scheduled to be delivered in January 2015. It comprises 17,852 sqm of office and retail space and is located on ul. Karolkowa, close to the Rondo Daszyńskiego subway station, set to be completed towards the end of 2014.

Asbud Group has been present on the Polish market since 1997, primarily in the residential market. It has been expanding to the commercial real estate market for the past few years.

LOKALE IMMOBILIA / NEWS

l R E TA I L

Rank Progress plans shopping malls sale

R

ank Progress, a property investor, plans to sell several of its shopping centers and build and finalize other investments.

The company will initiate the construction of the Aviator shopping mall in Mielec, southeastern Poland, and open another one in Krosno.

In H1 of 2014, Rank Progress recorded revenue of PLN 31.4 million from property sales, compared to PLN 20.3 million in H1 the year before. The bigger turnover resulted from increased GLA-sale (30,000 sqm) in the company’s schemes in Grudziądz and Chojnice.

“Our revenue allows us to conduct our business without any obstacles and guarantees us financial stability,” said Jan Mroczek, Rank Progress’ CEO.

AVIATOR shopping mall in Mielec

OFFICE

“The office market in Warsaw is increasingly mature and this is a great moment for the public administration sector to take advantage of the very competitive market situation.”

Joanna Mroczek, head of Research and Consultancy at CBRE

WBJ OBSERVER • OCTOBER 2014

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Market for risk-lovers Until recently, prime properties were readily snatched up as soon as they had risen from the ground. However, times when new office and retail schemes were sold on the block may be coming to an end.

Conversely, value-add and core-plus asset classes seem to be in

B Y B E ATA S O C H A

T

here is and always will be investor interest in a core product. Take TriGranit’s Poznań City Center, delivered in late 2013 and sold in early 2014, or Skanska’s Atrium 1 in Warsaw, bought by Deka Immobilien for €94 million even before it was completed. But the allure of core properties seems to be slowly fading.

Consider Warsaw’s office market.

On the one hand, prime office projects currently available for sale are getting increasingly scarce. “The biggest interest we have seen over the past 12 months has been in core assets, which means properties in Warsaw’s CBD. There aren’t many such schemes available,” says Soren Rodian Olsen, head of Office & Industrial Investments at Capital Markets of Cushman & Wakefield in Poland.

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LOKALE IMMOBILIA / INVESTMENT

Retail transaction volume by city size in H1 2014 6%

31 %

63 %

> 500,000 inhabitants 100,000-500,000 inhabitants <100,000 inhabitants

Source: Cushman & Wakefield

>>

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Seeking home further east Interview with Ben Habib, CEO of First Property Group What kind of property is on the investors’ radar this year?

As far as offices are concerned, it is still major cities that mainly attract investor interest: Warsaw, Wrocław, Kraków and possibly Poznań and the Tri-City. In Warsaw, institutional investors are still looking at class-A buildings in CBD, Mokotów and Wola. The issue with Warsaw though is that the vacancy rate has risen markedly since 2009-2010 when it was at 5 percent. Now it is pushing 12 or even 13 percent. In Kraków, the vacancy rate is still low, but it is a much smaller market than Warsaw.

I personally don’t see much attraction in investing in new class-A office buildings in Warsaw. There is too much supply coming online, creating pressure on rents. Currently, yields are at 6 percent for the office segment, but that may be just on paper. As the supply of offices increases, these yields could prove to be lower in reality.

I think existing office buildings with less impressive specifications are more interesting, especially those that are let at lower rent levels. They can be managed intensively to increase rents, cut costs and improve the asset’s income profile and value.

Despite the fact that the core segment offers ever decreasing yields, it still dominates the investment market. Why is that?

One of the problems with the Polish commercial property investment market is that 90 percent of turnover is due to international investors and many of these funds invest to gain exposure in Poland. Their default position is to buy prime properties. Quite a number of international funds have mandates to invest in CEE or in Europe as a whole.

They will generally not look for risk, they are looking to buy safe properties in their chosen geographies. Buying more management-intensive properties is really for private equity-type investors.

Over time, as the Polish economy grows and the market becomes larger and more stable, this should change. Another driver of interest in more asset management intensive properties in Poland is likely to be rising markets in Western Europe. As money finds it more difficult to earn respectable returns in Western Europe, investors are likely to seek homes further east, such as in Poland.

Office investment by location in H1 2014 Warsaw central location

25 % 56 % 20 %

Warsaw non-central Other cities

Source: Cushman & Wakefield

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OCTOBER 2014 • WBJ OBSERVER

>

On the other hand, all the new supply that is scheduled to be completed by 2016 (700,000 sqm is currently under construction, according to Cushman & Wakefield) could prove difficult to commercialize, making investors wary of the most recent developments. “There is too much supply coming online, creating pressure on rents. Currently, yields are at 6 percent for the office segment, but that may be just on paper. As the supply of offices increases, these yields could prove to be lower in reality,” explains Ben Habib, CEO of First Property Group.

Scarcity of prime assets is even more pronounced in the retail segment. There aren’t many schemes the likes of Manufaktura in Łódź (central Poland), Poznań City Center (western Poland), Silesia City Center in Katowice or Galeria Dominikańska in Wrocław (the latter are both located in southern Poland) – all of which have changed hands in recent years.

LOKALE IMMOBILIA / INVESTMENT

Images: Unibail Rodamco, Ghelamco

A NUMBER OF PRIME RETAIL SCHEMES CHANGED HANDS OVER THE PAST FEW YEARS, INCLUDING POZNAŃ CITY CENTER (LEFT), SILESIA CITY CENTER (MIDDLE) AND GALERIA DOMINIKAŃSKA (RIGHT) The shabbier, the better While the core segment is getting tougher, the other asset classes seem to be doing increasingly well. The huge office supply pipeline over the next two years will put even more pressure on B and C class properties, whose tenants will likely move to newer stock. “This may be attractive to sources of opportunistic capital, targeting standing office projects for refurbishment, re-letting and repositioning. We are certainly experiencing a much increased interest in Warsaw from such sources of capital,” said Olsen.

Value-add retail properties have been rather popular for quite some time now.

“We have seen growth of interest in value-add properties since 2010, as the global crisis prompted some investors to rethink their investment strategies,” said Agnieszka Kołat, JLL’s national director, Retail Investment CEE. Distressed retail assets are in no short supply. “The lifetime of the first and second generation shopping centers built in the 1990s was supposed to be 20 years. There are 5 million sqm of shopping centers that were built before 2005. For some of them the 20-year shelf life has already expired.” said Agnieszka Mielcarz, head of Retail Asset Management at Knight Frank.

First and second generation shopping malls do have some advantages over newly built schemes. Their location is usually very convenient and they have long been established as dominant retail

destinations. However, they are also increasingly obsolete and losing ground to more recent and versatile schemes. If they are not refurbished soon, their next appraisal may be a pretty rude awakening for their owners.

“If they want to sell their properties, the owners of these shopping centers will have to increase the value of their properties by improving revenue from leasing,” said Mielcarz.

Even core-plus properties could benefit from some retouching. These are schemes that are “conveniently located, with a large catchment area and a loyal client base but not necessarily of the most modern standard,” said JLL’s Kołat.

“These schemes could greatly increase in value through refurbishing, refreshing their tenant mix and thus boost their quality.”

However, repositioning is not something that can be done overnight. “In order to successfully implement a repositioning strategy, you need at least a few

“THERE ARE 5 MILLION SQM OF SHOPPING CENTERS THAT WERE BUILT BEFORE 2005. FOR SOME OF THEM THE 20YEAR SHELF LIFE HAS ALREADY EXPIRED.

years and a long-term asset management plan for the scheme based on a thorough business analysis. The average time frame for such an endeavor is three, five or even up to seven years,” she explained.

In search of potential The core-plus segment, which has thus far been discounted by most international investors, is also finally picking up. This category encompasses a broad spectrum of real estate: good quality Warsaw office schemes in less central locations, such as Mokotów, as well as in regional cities.

“Over the past 18 months, we have experienced increasing investor interest in Polish regional cities ... When you look at investment volumes for Polish regional offices in 2013, there was a 680 percent increase year-on-year,” Olsen said.

Warsaw’s non-central locations are also on the radar. “Considering the number of new and existing quality office buildings in the Mokotów district, a typical location for core-plus assets, we are confident to see more transactions happening in this segment,” he added.

Similar changes can be expected in retail investment. “Due to the dearth of prime assets in the largest Polish cities, investors are very likely to turn their focus in the forthcoming months to cities with a population of 100,000 to 400,000 offering a number of modern and successful retail properties,” claims the latest Cushman & Wakefield report. u

Agnieszka Mielcarz, head of Retail Asset Management at Knight Frank

WBJ OBSERVER • OCTOBER 2014

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LOKALE IMMOBILIA / INTERVIEW

Understanding office markets Interview with Soren Rodian Olsen, head of Office & Industrial Investments at Capital Markets of Cushman & Wakefield in Poland, about Poland’s top office markets: Warsaw and the regional cities, the opportunities they offer and the risks they carry I N T E R V I E W B Y B E ATA S O C H A Let’s start with Poland’s capital – Warsaw.

How attractive is it to investors these days, with all the supply in the pipeline?

Warsaw is a top investment destination for most investors. This has to do with the size of the city, liquidity of assets, the fact that it’s the capital and a proven, sustainable market. For investors, liquidity is important in terms of considering their future exit strategy.

space, moving from old redundant buildings or C-class buildings into modern space.

There is also a number of large occupiers that are looking to expand their space in Warsaw. They might have a plan for growing gradually over the next five years, taking up more space each year, or they will relocate from their current building because it cannot accommodate expansion.

Do you think the vacancy rates will exceed 20 percent in Warsaw?

When you look at Warsaw right now, its vacancy rates are around 13-14 percent and will likely hit 15 percent by the end of the year. We expect an increase throughout 2015 and 2016 followed by stabilization.

The reason is that there is currently some 500,000 sqm under construction, with a total of approximately 700,000 sqm scheduled for delivery by the end of 2016. After that, we envisage a period of stagnation in the office supply.

Can this demand match the supply that will come out of the pipeline?

We expect the supply will definitely exceed the demand over the next two to three years. This means there are likely to be winners and losers, where the losers may include older B and C class buildings, as well as buildings in less attractive locations.

From an investment perspective, this may be attractive to sources of opportunistic capital, targeting standing office projects for refurbishment, re-letting and repositioning. We are certainly experiencing a much increased interest in Warsaw from such sources of capital.

Some corporate occupiers may relocate from Mokotów to Wola partly due to the proximity to the city center, partly due to the improving infrastructure (ring road and Metro). Likewise, we expect to see tenants moving from the CBD to Wola or the Al. Jerozolimskie corridor, driven by lower costs and larger space requirements.

What effect will all this space have on the market?

Considering such a substantial office pipeline, some questions might arise about the sustainability of some schemes and locations. That said, this isn’t the first time we’ve seen a huge office pipeline in Warsaw.

We observed booms in the late 1990s, then again in 2006 and 2007. We regard this as part of the real estate cycle.

Where is the demand for office space coming from?

We are seeing a slow but steady shift in the way the public sector utilizes their office

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Is Wola a sustainable location?

Whether Wola as a whole is sustainable remains to be seen, but it is clearly an attractive proposition to corporate occupiers, which means it might become an extension

of the CBD or a “new” non-central business district in its own right. We do believe that schemes located within walking distance of a Metro station will be sustainable and attractive to corporate occupiers.

Will the vacancy rates push the rents down?

Prime headline rents in the CBD are currently at €22-25/sqm/month for best-inclass office assets in core locations. Net effective rents are lower due to tenant incentives, e.g. rent-free periods. It is fair to assume that rent levels will continue to “go south” due to the development pipeline and anticipated growing vacancy.

Let’s discuss regional cities. Poland has six major regional office markets: Kraków, Wrocław, Poznań, the Tri-City, Łódź and Katowice. Which are doing well and which are “difficult”?

When we look at regional cities, the demand for office space is driven mainly by the BPO and SSC sectors. After Warsaw, Kraków is the biggest BPO market in Poland, followed by Wrocław.

Kraków is Poland’s largest regional city and enjoys very strong interest from international tenants and investors. The city is a specific market, with an indefinable central business district. This makes it difficult to predict which locations will be sustainable over time. In spite of this, we are experiencing very strong investor interest in Kraków.

Wrocław, on the other hand, has a welldefined city center with several modern office schemes. The city center as well as the western strip towards the airport are considered the most sustainable locations in

LOKALE IMMOBILIA / INTERVIEW

“WHEN YOU LOOK AT INVESTMENT VOLUMES FOR POLISH REGIONAL OFFICES IN 2013, THERE WAS A 680 PERCENT INCREASE YEAR-ON-YEAR.

Image: Cushman & Wakefield

Wrocław. For that reason, it is an attractive destination for many investors in the office segment. Moreover, the municipality of Wrocław has been very open to investors and developers, which has helped position Wrocław as an investment friendly city in Poland. One of the most active office developers in Wrocław over the past four-five years has been Skanska Property Poland.

Skanska is currently constructing its fourth office scheme in Wrocław, and has been very successful in leasing and selling its projects.

What about other regional cities?

Further down the list of regional cities are the Tri-City and Poznań. Over the past three years, we have seen more and more schemes being developed in the Tri-City. There is also a substantial growth in BPO interest, partly from Scandinavian investors, but also from local and other international investors.

Although not as big as Kraków and Wrocław, the Tri-City office market is clearly on the investors’ radar. The Poznań office market has been growing a lot which has resulted in the current vacancy rate of approximately 11.5 percent, one of the highest figures among all large Polish cities. We believe it will take some time for the Poznań market to stabilize, also considering the current development pipeline. Łódź and Katowice are smaller office markets in this respect. Łódź is going through

a major transformation but has seen very few transactions over the past five years. Some 24 months ago, we started to see some changes, mainly due to improved infrastructure and international developers putting more focus on the city, e.g. Hines, Skanska, GTC and Mermaid Properties. There’s a lot of expectation connected with the complete revamp of the city’s downtown area that should help drive the local economy forward.

Who is interested in Polish regional cities?

Over the past 18 months, we have experienced an increasing investor interest in Polish regional cities with regard to offices; previously mostly from German funds, but now also American capital and UK investors. When you look at investment volumes for Polish regional offices in 2013, there was a 680 percent increase year-on-year. At the same time, there was a fall in office investment volume in Warsaw partially due to the lack of available stock.

This year, we are once more expecting a significant number of office transactions to be closed in Polish regional cities, and the interest from occupiers and investors is very strong.

Are investors specific in their requirements for regional cities in the same way as in Warsaw, analyzing the projects district by district?

Very much so. Because regional cities are smaller and less liquid, it is absolutely key to underwrite sustainability of the location, tenant covenants and rent levels.

Basically, identical to any investment underwriting in Warsaw.

Which property classes attract the most attention?

From what we have seen, the biggest interest over the past 12 months has been in core assets, which means properties in Warsaw’s CBD. There aren’t many such schemes available. There is also quite a lot of interest in value-add or opportunistic office assets from opportunistic capital sources. They look for properties that may have high vacancies, that need repositioning, or redevelopment.

Examples are Europa Capital’s acquisition of the Twarda Tower, previously occupied by Orange (Polish Telecom), as well as the Moniuszki Tower that was purchased by Catalyst Capital Partners.

Both buildings required refurbishment, re-positioning and eventually re-letting at the time of the acquisition.

Where does the opportunistic capital come from?

Mostly from North America or overseas capital with money managers based in the UK. u

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LOKALE IMMOBILIA / OFFICE

Bending over backwards THE WARSAW OFFICE MARKET WILL SEE 700,000 SQM OF OFFICE SPACE DELIVERED OVER THE NEXT TWO YEARS, GREATLY EXCEEDING DEMAND. WITH SO MUCH STOCK UNDER CONSTRUCTION, DEVELOPERS WILL HAVE TO ROLL OUT THE RED CARPET FOR THEIR PROSPECTIVE TENANTS B Y B E ATA S O C H A

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cies. “Currently, rents oscillate around €22-24 in the CBD area and we don’t expect any dramatic changes in the longer term. Historically, rent levels in Warsaw have fluctuated between some €20 per sqm per month and €35 at the height of prosperity,” said Bartłomiej Hofman, managing director of Immobel Poland.

Effective enticement Even though headline rents may remain the same, the pressure will definitely have some impact on effective rates. “The market nowadays is very much tenant-favorable, which is reflected by the increased range of incentives for tenants such as longer rent-free periods or increased fit-out contributions rather than the decrease in rents,” said Roger Anderson, managing director of Vastint Poland. Tenants will also look more carefully at service charges. Developers are doing their best to stay ahead of the curve in that respect as well.

“We offer clients a very detailed and

clear picture of what service charges they can expect. The market doesn’t offer it yet, but I believe that in the near future the tenant will get a guaranteed cap on service charges,” said Łukasz Paryś, director of office real estate operations at Bouygues Immobilier.

More than just space Still, even the most generous financial enticements might not cut it. Companies are well aware of their strong bargaining position and expect more than just competitive rents. “The problem is compounded by the fact that an increasing large group of office users are from ‘Generation Y.’ These tenants exhibit a different set of specific needs that were not previously required by the previous generation of tenants,” says Łukasz Kałędkiewicz, senior director, Office Agency, CBRE. To meet the expectations of their employees, companies pay increasing attention to factors such as additional

Image: Ghelamco

W

arsaw, with over 4.3 million sqm of office stock and another 700,000 sqm in the pipeline, is an increasingly tenant-driven market. During the first six months of 2014, developers delivered 190,000 sqm of office space in the city, within 17 projects. The total supply volume in 2014 could reach as much as 330,000 sqm in Poland’s capital, the highest figure since 2000, according to Cushman & Wakefield’s recent report.

With so much stock under construction, developers are under increasing pressure to offer extra incentives to attract and keep their tenants. “Companies are making long-term decisions, so now you are already dealing with companies whose deals expire in 2016. They already have the additional supply in their minds,” said Vera Wagner, vice president of Heitman.

Headline rents have been rather stable over the past year and developers seem confident they won’t fall below €20 per sqm per month, despite increasing vacan-

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amenities, working environment and environmental stability. “Tenants see the differences in the building standards and choose the ones which offer something more than just office space,” Vastint’s Anderson explained.

The new green What if you already offer top-notch, green and flexible space in a prime location? Is there anything else you can do to outmaneuver your competition? “You can offer additional services, such as parking for guests, a car wash, a gastronomy

BPCC_adv_WBJ_08_2014_2.indd 1

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offer. We will have all those things and additionally, we will offer a supermarket and most likely also a drug store in the same building. Our retail offer will be partly focused on the building’s tenants,” Hofman added.

Many office space providers even go beyond the walls of their building and take to setting up public utility spaces around their schemes. Take Ghelamco’s Plac Europejski that will be developed around the Warsaw Spire complex, which is set to deliver 100,000 sqm of office space next year. The square around the building will

feature a mini park, an amphitheater for cultural events and concerts, as well as an arcade for temporary art exhibits.

Art and culture are looking to become the new green. More and more developers are willing to pay sizable sums to be perceived as socially responsible. Heitman, for instance, opened an art gallery on the 35th floor of its Warsaw Trade Tower scheme. “Our goal is to do something that our tenants can enjoy, but we also wanted to support the art community, which is notoriously short on money,” Heitman’s Wagner explained. u

9/10/14 10:47:39 AM

Images: Bouygues Immobilier, Heitman

LOKALE IMMOBILIA / OFFICE

LOKALE IMMOBILIA / INTERVIEW

It’s all about experience B Y B E ATA S O C H A

Cultural space, a kindergarten and in-house amenities.

Poland’s first modern skyscraper shows how to be a classic

With all the space coming online in the next two years, what can landlords do to keep their tenants and bring new ones on board?

Rents matter a lot. All companies have been rather cost-conscious ever since the crisis.

You have to be competitive.

What does it mean exactly, in terms of rent rates?

Target rates should be €24-25 in prime schemes. In Mokotów, it’s about €14-15. What I think will happen, Wola will position itself in between the CBD and Mokotów. From the CBD, it will draw companies who want to save and from Mokotów, ones that are fed up with the traffic jams and want to upgrade their offices. We can see that the pressure has already started. Companies are making long-term decisions, so now you are already dealing with companies whose deals expire in 2016. They already have the additional supply in their minds.

What other factors, apart from rents, are important in negotiating with a potential tenant?

For a new office building, it’s definitely the quality. It’s also the reputation of the building.

Law firms, for example, want to be in Rondo 1 or the Metropolitan.

We believe that if your building isn’t new, there are other factors that are relevant. Companies want their employees to spend a lot of time in the office. They want their buildings to offer everything. Obviously you can’t have a Google-style office, but you can put in a lot of amenities that are complementary to the workspace. For example, we have a kindergarten in the Warsaw Trade Tower.

Is the kindergarten only for employees who work in the building?

They have preferred access. They can sign up first and if there are still places available, residents from Wola can sign up too. It’s also important to have more interaction between the office buildings and the neighborhood.

This way you don’t just have an office that people go into in the morning and leave after work.

We did an extensive survey among the employees in the building to get feedback about what’s important to them. Interestingly, they said they wanted more social activities, for example yoga or sports. We are now contemplating to create an activity room which can be used for yoga classes, meditation, etc.

Normally, employees working in one building meet in an elevator every day but never talk to each other. We are offering them opportunities to get to know each other, to mingle.

You also have quite an unusual feature for an office building, a culture and event space.

Yes, the amenities I’ve mentioned so far are all standard. But there are also “experience amenities,” as I like to call them. We have decided to create cultural space on the 35th floor with a view of the entire Warsaw skyline. We’ve arranged it to be a sort of gallery space, where various exhibitions are run and many cultural events are organized. Tenants can also use it for a board dinner, for instance.

We’ve realized that the Warsaw Trade Tower is a classic building, it has been

Interview with Vera Wagner, vice president of Heitman

here for many years, and yes, it’s not made of glass and steel, but the quality is still high. We wanted to present it in a classic way and we decided that an art gallery is a perfect fit. It covers 400-500 sqm in area.

It’s quite flexible so you can turn it into a concert hall, an auction house, a reception area. It’s designed to serve many functions, with a touch of culture.

What are you exhibiting now?

Now, we’re holding a photo exhibition for young Polish photographers. Last year, we worked with the Warsaw Academy of Fine Arts. We held a competition for young artists, and the employees in the building could vote for their paintings. The winners received awards.

Our goal is to do something that our tenants can enjoy, but we also wanted to support the art community, which is notoriously short on money. I’ve also learned that it is difficult for them to get attractive space to exhibit. So it is a win-win situation.

Is there a lot of interest in it?

Yes, on opening day we had 400 visitors.

Do employers who reside in your building benefit from all these amenities?

Indirectly they do. Companies compete for talent all the time, so in a way we are helping them to get a competitive edge by making the building a great working environment. Besides, we offer companies space to organize business mixers, which also matters. I think that all these amenities do make a difference.

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LOKALE IMMOBILIA / HOSPITALITY-INVESTMENT

Buy a pad, rent a pad POLES ARE TAKING TO APARTHOTELS AS A MORE LUCRATIVE FORM OF INVESTMENT COMPARED TO THE RESIDENTIAL MARKET. THEY ARE PARTICULARLY FOND OF THE SMALLEST UNITS B Y B E ATA S O C H A

W

hile the market for apartment hotels (often called aparthotels) and condo hotels has been developing in Western Europe since the 1990s, it came to Poland much later. The first apart-hotels were constructed in the early 2000s, but this type of real estate investment has only recently begun to flourish.

“At first, the aparthotel market was developing predominantly in holiday resorts in the mountains and at the seaside. The most attractive coastal resorts are Świnoujście, Międzyzdroje and

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Władysławowo, while in the mountains the most popular locations are Karpacz, Wisła and Krynica,” said Roksana Pachałko-Ciołkowska, property valuer at advisory firm Emmerson Evaluation.

For the past few years, investors have been increasingly interested in building them in major cities. “There is an extensive aparthotel offer in Kraków, Warsaw and Wrocław. There are also interesting aparthotel investments in the Warmia and Mazury region,” Pachałko-Ciołkowska added.

The interest of aparthotel developers

and individual investors in major cities is supported by the figures. “The average annual occupancy of an aparthotel in holiday resorts stands at some 40-60 percent, while in major agglomerations it reaches 60-80 percent,” said Marcin Dumania, CEO of Sun & Snow, a firm that deals in short-term leasing of nearly 800 apartments across Poland.

Not only for tourists The reason behind higher occupancy levels in major cities is their wider range of customers: they target not only tourists

Images: Shutterstock, Emmerson Evaluation

LOKALE IMMOBILIA / HOSPITALITY-INVESTMENT

but also business clients, who travel all year round. One of the major Polish residential developers, Polnord, is about to launch an aparthotel project in Warsaw’s Wilanów. The first stage of the investment dubbed SMART Aparthotel will deliver 195 units with a total usable area of 3,982 sqm, which translates into 20.4 sqm per apartment, according to the company’s H1 statement.

Some of the units will likely be acquired by companies in the nearby office park as temporary accommodation for their employees. Since workers these days are increasingly often employed on specific projects in various locations, aparthotels are a very convenient way for the company to provide workers with suitable accommodation located close to the office.

Due to their size, which often does not exceed 20 sqm, aparthotel units are often called “microapartments.”

Recently, developers have started targeting a new group of customers with their offer: students. “Microapartments will be rented to students from October till June, and between July and September – to tourists,” said Dumania.

“We expect the demand for these type of units to be substantial, because the rent rates will be highly competitive. A lot of private dormitories are currently being planned in cooperation with universities, which have land plots in the vicinity of the campus at their disposal,” he added.

A better investment Investor interest in aparthotels seems to be booming, particularly among individuals looking for a safe but

more lucrative alternative to investing in residential units. “Companies that manage apartments for rent currently offer an annual return between 7 and 10 percent of the net purchase price,” explained Pachałko-Ciołkowska from Emmerson Evaluation. Naturally, the actual return is somewhat lower, once we consider all the additional costs, such as maintenance, insurance and taxes. “The real yield on an aparthotel investment is at 5-7 percent, which is still more profitable than purchasing a residential apartment for the rental market,” she added.

There are downsides to this form of investment, though. “The [aparthotel] market is more susceptible to the economic situation than the residential market, it depends on how wealthy the society is and how well tourism is developing. It is therefore subject to more risk,” Pachałko-Ciołkowska explained.

“THE REAL YIELD ON AN APARTHOTEL INVESTMENT IS AT 5-7 PERCENT, WHICH IS STILL MORE PROFITABLE THAN PURCHASING A RESIDENTIAL APARTMENT FOR THE RENTAL MARKET.

Small is in Poles are getting particularly more interested in the smallest apartments.

“These small properties are currently very popular among investors,” said Dorota Tobiasz from the Investment Department of Sun & Snow. “First of all, the purchase of a 20-sqm microapartment with the purpose of renting it out requires less capital involvement than in the case of a 35-sqm property.

It also yields higher returns on investment, because the differences in rent rates are smaller than the differences in purchase price,” she explained.

A Wrocław-based company, named Starter, recently turned a former University Assistant Hotel in Wrocław into

a block of mini and micro apartments, between 11.5 and 27 sqm. “We sold 90 percent of all the units within six months after obtaining financing for the investment. All 149 microapartments have already been sold,” said Starter’s Paulina Strumidło. As many as 75 percent of them have been purchased by individuals who want to rent them out.

“The sale success of the first stage has shown that there is demand among investors and individual clients for this type of investment. We are planning to continue the project both in Wrocław, where we will launch the second stage of the development, and in other major cities in Poland,” Strumidło added. u

ROKSANA PACHAŁKOCIOŁKOWSKA PROPERTY VALUER AT EMMERSON EVALUATION

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LOKALE / LOGISTICS

No room for a vacuum Can Poland compete with the German warehouse market? Is price the only factor in play? In investment volumes, Poland falls way behind its neighbor. What do these two markets have in common?

Robert Dobrzycki, managing partner of Panattoni Europe

I N T E R V I E W B Y B E ATA S O C H A With 8 million sqm of total stock, the Polish warehouse market is still only a fledgling compared to the mature German market. Are there any similarities between the two?

Both of these markets serve similar clients: the automotive industry, local domestic consumption as well as distribution to other European countries. Obviously, the German market is significantly larger than the Polish one. But they both serve their neighbors.

They both play an important role as major consumer markets as well. When you compare the size of the German market with, say, Switzerland or Austria, it’s like comparing Poland with the Czech Republic.

What about the investment market?

It is indeed hard to compare their investment volumes, but that is largely due to the fact that the Polish market is very young and fresh.

The first warehouse facilities started to appear in 1995-1996. The supply of properties for sale is therefore much smaller.

Besides, the ownership structure in Germany is much more dispersed.

There are a lot more buyers and sellers. In Poland, there are a few major international owners, who are reluctant to sell the properties they hold in their portfolios.

Some say that because of the portfolio size of the major players on the Polish market, it is next to impossible for new investors to enter the market. Would you agree?

I don’t think so. A new player doesn’t necessarily need to have a large portfolio. Our market is growing, the supply is growing, which creates opportunities for new players. In the future, we won’t have just a few major players, but more medium-sized and even a few small participants. This will make the market more liquid and improve the conditions for all parties, including tenants. The more liquid the product, the cheaper it gets.

Both in Germany and in Poland, the bulk of tenant demand is currently coming from e-commerce and logistics firms. Is this also true about the rest of Europe?

It’s a trend we can see across Europe. Of course, there are places which will never become European distribution hubs (like Spain or southern Italy) due to their geographic location.

However, countries located in Central Europe are all quite similar. The same tendencies that appear in Western Europe are coming to Central Europe, including to Poland. Central European countries may be lagging behind in e-commerce, because this type of consumption is not yet as popular as in Western Europe. But this is slowly changing.

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Berlin, which is only 100 km from the Polish border, offers the lowest rents among the top five German markets (at €4.70 per sqm per month for prime properties). Can Poznań, with rent levels up to €3.30 per sqm per month, really compete with warehouse space offered in Germany?

I believe it can. I don’t think that Berlin will be a major warehouse-industrial market in the long run. It is, and will predominantly remain, a local market.

Poznań is seeing a lot more activity than Berlin, particularly among companies looking for cheaper space and lower labor costs. The extra distance doesn’t make that much of a difference. Poznań is becoming an international distribution market, also serving Germany. I believe it has a brighter perspective than Berlin.

Why do German companies decide to relocate to Poland? Is it only a matter of warehouse costs? What other factors come into play?

Rents, labor costs, flexibility of our labor market. We often say that our labor market is not flexible enough, but compared to that of Western Europe, it surely is. They are also attracted to the proximity of the consumer market as well as the quality of work they can find here.

The German warehouse market may be facing some limitations in the future: the German federal government has been considering imposing a limit on land development by 2020 of up to 30 ha per day (currently it is at 74 ha; in 2004, it exceeded 120 ha a day). Do you think this could have any effect on the Polish market?

Definitely yes. It is a great opportunity for Poland and for developers to attract investment. Any limitation on business activity makes neighboring countries more attractive. If there is a vacuum in the market, someone will fill it. For years, we have seen that companies burdened with restrictions at home look for alternative solutions in Central Europe. For instance, regulations at home regarding labor law and trade unions draw large companies’ attention to Poland. They look for a calmer environment to do business in and serve Western markets from.

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NEWS

WBJ Observer presents

Time is of the essence Express delivery is not only essential for medical and electronics industries.

Parcels are also sent by fashion and accessories retailers

Tomasz Buraś is the CEO of DHL Express (Poland)

What type of clients use express delivery?

Express delivery is for those clients who need fast, reliable and secure delivery. When a firm is entering uncharted territory, we can provide them with knowledge and expertise of the local logistics market in 220 countries all over the world.

In Poland, our express services are often used in the electronics industry – shipping goods and components. The medical industry comes next, with all its time-sensitive samples and equipment. The automotive industry is another major client. We also have quite a large number of parcels with fashion and accessories.

Express delivery services aren’t cheap. What do fashion and accessories companies use them for?

Given that your business is constantly expanding, what infrastructure investments are you planning to carry out in the next few years?

We invest in infrastructure a lot. Right now we are close to completion with the first phase expansion of our hub in Leipzig, an investment which cost €150 million and added 44,000 sqm of warehouses and offices. Leipzig is one of our three major hubs: the other ones are located in Cincinnati and in Hong Kong.

We are also going to build gateways and hubs across Poland.

Right now we have six gateways in Poland (Warsaw, Katowice, Gdańsk, Wrocław, Poznań, Szczecin) as well as six domestic hubs. We want to create over a dozen regional facilities dedicated to international deliveries in Poland over the next five years. They will be located close to major agglomerations.

Logistics is not only real estate and machines. What else is DHL you investing in?

Naturally, given our global reach, we continue to invest a lot in our IT solutions, in integrating systems and providing the most standardized platforms for all of our centers.

We have also been investing millions of euros in customer service, in knowledge and competencies. We’ve been doing that for years and I think these investments are even more important than the tangible investments. After all, you can buy machine specs, cars, IT systems, etc. relatively easily, but you can’t copy or reproduce company-client relationships.

BROUGHT TO YOU BY DHL

There are two types of fashion businesses we have as clients.

First, we serve companies that import high-end brand goods and sell them in Poland. These are usually small boutiques. We also have quite a lot of Polish brands that sell their garments and shoes outside of the country.

In fashion, just like in electronics, time is of the essence. We have a client, a geographer by education, who has an incredible knack for picking out shoes from producers all over the world. The shoes he picks always become the hit of the season and he makes great money on them. He purchases a very limited number of models and sells them in Poland.

We also have a client who established a clothing store while she was an intern in Dubai. She now lives in northern Poland. The way her company works is quite incredible: she collects orders during the week, sews the clothes here and ships them out every Friday. On Sunday, they reach the store in Dubai.

Even popular and mass brands use our services. Not for the clothes that you see on the rack, but when they collect samples of fabrics, ship prototypes, prepare a catalog. These samples cannot

get lost, they are often irreplaceable and must get to the destination on time.

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CITYSCAPE / WARSAW

Did you know?

Warsaw’s iconic Palace of Culture and Science was built in 1955 as “a gift from the Soviet people to the Polish nation” and for many it was a symbol of communist oppression. After 1989, many argued that it should be demolished or somehow refurbished so it wouldn’t remind people of that dark period of Poland’s history. Nowadays, such sentiments are less frequent with many accepting the building as Warsaw’s trademark. At the time of construction, it was the second tallest building in Europe. The building was modeled after the “seven sisters,” a number of skyscrapers in Moscow.

Similar buildings were constructed in other Eastern European cities.

Poland’s beating heart The capital city of Poland and the country’s biggest city with a population exceeding 1.7 million citizens, Warsaw has always had its place among the most recognizable cities in Europe. Thanks to numerous classical monuments erected in the 18th century, Warsaw used to be called the “Paris of the East.”

Despite its size, it’s a relatively young city.

Its beginnings started in the 13th century.

The city’s name stems from Warcisław, the knight, or rather the diminutive Warsz, who was the village’s owner. In the 16th century, King Sigismund Vasa moved the capital of Poland from Kraków to Warsaw. This precipitated a major expansion of the provincial town. It remains the capital to this day.

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However, the history of Warsaw hasn’t always been a bed of roses. As a result of the Second World War, up to 85 percent of the city was destroyed. In 1939, Warsaw was home to the biggest number of Jews in Europe. Hardly any of Warsaw’s Jews survived the holocaust. Major monuments have been erected and Jewish history tours are organized year-round.

After the war, the capital city was effectively rebuilt, including the rebuilding of entire historical sections of the city (e.g. the old town). Recently, it has become one of the most developed cities in Central and Eastern Europe and a center of global and domestic businesses.

Maria Skłodowska-Curie

Born in Warsaw in 1867, Maria Skłodowska-Curie was the first women to win a Nobel Prize and the first ever person to win it twice. Because Poland was part of the Russian Empire at the time, she had to study at the Polish underground university before moving to Paris to continue further education. In 1903, she won her first Nobel Prize in physics along with her husband Pierre Curie and Henri Bercquel for their research on radiation. She was awarded a second one in 1911 in the field of chemistry, for discovering two elements, radium and polonium. Even though she spent most of her adult life in France, she never lost her sense of Polish identity, visiting Warsaw regularly and naming one of the elements she discovered – polonium, after her native country.

Images: Shutterstock, Wikimedia, Flickr/Platformarp

Favorite daughter

LONDON 1,450 KM PARIS 1,368 KM BERLIN 517 KM

MOSCOW 1,151 KM

PRAGUE 517 KM

ROME 1,320 KM

MAYOR: HANNA GRONKIEWICZ-WALTZ AREA CODE: 22 AREA: 517.24 SQ KM NEAREST AIRPORT WARSAW CHOPIN AIRPORT

POPULATION (DEC. 2012) 1,724,404

DISTANCE TO THE CITY CENTER 8 KM

HIGHWAY A2

WORKING-AGE POPULATION (DEC. 2012)

1,061,842

UNEMPLOYMENT RATE (DEC. 2013)

4.5%

MEDIAN PAY (2012)

PLN 5,226.05 MODERN OFFICE SPACE 4,300,000 SQM OFFICE VACANCY RATE Central 16.3% Non-central 14.6% PRIME HEADLINE RENTS Central €16.00-€26.00 Non-central €11.00-€18.00

NUMBER OF UNIVERSITIES

NUMBER OF STUDENTS

NUMBER OF GRADUATES A YEAR

78

249,800

62,500

PERCENTAGE OF CITY COVERED BY ZONING PLANS: 30% MAJOR INDUSTRIES: IT, outsourcing, banking, telecomunnication RECENT MAJOR INVESTORS Hochtief, IBM, Bank of China, Nordea Group, Orange, Skanska, T-mobile

WBJ OBSERVER • MAY 2014

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OBSERVER TOP 10

OBSERVER RANKING

Franchisors Ranked by capital invested into franchisees' or partners' facilities in 2013*

More and more Poles earn profits from cooperation with business licensors. In 2014, the thousandth franchise brand in Poland will debut and there will be over 100 partnership system coordinators, according to the Report about Franchising in Poland 2014 published by PROFIT System consulting firm. Gastronomy and clothing branches are seeing the largest share of new partnership systems. Grocers are showing the fastest and largest growth of all franchisees.

Polish partnership systems are also getting popular outside of the country. Almost 100 Polish franchise brands are oper-

ating successfully in 50 countries.

The dynamically growing number of licensee firms was the catalyst for our “Franchisors and Partnership System Coordinators” ranking. The Book of Lists team in cooperation with the Polish Franchisor Organization (POF) created the fact sheet, analyzing firms that are associated with the POF. The ranking order depended on the amount of shops, licensees and the investment amount per shop. The authors of the ranking have presented market leaders who exhibit credibility.

1MCDONALD'S POLSKA

Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 745.1

Polish branch of fast food chains McDonald's is running for 22 years and consists of 337 units in more than 100 locations throughout the country. More than 60% of its restaurants are operated by franchisees. At the moment, 203 restaurants operate licenses held by 59 licensees. Franchisees can take advantage of the know-how and support network.

Average amount of net investment in franchise or partnership facility (PLN, thousands): 3,841 Franchisor's total revenue in Poland (PLN, mln): 1,062.3 Number of franchise and partner facilities: 2013: 194

2 CARREFOUR POLSKA Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 57.1

Carrefour Poland offers an opening package adapted to the size of the store. In the case of Carrefour Express convenience format with an orange logo, the company buys 100% of the shop equipment. In the case of Carrefour Express mini markets with a green logo, the franchisor provides: external visual elements and furniture for the alcohol and vegetable departments; the IT system; a set of clothes for store personnel and small equipment.

Average amount of net investment in franchise or partnership facility (PLN, thousands): 140 Franchisor's total revenue in Poland (PLN, mln): WND Number of franchise and partner facilities: 2013: 408

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OBSERVER RANKING

3 YES BIĹťUTERIA

7DALLMAYR

Capital invested into franchisees' or partners' facilities (in 2013, mln)

Capital invested into franchisees' or partners' facilities (in 2013, mln)

The franchisor should meet formal requirements including a form of franchise agreement security (promissory note, notarial deed) and the lack of a criminal record. They should have premises with a corner display window, located by the main route, with an area of about 50 sqm, preferably on the ground floor, in shopping malls.

The duration of the franchise agreement is 5 years.

Average amount of net investment in franchise or partnership facility (PLN, thousands): 159.2 Franchisor's total revenue in Poland (PLN, mln): 15.8 Number of franchise and partner facilities: 2013: NA

PLN 37.8

Average amount of net investment in franchise or partnership facility (PLN, thousands): 360 Franchisor's total revenue in Poland (PLN, mln): WND Number of franchise and partner facilities: 2013: 105

4 PANDORA JEWELRY Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 25.2

The franchisor offers: 50% discount on the purchase of furniture: extended to 60 days payment term on product order opening package; marketing support (own media, support, etc); VM support (product placement; initial product training, customer service training, training on the job floor.

Average amount of net investment in franchise or partnership facility (PLN, thousands): 1,200 Franchisor's total revenue in Poland (PLN, mln): 324.6 Number of franchise and partner facilities: 2013: 21

5 SOLAR COMPANY Capital invested into franchisees' or partners' facilities (in 2013, mln)

Images: Shutterstock, McDonald's

PLN 24.9

Polish brand founded by three co-owners, connecting global trends of Polish design. Elegant style, based on the quality of materials and cut. The franchisee should have sales and team management skills, in order to build customer loyalty and a spirit of cooperation. The company provides support in the form of sales and personnel management training.

Average amount of net investment in franchise or partnership facility (PLN, thousands): 150 Franchisor's total revenue in Poland (PLN, mln): 148.2 Number of franchise and partner facilities: 2013: 166

PLN 10.3

8 CARTE D'OR CAFE Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 6.8

Average amount of net investment in franchise or partnership facility (PLN, thousands): 200 Franchisor's total revenue in Poland (PLN, mln): 9.6 Number of franchise and partner facilities: 2013: 34

9 GREEN WAY

Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 5.7

Average amount of net investment in franchise or partnership facility (PLN, thousands): 300 Franchisor's total revenue in Poland (PLN, mln): 0.6 Number of franchise and partner facilities: 2013: 19

10 MERITUM BANK ICB Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 4,9

Average amount of net investment in franchise or partnership facility (PLN, thousands): 30.0 (1) Franchisor's total revenue in Poland (PLN, mln): 393.4 Number of franchise and partner facilities: 2013: 151

6 TELEPIZZA POLAND Capital invested into franchisees' or partners' facilities (in 2013, mln)

PLN 12.9

Average amount of net investment in franchise or partnership facility (PLN, thousands): 160 Franchisor's total revenue in Poland (PLN, mln): 88.6 Number of franchise and partner facilities: 2013: 81

Footnotes: WND = Would Not Disclose * the product of the number of franchise businesses and the average net investment value in one business in thousand PLN in 2013. Data presented thanks to cooperation with Polish Franchise Organisation (franchise.org.pl, 22 560-8035) Research was conducted among POF members in March-April 2014. Companies not responding to our survey are not listed.

(1) plus negotiable license fee

WBJ OBSERVER â&#x20AC;˘ OCTOBER 2014

79

GADGETS >>

TECHNOLOGY TO MAKE YOUR LIFE EASIER

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

Grillbot The grilling season is almost over, but weather permitting there are still a few grilling session left this year. Or you can start preparing for next year. And since we’re living in the 21st century, why not hire robots to help us with the worst part of this outdoor activity – cleaning. With three rotating brushes Grillbot can remove burnt food and grease, while you can spend this time with your friends and family enjoying a few cold ones. The brushes will not damage your steel or porcelain grills and are dishwasher safe. It can even clean surfaces that are still hot (below 120 ºC).

Price: $130

Ricoh Unified Communication System (UCS) P1000

This is a lightweight, 1.3 kg compact unit about the size of a small laptop computer. It features a 10.1-inch display, a wide-angle 170° camera, speaker and a microphone and uses wired or wireless LAN. The camera’s direction can be reversed for situations when the location or background is important. With a codec standard video of H.264/SVC, the resolutions and frame rates are automatically controlled according to the load status of the network. No connectors, cables or other equipment are required. Furthermore, nine-point simultaneous displays are possible for up to 20 simultaneous connection points.It is possible to connect with other mobile devices.

Price: $865 + monthly fee

Ricoh.com

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OCTOBER 2014 • WBJ OBSERVER

Adobe Ink and Slide Adobe Ink and Slide is a stylus and digital ruler combo which lets you draw anything you want on your iPad. It’s a beautifully designed pressuresensitive pen and a magnetic ruler. It lets you work on your drafts on an iPad and easily send them to your desktop app for more complicated work.

Price: $199

Adobe.com

Images: `Grillbot, Adobe, Ricoh, Dualitt, Kagu, Swash

>>

>>

Grillbots.com

Swash If you hate going to the dry cleaners this machine is for you. Swash, made by Whirlpool and Procter & Gamble, allows you to refresh your clothes in just 10 minutes without leaving your home. It removes wrinkles and gives them a fresh scent without damaging your clothes.

It works with most fabrics and doesn’t require water. You just need to plug it in. This slick-looking machine can be put anywhere in the apartment without looking out of place. However, you really must need to hate dry cleaners to buy it, as the machine itself costs $500 with a 12-pack of pods (one pod per piece of clothing) will run you $7.

Price: $499

Swash.com

>>

The Cozy Room Always wanted that man (or woman) cave but didn’t have space for it? Then The Cozy Room is perfect for you. The whole capsule is small (250x120 cm) but is packed with shelves, drawers, comfortable chair and has space for your desktop PC or TV, whichever you prefer. It even has a “collection rack” for all these dolls action figures that you are not sure that everyone should know you collect. Add a fully-stocked mini fridge and this could be a perfect, albeit, expensive gift for many. Keep in mind, it takes three months to produce and deliver one of these.

Price: $8,000

Kagu-cozy.co.jp

>> Dualit Lite Toaster With everything labeled as “smart” nowadays, it shouldn’t come as a surprise that someone designed a smart toaster. Considering all these burnt toasts your standard toaster has been making for breakfast over the years, this is a step in the right direction.

The Dualit Lite Toaster, according to its producer, is really smart.

It takes into account the room temperature, its own internal temperature, how many slices have been toasted, and how long the toaster has been cooling between uses. All this, allegedly, helps make it a perfect toast. You can even check the bread while its toasting without canceling the cycle. Smart, isn’t it?

Price: $145

Dualit.com

>>

WBJ OBSERVER • OCTOBER 2014

81

EVENTS / ECONOMIC FORUM

RUBBING SHOULDERS WITH THE HEAVYWEIGHTS

T Former President Lech Wałęsa was one of the Forum’s guests

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OCTOBER 2014 • WBJ OBSERVER

he Economic Forum in Krynica, dubbed by many as “Polish Davos” was organized for the 24th time.

After so many years, it’s difficult to top the previous years’ meetings continuously.

This was somewhat the case this year, as the speaker list was less impressive than in the previous years. While last year’s Forum was opened by PM Donald Tusk and two years back President Bronisław Komorowski was a keynote speaker, this year the absence of top government officials was noticed, yet understandable.

Days before the Forum started, PM Tusk was nominated to the post of President of the European Council and every top Civic Platform official was in Warsaw trying to secure their positions in the newly formed government.

Despite that, you could hardly complain about the lack of politicians. Every leader of the opposition party was there as well as many international politicians, including former PMs of Spain, Lithuania and Latvia. As always, there were CEOs of

EVENTS / ECONOMIC FORUM

major Polish companies and as usual, state-owned companies were represented the best.

Images: Institute for Eastern Studies

Focus on Ukraine Just like every year, the forum was divided into a few thematic paths, regular topics included – health care, innovation, energy, local government.

But with the recent crisis in Ukraine, much of the focus was shifted to the east of the EU. There was a series of panels on international security, EU and its neighbors and a special Europe-Ukraine Forum with a number of Ukrainian panelists, including ministers, professors and CEOs. Yet, despite a somewhat worse-then-usual guest list, the Economic Forum in Krynica was a one of a kind event. It’s the only place where you can rub shoulders with the Warsaw Stock Exchange CEO, MPs or former presidents. Krynica's strength is not only in stacked panels, but the off-the-record discussions taking place all over the venue, very often till the late hours. Guests, with some exceptions of course, do not hide in their hotel rooms, after their panels are over, but mingle with the crowd and are approachable.

The highlights of the discussions included a panel on the new role of Central Europe, where panelists, including former PM Jan Krzysztof Bielecki and Orlen CEO Jacek Krawiec talked about the growing importance of the CEE region.

“In our region, we are getting back to the basics in a sense. In 1937, Czechoslovakia resembled Spain in terms of the development level. Poland was similar to Greece. Today, Poland is close to Greece while the Czech Republic and Slovakia are beginning to catch-up with Spain,” said Krawiec.

There was also the signing of a nuclear contract between Tauron, Enea and KGHM. The three energy giants signed a contract with PGE for the purchase of 10 percent of shares each in PGE EJ1 – a company responsible for the construction and maintenance of the first Polish nuclear power plant.

According to Poland’s nuclear program, the 3000 MW plant should come online until the end of 2024.

Next year’s edition, the 25th forum, should be more star-studded than this year’s. Especially, considering that it will be held right after the Parliamentary elections.

Politicians always happily attend the Forum. Leszek Miller (Democratic Left Alliance) and former Spanish PM Jose Luis Rodriguez Zapatero speak to the press

WBJ OBSERVER • OCTOBER 2014

83

EVENTS / SCF

T

he Forum is a regular gathering of shopping center tenants and developers organized since 2005. The Fall Edition of the Shopping Center Forum 2014 took place on September 17 and 18 at Warsaw’s EXPO XXI center and is the largest event of its kind in Central Europe. It features a showcase of shopping center projects, talks regarding lease of space, developer and retailer networking, conferences and presentations of cutting-edge technology and services for shopping center tenants. Shopping center managers and owners make up 90 percent of the exhibitors.

Retailers got the chance to find out about more than 170 projects presented by well-known brands.

“Events of this kind always result in a unique opportunity to meet key representatives of the commercial property market – retailers, investors, lease-up agencies and other partners,” says Marta Hamarowicz, head of the Leasing Department at Atrium Poland Real Estate Management. This year’s Shopping Center Forum featured the brand-new concept of Speed Networking, an area for quick meetings between developers and key tenants.

Networking opportunities Forum participants could present their offers to representatives of chains. About 300 retail representatives took part in the SCF 2014 Fall Edition. “The SCF is a place where it’s worth meeting lessors, and other lessees alike, in order to talk shop and exchange experiences from various locations and consider mutual development in new projects,” says Waldemar Madajczyk, Senior Director of Emerging Markets at Guess Europe.

“For us, Shopping Center Forum participation is most of all about getting a comprehensive snapshot of the market,” says Dominik Szulowski from McDonald’s Polska sp. z o.o. An important aspect of the Shopping Center Forum are its evening business meetings in a less formal atmosphere: the Welcome Mixer at Pure Sky Club and the After Party at Nova Maska Piano Art Club & Restaurant.

This year’s Shopping Center Forum’s content partners included: United Nations Global Compact, Causa Finita Law Firm, Mind Progress Group, and PKP SA. Complementary to the Expo, these companies showcased the most important trends and challenges facing the Polish retail property market at the conference.

Another get-together for the retail property industry is com-

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OCTOBER 2014 • WBJ OBSERVER

ing up in the form of the Winter Edition of the SCF to be held on March 3, 2015 at Legia’s stadium. The program includes a welcome mixer, 30 booths devoted to showcasing developers’ offers, a conference and – first and foremost – the grand gala of the SCF Retailers’ Awards. This award is given out to the best lessees of retail space in shopping centers. The winners are chosen by an independent, 10-person jury comprised of representatives of the largest Polish consultants of management and leasing of retail facilities.

Shopping Center Forum Fall Edition 2014 – 1,400 participants, 300 retailer representatives and 170 development projects

Images: SCF

A full view of the market at the SCF 2014 Fall Edition

2 2

LIFESTYLE / RESTAURANTS

NEW BEGINNIGS Established this summer, we bring you five places that peaked the public interest – now, with a few months under their belt, they’re looking like serious contenders… general hangout), their food has proved consistently good. The menu is an everevolving affair, which on our visit included beef cheeks cooked sous vide and served with coffee puree and caramelized shallots and redcurrant. Order a La Trappe Blonde with it and let the day slip away. pl. Zbawiciela 5, tel. 739 070 808

WABU

L’ENFANT TERRIBLE

Sushi gets a five-star makeover in Wabu, a place that proudly proclaims that they have no menu: instead, ‘every dish is a unique composition’ prepped by their chefs according to your whims. You might find your whims influenced by the works of author Haruki Murakami – sections of his texts are occasionally read out at night, while the sushi masters chop up dishes mentioned in his books.

The menu doesn’t faff about – it is strong, silent and absent of adjectives: dishes are surmised using one word, in some cases two, imparting an element of suspense to the ordering process. The five-course tasting menu (zł. 170) is the work of chef Michał Bryś, and on our visit, was a fine dining triumph, the highlight of which was duck hearts – what beautiful things. This place is going to be huge.

ul. Krucza 41/43, tel. 22 628 9474, wabu.pl

TAPAS GASTROBAR

RUMBURAK Sit – weather permitting – amongst shaded colonnades in an atmosphere that’s both well-heeled and welcome. While Rumburak is difficult to pigeonhole (not really a restaurant, not really a bar, more of a

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OCTOBER 2014 • WBJ OBSERVER

Here it’s all scuffed timber tables supported by rescued factory metal, open ductwork and elaborate floor tiles of Iberian persuasion. But this is not some dark, heavy bolt hole, and the floor-to-ceiling windows lend light and modernity. Yet it’s the food that really does the talking: first class gazpacho, meltingly tender beef cheeks and patatas bravas – perfectly fried potatoes served in a ballsy tomato sauce. In short: magnificent.

Jarheads will love Słoik, a place lined with glass jars brimming with colorful ingredients and bright preserves. The approach pits modernist against classic, and the winner is you. And the cocktails are up to par as well.

ul. Grzybowska 63, tel. 22 251 1310, tapasgastrobar.pl

ul. Złota 11, tel. 600 396 688, restauracjasloik.pl

SŁOIK

Images: Słoik, Wabu, Tapas Gastrobar, Rumburak, L’enfant Terrible

ul. Sandomierska 13 (enter from Rejtana), tel. 22 119 5705, eterrible.pl

LIFESTYLE / HOTELS

SHORT

MEDIUM

WBJ OBSERVER • OCTOBER 2014

87

LIFESTYLE / R ON E S AT AFUI R N AA N L TNS O T E

ALEX WEBBER EDITOR OF THE WARSAW INSIDER

Liking Hipsters Before It Was Cool Warsaw: good things happen here. We’ve got the world’s skinniest house, a giant plastic palm tree and a rainbow installation that lights up in flames once every month. It’s a good place and a great city, we’re all agreed.

But lurking under this wonderful veneer is a sickness every bit as black as the vilest of cancers. It is a plague of pandemic proportions. It is the hipster.

These are not my sentiments, but those of a friend of mine. We were sitting in Rumburak last month, a smart little place on pl. Zbawiciela. Conversation was going well, until that is, he announced, “I don’t know why they don’t just ring it with a big, barbed wire fence.” Stupidly (as it turned out), I thought he was referring to the rainbow.

Actually, he meant the whole of Zbawiciela. “We need to keep the hipster scum in one place and under control,” he explained. Now despising a whole section of society because of their membership of a tricky-to-define subculture seems a bit daft to me, but it’s not the first time I’ve heard such passions expressed.

The hipster backlash is in full throttle, certainly amongst my expat friends. Bewilderingly, their arguments aren’t particularly well-thought out. In fact, such is their confused definition of what actually constitutes a hipster, that I get the impression they’re simply scared of fashionable young people.

My friends, it appears, have become cranky old fogies.

Of course, to a degree, so have I. But I have no disdain for these hipster sorts. They speak English (often better than me), they don’t punch you on the bus for being foreign and their quirky sense of fashion will at the very least amuse. More importantly, they’ve changed Warsaw for the better.

For a couple of years, pre-money meltdown banking crisis, Warsaw was in danger of becoming dangerously homogenous. It was turning into a city of skyscrapers and Starbucks. There’s nothing wrong with that, but you had the feeling that the capital

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was heading into some sort of faceless oblivion, condemned to live out its existence like the anonymous clone of some bland Western city. A character like Warsaw deserved more.

Then, from nowhere, these hipsters emerged, and along with them a wave of individuality and arty expression. Warsaw became exciting again. Weird bits of public art, edgy design studios, buildings reclaimed from ruin and transformed into galleries and clubs – it was all down to the hipsters. The regeneration of wrecked districts like Praga and Powiśle wouldn’t have occurred had they not become trendy first – and guess whom you can credit for that.

But more than this, I’ve allied myself with hipsters because of their services to food and drink. A few restaurants talked about concepts of fresh, natural and organic in my early days out here, but most were lying. It was places like Solec 44 that took it to the next stage. Now you can’t enter a restaurant without it proudly proclaiming their produce is delivered fresh from farmyards and forests.

And there’s the drink. No more must you glug your way through stale, yellow fizz. Thirst for the socalled ‘Euro lager’ has been replaced by an insatiable lust for craft beer. And again, guess who popularized it. So I’m told, on average three or four artisan breweries open each month; at least two new exciting beers enter the market each and every week; multi-tap bars are mushrooming across the nation.

Drinkers aren’t just drunk, they’re now happy as well. The culmination of this all is Warsaw’s first true beer festival – held in Mokotów on the weekend of October 10th. And you know what? I think I’ll buy the first hipster I see a large glass of lager. It’s the least I can do to say thanks. u

“ON AVERAGE THREE OR FOUR ARTISAN BREWERIES OPEN EACH MONTH; MULTI-TAP BARS ARE MUSHROOMING ACROSS THE NATION.

Image: Shutterstock

The culprits of a better aura