Poland Today Business Review+ No. 59-60

No. 059-60 / 3rd November 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

GM to hire 300 new workers in Gliwice for Opel Astra V production page 2

BANKING & FINANCE

Polish banks are in robust shape, KNF's assessment shows page 3

ENERGY & RESOURCES

PM Kopacz says new EU climate pact is good for Poland page 3 Polish gas monopoly pays PLN 1bn for Norwegian oil fields page 4

TRANSPORT & LOGISTICS

Developer MLP Group to build 121,000 sq.m of warehouse space for Polish retailer page 5 Amazon launches three giant fulfillment centers page 6 Net warehouse take-up to surpass 1m sq.m in 2014 page 7

HOSPITALITY

Accor offers to sell 46 CEE hotels to Polish subsidiary Orbis page 8

RETAILERS

Drugstore chain Rossmann launches 3rd distribution centre in Poland page 8 Kids clothing company Coccordillo hits the bourse to finance expansion page 9

RETAIL PROPERTIES

Auchan's property arm to develop large retail center in Wilanów page 10

POLITICS & ECONOMY

Poland takes 32nd place in World Bank's global 'Doing Business' ranking page 10 GDP growth to top 3% in 2014-15, IMF says page 11

POLAND TODAY EVENTS

Upcoming and recent events pages 12-14

OPINION

Poland falling behind in ease of doing business page 15

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 16-18

Poland is strengthening its position as CEE's distribution hub. Photo: Rossmann

No end in sight to warehouse boomNo end in sight to warehouse boomNo end in sight to warehouse boomNo end in sight to warehouse boom Although last week saw the much anticipated launch of three gi-ant fulfillment centers in Wrocław and Poznań by US e-retailer Amazon, the boom in Poland's industrial property sector seems far from over. In this edition of BR+ we also bring you stories on warehouse developer MLP's huge BTS contract with Polish re-tail group Czerwona Torebka, drugstore chain Rossmann's brand new distribution hub as well as Q3 warehouse market sta-tistics by real estate consultancy JLL. pages 5-8

Automotive sector market leaders meeting 18 November 2014, Kielce

What is the state of play in Poland’s automotive market?

Is Poland’s automotive industry shifting into higher gear? What are the

influences driving the market? Find out the answers to these questions and

more at a meeting of leaders in Poland’s automotive sector organised by

DNB Bank Polska S.A. The conference will feature the latest automotive

sector report by DNB Bank and Deloitte, while experts and leading figures

in the industry will offer their own views on market trends.

On top of that, participants will have the chance to experience an adrenaline

rush by driving the Lamborghini Gallardo SE (520HP), the Ferrari 458 Italia

(570HP) the Hummer H2 (325HP) and the BMW 3 (230HP)!

organizer partners

more info on www.poland-today.pl

weekly newsletter # 059-60 / 3rd November 2014 / page 2


Opel to hOpel to hOpel to hOpel to hire 300 new ire 300 new ire 300 new ire 300 new workers in Gliwice workers in Gliwice workers in Gliwice workers in Gliwice for for for for Astra V productionAstra V productionAstra V productionAstra V production

The Polish General Motors plant in Gliwice will re-cruit 300 new employees by the end of this year as the company gears up to launch production of the brand new Opel Astra V model in 2015. The factory, which makes the current generation of the popular Astra compact as well as the Cascada convertible and em-ploys 3,000 staff at the moment, is also returning to a three-shift model as it anticipates a considerable in-crease in output. GM first communicated its decision to allocate pro-duction of its next-generation Astra compact car mod-el to its manufacturing plants in Gliwice, Poland and Ellesmere Port, UK in mid-2012. The announcement was of crucial importance for both plants, as it ensured their survival for at least another half a decade. At the time, Opel/Vauxhall said it would invest EUR 300m into the two facilities in order to upgrade them to the latest manufacturing standards and prepare for pro-duction of the new model. Gliwice received EUR 95m of that total capex, earning the GM project the "Big-gest Investment of the Year" award from Poland's in-vestment promotion agency PAIiIZ, last year. The Opel plant in Gliwice is GM's main Polish produc-tion facility. The plant made some 108,500 cars last year, down by some 16,800 units from the 2012 level and well below its total annual capacity of 207,000 units. Opel employs some 3,000 staff in Gliwice and cooperates with an estimated 100 suppliers in Poland. The Polish plant manufactures the Astra IV compact in several versions (hatchback, sedan, GTC, and OPC).

Recently it has added the new Cascada convertible to the mix, which required investments to the tune of EUR 55m. The Cascada is part of Opel's multibillion euro model offensive introducing 23 new vehicles and 13 new powertrains from 2012 through 2016. The pro-duction of the next generation Astra V is to begin in mid-2015.

GM is Poland's No. 3 car manufacturer Car production in Poland by maker in '000 units

0

100

200

300

400

500

600

Opel

VW

Fiat

2009

2010

2011

2012

2013

Source: Samar

The US carmarker also owns a car engine plant in Ty-chy, where it plans to launch production of a new gen-eration midsize diesel engine family. The related capi-tal expenditure is to reach EUR 250m, making it the largest investment the Tychy plant has seen to-date, and bringing total GM investments in Poland in excess of EUR 1bn. According to GM, production of the all-aluminum 1.6liter four-cylinder diesel engines is to launch in 2017, with maximum annual capacity being envisaged at 200,000 units. The new engine family, which will meet Euro 6 emission standards, is to be in-stalled in a wide range of Opel/Vauxhall models.

Launched in 1999 and located in the Katowice special economic zone, the Tychy engine factory used to be part of Japan's Isuzu Motors. GM acquired a 60% stake in the business back in 2002 and purchased the outstanding 40% last year. According to the company, the transaction underlined Europe's importance of Europe for GM, as "one of the most competitive car markets in the world with highest customer demands in terms of fuel economy and CO2 standards." With a staff of just over 500, the Tychy factory currently makes the Circle L 1.7l diesel engines. Since its found-ing, the plant has turned out more than 2.5m engines.

Currently the GM plant in Gliwice makes the 4th gen-eration of Opel's Astra compact. Photo: GM Company

Poland's automotive exports came to EUR 17.9bn in 2013, 1% up on the prior year, and in 2014 the figure is likely to reach EUR 18.6bn, predicts Rafał Orłowski of market research company AutomotiveSuppliers.pl. According to their estimates, the largest products group were parts and components, representing more than 38.8% of the country's automotive exports (EUR 6.95bn; +5% y/y), followed by passenger cars and light commercial vehicles with 30% (EUR 5.13bn; -3.8% y/y) and Diesel engines with 12.3% (EUR 2.2bn; +4.8% y/y). Poland-based car manufacturers turned out


slightly more than 575,000 passenger cars and LCVs last year, marking a 9.6% drop from 2012, according to market researcher Samar. Although Fiat Auto Po-land retained its position as the country's number one carmaker, its share in the total vehicle output dropped by 3.4 pps, down to 51.4%. The Poznań-based Volkswagen plant came second with a 29.7% share (+4.2 pps), whereas Opel Polska's factory in Gliwice saw its share shrink by less than 1 pps, reaching 18.9%.

BANKING & FINANCE

Polish banks are in Polish banks are in Polish banks are in Polish banks are in robustrobustrobustrobust shape, KNF's shape, KNF's shape, KNF's shape, KNF's assessment showsassessment showsassessment showsassessment shows

An asset quality review and stress tests carried out by the Polish financial watchdog KNF in line with the ECB methodology have shown that Polish banks are generally in robust shape. KNF said that only two Polish banks, Getin Noble Bank and BNP Paribas Polska, had lower that required capital, although their condition is hardly a cause for concern. "The small adjustment in capital resulting from the Polish asset quality review (AQR) in combination with the EBA stress tests show the broad resilience of the banking sector," Fitch Ratings commented on the KNF study. "The results are consistent with the Viabil-ity Ratings for the Fitch-rated banks, which reflect their standalone strength, and so the ratings impact is likely to be limited." A similar "health check" carried out by the European Central Bank was failed by 25 out of 130 euro zone lenders, although some have since implemented measures to improve their condition. The ECB or-dered 13 banks to prepare restructuring plans. Since

Poland is not part of the eurozone, the ECB's stress tests did not include Polish banks, and therefore KNF carried out a parallel examination that covered 15 banks, representing 72% of the sector's assets.

Poland's largest banks Total assets as of end of 2013 in PLNbn

0 50 100 150 200

Getin Noble Bank

ING BSK

mBank

BZ WBK

Pekao

PKO BP

Source: banks

"The results of stress tests confirm the legitimacy of a conservative supervision policy and recommendations issued earlier by the KNF,” the Polish watchdog's bank inspection director Tomasz Piwowarski told a press conference. Getin and BNP Paribas, the two institutions that failed KNF's tests, have since followed the regulator's rec-ommendations and raised their equity. "The overall capital shortfall from the combined exer-cise was only PLN 398m, a very small percentage (0.35%) of total sector common equity Tier 1 (CET1) capital. It was also virtually fully covered by 1H14 profit retention (Getin Noble Bank) and capital raised during 1H14 (BNP Paribas Bank Polska SA)," Fitch added.

ENERGY & RESOURCES

PM Kopacz saysPM Kopacz saysPM Kopacz saysPM Kopacz says new new new new EU EU EU EU climaclimaclimaclimate pact is good te pact is good te pact is good te pact is good for Polandfor Polandfor Polandfor Poland

Polish Prime Minister Ewa Kopacz said the recent EU summit that saw new, ambitious emissions reduction targets being set for the 27-nation bloc, was a success for Poland. At the summit, in late October, European leaders approved a broad climate pact obliging the EU as a whole to cut greenhouse gas emissions by at least 40% by 2030, compared to 1990 levels. Besides the CO2, two 27% targets were agreed – for renewable en-ergy market share and increase in energy efficiency improvement. The targets are not final, however, as a special "flexi-bility clause" was added to the final text, making it possible for the European Council to return to the them after the UN climate change summit in Paris, in December 2015. For Poland, which generates some 90% of its electrici-ty from coal, the key concern was that a rigid CO2 re-duction plan would force Polish utilities to speed up investments in new, cleaner power sources and/or buy emission permits, both scenarios leading to higher en-ergy prices. Poland had threatened to veto any move by the EU that would lead to such an outcome. What put the Polish PM in a jubilant mood following the October summit were certain special provisions, included in the package, that would compensate Po-land and other less affluent, coal-dependent nations, making the planned emissions cuts less expensive for industry. Under the deal, Poland will be able to trans-fer emission permits to power sector firms free of


charge, which should guarantee that electricity prices do not go up.

Energy generation in Poland in 2012 By source, actual data

Other

2%

Gas

4%

Coal

84%

RES*

11%

Source: Economy Ministry *) renewable sources

EU leaders also approved a reserve fund financed from 2% of overall carbon emission allowances, in order to pay for energy sector investments. The initial Com-mission proposal had been of 1%. Poland is said to re-ceive a total of PLN 7.5bn from the new fund by 2030, showed unofficial estimates cited by the Polish media. According to PM Kopacz, Poland is to receive a half of the reserve fund, which is based on GDP per capita. This means the country will receive an additional 134m tons of emissions allowances under the EU Emissions Trading System.

ENERGY & RESOURCES

Polish gas monopoly Polish gas monopoly Polish gas monopoly Polish gas monopoly pays PLN 1bn for pays PLN 1bn for pays PLN 1bn for pays PLN 1bn for NorwegiaNorwegiaNorwegiaNorwegian oil fields n oil fields n oil fields n oil fields

PGNiG Upstream, a subsidiary of Poland's gas mo-nopoly PGNiG, has agreed to buy an 8% in the Gina Krog field in Norway along with stakes in three other minor fields offshore the North Sea from France's To-tal for PLN 996m (USD 317m). The acquired stakes translate into 320,000 tons of oil and 90m cb.m of gas this year. Total will retain a 30% stake in the Gina Krog field, which is expected to produce 60,000 bar-rels of oil and 9m cubic meters per day, the French company said in a statement. The agreement is conditional on the company obtain-ing all necessary administrative permits by the end of 2014. PGNiG expects to complete the transaction in the fourth quarter of this year, the statement said. The company estimates the deposits, located in Nor-wegian Sea and the North Sea, amount to 33 million barrels of oil equivalent (boe), with a split of 72% of oil and 28% gas. The deposits have some 14 years of pro-duction, PGNiG said. As of beginning of 2014, PGNiG's total foreign gas and oil deposits stood at 60m boe. With the acquisition, PGNiG boosts its production outside of Poland by approximately 60%. Analysts welcomed the deal, saying the Polish compa-ny managed to acquire producing assets at a relatively attractive price. Without the transaction, PGNiG's overseas production was likely to begin declining al-ready in 2015. Now, it is expected to remain at the cur-rent level, or even increase slightly.

Last year PGNiG's net earnings dropped 14% y/y and came to PLN 1.92bn, while its revenues increased by 12% and came in excess of PLN 32bn. The company owed much of the profit to the launch of oil produc-tion from the Skarv field in Norway and Lubiatów field in Poland. Its production and exploration reve-nues rose 45% y/y and topped PLN 6.26bn.

PGNiG continues to boost its upstream capabilities. Photo: PGNiG

PGNiG is determined to continue acquiring further exploration and production concessions around the world, as part of Poland's efforts to lessen the depend-ence on Russian oil and gas imports. Its efforts have not always been successful as PGNiG's 2013 financial statements include a PLN 292m impairment loss on its exploration operations in Libya (POGC Libya BV) as well as a PLN 137m provision for the outstanding li-cence obligations under the Murzuq project in Libya. PKN Orlen and Grupa Lotos, the state-controlled Polish oil refiners, likewise seek to get hold of produc-ing assets abroad. A year ago Lotos paid PLN 536.3m for stakes in 14 Norwegian North Sea concessions, some of which are already at the production stage. PKN Orlen, on its part, has acquired two Canadian oil production and exploration firms, TriOil and Birchill Exploration, for a combined PLN 1.25bn.



Developer MLP Group Developer MLP Group Developer MLP Group Developer MLP Group to build 121,000 sq.m of to build 121,000 sq.m of to build 121,000 sq.m of to build 121,000 sq.m of warehouse space for warehouse space for warehouse space for warehouse space for PoPoPoPolish retail grouplish retail grouplish retail grouplish retail group

The Warsaw-listed industrial space developer MLP Group last week announced the signing of its largest contract to-date, which also counts among the biggest deals in the history of Poland's industrial property market. Over the coming four years, MLP is to develop approximately 120,800 sq.m of warehouse and office space for three chains belonging to the listed Polish re-tail group Czerwona Torebka: Małpka Express, Dyskont Czerwona Torebka, and Merlin.pl. Each lease cover a period of 15 years. As part of the transaction, a new logistic park, MLP Poznań West, will be developed on a 20-hectare plot located near Poznań where two FMCG chains Dyskont Czerwona Torebka and Małpka Express will take up a total surface area of approximately 79,300 sq.m. The first building, with the surface area of about 25,500 sq.m is to be delivered to the client in December 2015. The other one, with 53,800 sq.m of space is to be commissioned a year later. The third lease agreement provides for development and lease of a 41,500 sq.m facility for Merlin.pl, one of Poland's leading online retailers. The facility will be developed within the MLP Pruszków II logistic park owned by the MLP Group, which is currently being extended. The investment is to be developed in 2018 and the facility is to be delivered in Q3 2018, at the lat-est although the client may choose to embark on the project much earlier.

"This is a record- breaking project for MLP Group and one that will allow us to significantly increase the scale of our business. We are in an intensive growth phase. The project, developed for three retail companies, is an excellent fit with our strategy which, in addition to the development of logistic parks, also focuses on the construction of large built-to-suit projects. The change in our business strategy has visible results and gives strong basis for further growth of MLP Group in the coming years," said Radosław T. Krochta, Chief Exec-utive Officer and Vice President of the MLP Group S.A. Management Board.

Czerwona Torebka is targeting 100 discount su-permarket openings per annum. Photo: Czerwona Torebka

At the end of 2013, the total warehouse space leased by MLP Group S.A. reached over 350,600. sq.m, marking an 18.5% increase on the prior year. In 2013, the com-pany signed leases with 22 clients, for a total of nearly 94,000. sqm. of warehouse and office space. Agree-ments with new clients for development of new facili-ties within MLP's five existing logistic parks: MLP Pruszków I, MLP Pruszków II, MLP Tychy, MLP Poznań and MLP Bieruń, represented more than a half of the total figure (48,300 sq.m), the rest being lease extensions (approx. 31,000 sq.m) and leases of premis-es already available at the five parks (14,500 sq.m).

According to the developer, it can add a further, 372,000. sq.m of new warehouse to each of its existing five parks, thus doubling its current offering. MLP Pruszkow II, MLP Poznań and MLP Bieruń parks in particular have the potential for further expansion. Its two latest projects MLP Lublin and MLP Wrocław will add a further 118,000 sq.m to that total. At the moment, MLP Group owns more than 158ha of land in Poland, which according to the company will allow it to reach a target level of warehouse and production space of around 720,000 sq.m. The key shareholder in MLP Group is Cajamarca Holland B.V., a Dutch-based subsidiary of the Tel-Aviv-listed Israel Land Devel-opment Company Ltd. "Our strategy is to build warehouses and industrial fa-cilities based on signed lease agreements, which makes our business safe and predictable, and generates high margins. It might happen that for technical reasons we end up building an asset that offers more space that we have secured tenants for, but as a principle it is not our intention to develop speculative projects," Radosław Krochta explained MLP's strategy to Poland Today. A growing retail empire Merlin.pl, Małpka and Dyskont Czerwona Torebka all belong to the Warsaw-listed company Czerwona Torebka, a brainchild of Mariusz Świtalski, the creator of Poland's most successful retail concepts (Biedronka discount groceries, Żabka convenience stores, and Eurocash wholesale warehouses). Czerwona Torebka started up as a developer of neighborhood shopping plazas, only to change its strategic focus to retail in August 2013. when it acquired Małpka Express, a rap-idly expanding chain of convenience stores that has grown from 80 locations in mid-2013 to more than 300 as of August 2014. The company is hoping to speed up the pace to reach 300 new stores per annum in the coming years, targeting 2,500 locations.


Its most recent creation is Dyskont Czerwona Torebka, a discount grocery concept that targets both small towns (with population of 10,000+) and big cit-ies, but unlike its key competitors Biedronka and Lidl, it does not sell private labels, focusing on brand name goods only. Every product carries two price tags: a re-tail and a wholesale one, the latter being applicable when a client purchases more than six items of the same kind. The chain's long-term plan is 100 openings annually. Besides the two retail chains and its network of shopping plazas, Czerwona Torebka is also the owner of one of Poland's top multimedia retailer and e-commerce operators Merlin.pl. The group counts on synergies between its online and brick & mortar busi-ness on the of logistics and purchasing side. Czerwona Torebka debuted on the Warsaw Stock Ex-change in 28 December 2012, raising merely 19m in-stead of the PLN 280m it had been hoping to get. De-spite the disappointing IPO, the business attracted a strong minority shareholder in the shape of private equity fund Pinebridge, and its listed status enables it to finalize acquisitions via share swaps, which proved handy in the case of Merlin.pl and Małpka Express. Czerwona Torebka is not planning an equity boost an-ytime soon, hoping to rely on its own cash, bank loans and bond issues for financing.


Amazon launches three Amazon launches three Amazon launches three Amazon launches three giant fulfillment giant fulfillment giant fulfillment giant fulfillment centers in Polandcenters in Polandcenters in Polandcenters in Poland

The last week of October saw the official opening of three giant Polish fulfillment centers by US e-commerce giant Amazon. Delivered by US industrial property firm Panattoni Europe and Australian-

owned Goodman at the estimated cost of EUR 100m each, the Polish centers are the most technologically advanced of Amazon's 30 existing fulfillment centers worldwide. Panattoni opened the two Amazon centers in Bielany Wrocławskie near Wrocław and Sady near Poznań, with a combined space of 246,000 sq.m, on October 28 and 29, respectively. Each of the facilities totals in ex-cess of 100,000 sq.m, including 90,000 sq.m of ware-house space and 8,000 sq.m of office space per center. The construction took only 10 months, on the average, even though in Poznań Panattoni was responsible for major changes to the road infrastructure. The two fa-cilities are undergoing the final stage of assessment for a BREEAM Interim rating of 'Very Good'.

Having completed two giant centers for Amazon in

Poland,Panattoni Europe is building another one in the Czech Republic. Image: Panattoni Europe

Amazon's 2nd Wrocław centre, built by Goodman, opened on October 28 as the 12th project the Australi-an developer delivered for the online retailer in Eu-rope. Overall, over the past eight years, Goodman built 12 facilities with a combined space of more than 1m sq.m for Amazon. Similar to the two projects built by Panattoni, Goodman's Wrocław center measures 123,500 sq.m. Besides their size and the speed, with which they were delivered, Amazon's investments are impressive also

in terms of their impact on the local labor market, as each of the centers will have 2,000 full-time employ-ees, and during the peak holiday season Amazon is to take on an extra 3,000 temporary workers in Poland.

Goodman has delivered more than 1m sq.m of indus-trial space in Europe for Amazon. Image: Goodman

The gross hourly pay offered by Amazon is PLN 13 in Poznań and PLN 12.5 in Wrocław, which adds up to a monthly wage of some PLN 2,200 before tax. Com-pared to Amazon's German workers, who earn similar figures but in euros, this may not seem like much, but considering the average in the Polish warehouse sec-tor, these are competitive wages. Moreover, Amazon offers 26 days of paid holiday a year, one złoty hot lunches and free transport by shuttle bus from towns located even as far as 90km from the workplace. Since Amazon continues to recruit both in Poznań and Wrocław, with hundreds of positions still available, other warehouse operators in these regions may need to sweeten up their employee benefits packages if they wish to avoid staff shortages this autumn. The new centers will serve to handle orders from Am-azon.de, and ultimately will serve customers from all over Europe. This may put some pressure on Amazon employees in Germany, who have engaged in a series


of strikes over the past two years over pay and work conditions. Amazon employs a total of 9,000 ware-house staff at nine distribution centers in Germany, its second-biggest market behind the United States, plus 14,000 seasonal workers. Trade unions want Amazon to raise pay for workers at its distribution centers in accordance with collective bargaining agreements across the mail order and retail industry in Germany. Amazon, however, has rejected the demand, arguing that it regards warehouse staff as logistics workers and says they receive above-average pay by the standards of that industry. Originally an online bookstore, Amazon has evolved into a global e-commerce platform that sells pretty much everything as well as produces movies, mobile phones and tablets, The Seattle-based giant, which has branches in Canada, Germany, France, China, Japan, Italy, Spain, Brazil and the UK, is yet to break even however, as its financial results to-date have failed to impress. In Q3 2014, the company posted a net loss of USD 437m on USD 20.58bn revenues. Published less than a week before the opening of the three fulfillment centers in Poland, Amazon's disappointing Q3 results fell way short of market expectations, sending the company's stock down by 10%. It was already down 23% on the year as some investors have grown tired of the company’s continued “invest now, show profits later” approach.


Net warehouse takeNet warehouse takeNet warehouse takeNet warehouse take----up up up up to to to to surpasssurpasssurpasssurpass 1m sq.m in 1m sq.m in 1m sq.m in 1m sq.m in 2014, says JLL2014, says JLL2014, says JLL2014, says JLL

Net take-up in Poland's industrial property market will most likely exceed 1m sq.m this year, according to

estimates by real estate consultancy JLL. In the first three quarters the figure came to 787,000 sq.m. "The industrial market is in very good shape. Overall market sentiment remains positive as demand for warehouse floor space displayed a y/y increase for the fourth consecutive quarter," said Tomasz Mika, Head of Industrial Agency Poland, JLL. Total demand registered in Q3 2014 stood at 343,000 sq m, with new agreements and extensions accounting for 261,000 sq m, and the remainder - 82,000 sq m - being attributable to renewals. Gross demand since the beginning of the year is over 1.2m sq.m, and the total tenant activity will exceed 1.5m sq.m by the of the year.

Largest warehouse owners in Poland As of 1H 2014, in % of total stock

Other

44%

Panattoni

5%

Blackstone

12%

Prologis

26%SEGRO

13%

Source: JLL

Since the beginning of the year, the highest interest in industrial space was recorded in the Warsaw Suburbs Zone (313,000 sq m), followed by Upper Silesia (255,000 sq m), which both happen to be, stock-wise, the largest warehousing regions. In Q3 alone, howev-er, Upper Silesia topped the ranking with 87,000 sq.m, followed by Warsaw Suburbs, Poznań and Wrocław.

Logistics operators remained the key occupier group during Q3 accounting for 35% of net demand, followed by retailer (28%) and automotive firms (17%). On the supply side, Q3 saw the completion of some 436,000 sq.m of new space, which brought Poland's total modern industrial stock to 8.2m sq.m. "The largest stock increases were registered in Wrocław and Poznań, where most notable comple-tions involved two of the three Amazon buildings. Af-ter these spectacular completions 539,000 sq m of in-dustrial space is still under construction. Again Poznań and Wrocław have the highest developer ac-tivity with a combined total of 55% of Poland's indus-trial stock in the pipeline," said Jan Jakub Zombirt, Senior Research Analyst, JLL. Encouraged by growing interest from tenants, devel-opers again feel confident enough to embark on spec-ulative developments. As of the end of Q3 such pro-jects accounted for 24% of the stock under construc-tion, well above the 9.6% registered in the previous quarter. The largest projects of this type include the extension to the North-West Logistic Park in Szczecin (42,500 sq.m – all speculative), Panattoni Park Ożarów II (20,000 sq.m, of which 16,400 sq m is speculative ) and Panattoni Park Poznań IV (35,000 sq.m, of which 15,000 sq.m is speculative). The average vacancy rate in Q3 stood at 9.3%, signifi-cantly below the 10.5% registered in the previous quarter. Among the main submarkets, the highest share of vacant space was found in Warsaw Inner City (15.6%) and Central Poland (15.0%), and the lowest in Poznań (3.7%) and Wrocław (5.4%). When it comes to rents, JLL reports that they remain relatively stable in most regional markets. The only change to rents was observed in Poznań – a decrease from EUR 2.25-3.15 in Q2 to EUR 2.25-3.00/ sq. m/ month in Q3 2014.


HOSPITALITY

Accor offers to sell 46 Accor offers to sell 46 Accor offers to sell 46 Accor offers to sell 46 CEE hotels to Polish CEE hotels to Polish CEE hotels to Polish CEE hotels to Polish subsidiary Orbis subsidiary Orbis subsidiary Orbis subsidiary Orbis

Poland's top hospitality group Orbis has received an offer from its majority investor, France's Accor, to ac-quire the latter's 46 hotels in Central Europe for EUR 142.3m (PLN 600m). Under the proposed arrange-ment, Orbis would become the sole licensor of Accor brands in the region. Orbis has been granted negotia-tion exclusivity until the end of November but with Accor as its strategic partner, the real decisions will be made in Paris rather than Warsaw. "Accor's offer, which is generally in line with our ex-pansion strategy, is being currently analyzed by inde-pendent external advisors. The London-based consul-tancy HVS has been hired to determine whether the potential transaction would be beneficial for Orbis and its shareholders, Ireneusz Węgłowski, Vice President of the Management Board of Orbis. tells Poland Today. According Mr. Węgłowski, an equity boost targeted at Accor, as a way of financing the acquisition, is not be-ing taken into consideration. Asked where is Orbis go-ing to get the cash from, the executive replies: "There are many ways in which we could finance the potential transaction. Orbis has solid cash reserves at the moment and no debt, which makes bank financing easily available to us. Moreover, since we have been looking into a number of growth scenarios for some time now, we remain in close contact with banks re-garding loans. Negotiations with banks and the analy-sis of Accor's offer are being carried out simultaneous-ly."

The Warsaw-listed Orbis has been offered to take over Accor's businesses in Hungary (which also encom-passes Accor operations in Macedonia, Slovakia and Bulgaria), Czech Republic, Romania and Poland (Muranowska Sp. z o.o. and Hotek Polska Sp. z o.o.). The 46 hotel portfolio includes: 11 owned (1,974 rooms), 17 leased (3,573 rooms), 11 managed (1,685 rooms) and 7 franchised (821 rooms). All hotels oper-ate under the Accor brands: Sofitel, Pullman, MGallery, Novotel, Mercure, ibis and ibis budget. 76% of the existing hotels is located in capital cities. The subsidiaries in Poland include two hotels that Orbis has already been operating on a management contract basis i.e. ibis Warsaw Old Town and Sofitel Wroclaw Old Town. Most of the hotels are operational, while eight projects are in pipeline of which three hotels will be managed and five will be subject to franchise agreements. Long-time partners Accor entered Poland in 1973 through Novotel fran-chise with Orbis in which it became a majority share-holder 35 years later and currently holds close to 53% of the business. The Orbis Group encompasses 68 ho-tels (including 52 owned, 1 leased, 3 hotels under man-agement agreements and 12 franchised) operating in 32 cities and resorts in Poland, Lithuania and Latvia. It offers clsoe to 12,000 rooms under the ibis, ibis Styles, ibis Budget, Mercure, Novotel, Sofitel and Orbis Ho-tels brands. In 2010 Orbis adopted an asset-light strat-egy, which emphasizes the company's role as a hotel operator and prioritizes expansion via management and franchise agreements. Hence, Orbis has been gradually restructuring its asset portfolio, seeking ways to refinance certain real properties with the help of long-term investors. Recently its expansion has re-lied on franchise and management agreements as well as revamping of existing properties. "We have already gained the experience in acquiring the Hekon hotels from Accor in 2003, which was a real

success. We are also licensed to operate hotels under the Accor brands in Poland, Lithuania, Latvia and Es-tonia. By taking over hotels in six other countries we would record a significant business increase – the total number of our hotels would exceed 110 and strength-ening Orbis' position as the biggest hotel group in Cen-tral Europe," says Ireneusz Węgłowski. The Warsaw-listed Orbis turned over PLN 682.6m in 2013 (down from PLN 707.4mm in 2012), while its net income came to PLN 65m (vs. 68m in 2012). Average revenue per room dropped 4.6% last year, down to PLN 124.1, while room occupancy rose by three per-centage points and topped 58.8%. As of June 2014, Orbis had PLN 2.1bn worth of assets. The company has recently embarked on a PLN 100m investment pro-gram, seeking to upgrade some of its key properties by the end of 2014. Some 90% of the total amount is to be spent in Warsaw, where Orbis operates 11 hotels. The combined price tag on the ongoing makeovers of Mercure Warszawa Centrum, Novotel Warszawa Cen-trum, and Sofitel Victoria Warszawa is PLN 75m. To-tal capital expenditures in 2013 came to PLN 95m and included also substantial outlays on IT.

RETAILERS

DrugstDrugstDrugstDrugstore chain ore chain ore chain ore chain Rossmann launchRossmann launchRossmann launchRossmann launches 3rd es 3rd es 3rd es 3rd distribution centre distribution centre distribution centre distribution centre

German drugstore giant Rossmann has launched a distribution center in Pyskowice, 30-km north west of Katowice. The PLN 70m project, which includes a 25,000 sq.m high-bay storage area, took 11 months to complete and it has created some 300 jobs, including 230 directly with Rossmann. Over the coming five years, the retailer is expecting to hire a further 100


staff in Pyskowice. The new hub will handle deliveries to Rossmann stores in southern Poland. Together, Rosmann's three Polish distribution centers (Łódź, Grudziądz, and Pyskowice) have a storage area of 100,000 sq.m. "This is our most important investment this year. With 150 store openings per annum we need to make sure we have sufficient capabilities to handle logistics. For more than two years a similar unit has been in opera-tion in Grudziądz, in the north of Poland, easing the burden on our main distribution center in Łódź. We are expecting Pyskowice to deliver a similar outcome," said Rossmann's CEO Marek Maruszak.

Rossmann 's Pyskowice hub will cover the south of Poland. Image: Rossmann

The first Rossmann drugstore in Poland opened in 1993 in Łódź. In 2012 the Polish unit boosted its sales by nearly 17%, passing the PLN 5bn mark, which means that over the prior four years its turnover quad-rupled, despite a rather poor sentiment on the market during the post-crisis period. In 2013 Rossmann's rev-enues totaled PLN 5.67bn, representing a y/y growth of 13%, and according to CEO Marek Maruszak the re-tailer intends to maintain a similar pace of expansion

(10-13%) in 2014 and 2015. The company estimates that its share in the Polish drugstore market increased from 18.7% as of end of 2012 up to some 22% a year later. Last year Rossmann opened 150 new stores in Poland adding a further 100 or so since the beginning of this year. Currently the chain operates 945 outlets in 400 towns and cities, employing more than 13,000 people. It's only a matter of months before the chain hits the 1,000 stores mark. Poland is Rossmann's second largest market after Germany, where the chain operates more than 1,850 outlets. In November 2013 Rossmann opened its 3,000th outlet in Hannover. Globally, its store num-bers tripled since 2004 and its rapid growth over the past year. Rossmann saw its global sales revenues grow 16.1% y/y in 2012 and total EUR 5.95bn. The company's founder Dirk Rossmann maintains a major-ity stake (60%) in the business, with the remaining 40% being held by the A.S. Watson Group, owned by Hong-Kong billionaire Li Ka-shing.

RETAILERS

KidsKidsKidsKids clothing clothing clothing clothing companycompanycompanycompany Coccordillo hits the Coccordillo hits the Coccordillo hits the Coccordillo hits the bourse to finance bourse to finance bourse to finance bourse to finance retail retail retail retail chain expansionchain expansionchain expansionchain expansion

CDRL, a company that owns of one of Poland's top kids clothing retailers Coccodrillo, has carried out a successful listing on the Warsaw Stock Exchange. The estimated PLN 14.9m worth of proceeds from the IPO CDRL plans to spend on retail network expansion and online store improvements.

"Besides providing us with funding for expansion, the IPO represents a natural step forward in the develop-ment of the Group. Our goal is to strengthen our posi-tion as a regional leader in the fast-growing kids cloth-ing market," commented CDRL's CEO Marek Dworczak.

Coccodrillo stores in Poland & abroad

200

225

250

275

300

325

350

375

400

2011 2012 2013 *2014

Source: URE *) as of end of Q3

As of end of September, there were 205 Coccodrillo outlets in Poland and by the end of the year the com-pany is hoping to reach 220 locations. Its long-term plan for the Polish chain is 250 stores. The Polish re-tailer has also seen impressive growth outside of Po-land, where it has 130 outlets, located mainly in other CEE countries, but also in more exotic markets, such as Saudi Arabia, China or Brazil. Next year CDRL is to put a stronger emphasis on for-eign expansion and launch a pan-European online store that will be launched in Q1 2015 in Germany, Austria, Slovakia, Czech Republic and Russia as well as in English language for other markets. Last year Coccodrillo posted PLN 3m worth of net earnings on PLN 149m turnover. This year the respec-


tive figures are expected to reach PLN 10.9m and PLN 159m. CDRL's bonds has been listed on the Warsaw Stock Exchange's Catalyst market since December 2011. The two main shareholders in CDRL are its CEO Marek Dworczak and his deputy Tomasz Przybyła.

RETAIL PROPERTIES

Auchan's property arm Auchan's property arm Auchan's property arm Auchan's property arm to develop large retail to develop large retail to develop large retail to develop large retail center in Wilanów center in Wilanów center in Wilanów center in Wilanów

Morelia Investments, a company linked to Immochan, the property arm of French retailer Auchan, has unveiled plans for a large shopping cen-ter in Warsaw's popular residential district of Wilanów. Offering some 29,000 sq.m of GLA, the pro-ject will house approximately 100 outlets with an Auchan hypermarket (8,000 sq.m) as well as a large non-food outlet also operated by Auchan (7,000 s.qm) as its anchor tenants. The investor is hoping to com-plete Wilanów Park by the end of 2016 at the cost of EUR 65m, but it is yet to obtain a building permit for the project. Wilanów Park will be located near the planned inter-section of Przyczółkowa Street and the future Warsaw ring road. It will include 1,600 underground and 500 surface parking spaces. Adjacent to the centre, the de-veloper envisages a 3ha park and recreational area with a range of sports and leisure facilities, including a skate park, ice rink and fitness equipment. The prom-ise of all those bonus functions is likely meant to con-vince the local authorities to approve the construction of a yet another large retail development in the area, where the Warsaw-listed GTC and Flemish Ghelamco are already working on shopping center projects.

GTC, which developed one of Warsaw's most popular shopping centers Galeria Mokotów, is currently pool-ing together resources to finance two major retail pro-jects: Galeria Wilanów and Galeria Północna in War-saw, Poland. GTC estimates that phase one of Galeria Północna will open its doors in 2015 with a GLA of 64,000 sq.m, whereas Galeria Wilanów is to welcome its first customers in 2016 with an initial GLA of 61,000 sq.m. The dates are not final, however, as GTC is yet to obtain building permits for the two projects, each of which is to cost some EUR 170-180m to build, according to information Poland Today received last year from GTC's Małgorzata Czaplicka. The developer has recently signed leases with key tenants for the two centers: hypermarket operator Carrefour (9,300 sq.m in Północna and 6,800 sq.m in Wilanów) and fashion retailer LPP (4,670 sq.m and 4,680 respectively).

Auchan is yet to obtain a building permit for Wilanów Park. Image: Morelia Investments

Flemish developer Ghelamco received a building per-mit for its Plac Vogla neighborhood shopping centre project in Wilanów already in December 2013. The scheme will be the company's first retail development. Construction on the Plac Vogla investment were to begin this year and take approximately seven months. The facility is expected to deliver almost 11,000 sq.m of retail space and house around 50 tenants. Besides Plac Vogla, the Belgians have recently unveiled plans

for another two neighborhood shopping centers in the greater Warsaw area (in the Piaseczno and Łomianki suburbs) that will respectively comprise 11,500 sq.m and 7,000 sq.m of space and house 60 and 30 retailers.

POLITICS & ECONOMY

Poland Poland Poland Poland takestakestakestakes 32nd 32nd 32nd 32nd place inplace inplace inplace in World Bank's World Bank's World Bank's World Bank's global 'Doing Business' global 'Doing Business' global 'Doing Business' global 'Doing Business' rankingrankingrankingranking

Poland has again earned praise from the World Bank for making life easier for entrepreneurs. By imple-menting sound regulatory reforms in a number of are-as, the country earned a top spot among the new EU member states in Central Europe in the 2015 edition of World Bank's influential Doing Business report. Po-land's position in the ranking improved for the sixth consecutive year, and currently the country ranks 32nd among the 189 economies analyzed by the insti-tution, its best result ever. "This year's 32nd Doing Business ranking for Poland reflects the Government's ongoing reform efforts, which document the country's impressive achieve-ments in the areas of enhancing the quality of the business climate and accelerating post-crisis economic growth. Poland has been one of the Central European leaders in implementing regulatory reforms over the past years," said Marina Wes, World Bank Country Manager for Poland and the Baltic Countries. In particular, Poland made getting electricity less cost-ly by revising the fee structure for new connections. It also made transferring property easier by introducing online procedures and reducing notary fees. Finally,


Poland made trading across borders easier by imple-menting a new terminal operating system in the port at Gdańsk, World Bank said. "The improvement in ranking was the effect of some methodological changes, while the score for Poland did not change significantly since the previous year. However, in the last five years Poland advanced by as much as 40 positions in this ranking, which is quite an impressive achievement," BZ WBK bank commented on the news. In fact, had the report relied on the same methodology as last year, Poland's position would have declined by two notches. Despite impressive strides the country has made in recent years, it continues to lag behind many of its regional peers in a number of crucial cate-gories, such as "Starting a Business," "Enforcing Con-tracts," "Resolving Insolvency," and "Dealing with Construction Permits." In the latter case, Poland occu-pies an embarrassing 137th place globally. The annual World Bank Group flagship Doing Busi-ness report analyzes regulations that apply to an econ-omy's businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and resolving insolvency. A higher score indi-cates a more efficient business environment and stronger legal institutions. According to World Bank, doing business is the easiest in Singapore. Joining it on the list of the top 10 economies with the most busi-ness-friendly regulatory environments are New Zea-land; Hong Kong SAR, China; Denmark; the Republic of Korea; Norway; the United States; the United King-dom; Finland; and Australia. Read Poland Today Editor Andrew Kureth's critical take on Poland's achievements in the "Doing Business" ranking on page 15.


IMF expects Poland's IMF expects Poland's IMF expects Poland's IMF expects Poland's GDP growth to top GDP growth to top GDP growth to top GDP growth to top 3% 3% 3% 3% in 2014in 2014in 2014in 2014----15; says more 15; says more 15; says more 15; says more rate cuts are welcomerate cuts are welcomerate cuts are welcomerate cuts are welcome

More rate cuts might be in order in Poland as the country's economic growth loses momentum and in-flation remains at historic lows, the International Monetary Fund said. According to the Washington D.C.-based institution, the growth rate in 2014 and 2015 will be around 3%. However, the outlook is uncertain because a slower pace of improvement in the euro zone and other emerging markets is likely to have a significant impact on Poland, the IMF said in a statement, which con-cluded its 2014 staff visit last week.

In the first reduction since July 2013, Poland's Mone-tary Policy Council cut the main reference rate by 0.5pps last month, down to a record 2%. Although the cut had been largely anticipated, its depth came as a surprise to market participants. The Council will con-vene next on November 4-5, and according to many economists a further lowering of borrowing costs is very likely, although opinions differ as to whether the rate setters choose November or December to make the cut. "With the output gap still open and growth losing momentum, further monetary easing would be needed if inflation expectations continue to decline or if eco-nomic activity is projected to slow down further,” the IMF said, adding that the recent rate cut was “wel-comed."

GDP growth in Poland (y/y)

0%

1%

2%

3%

4%

5%

6%

7%

2005

2006

2007

2008

2009

2010

2011

2012

2013

*2014

*2015

Source: GUS, EC *) average projections by IMF

The pace of Poland's GDP growth slowed from 3.4% y/y (seasonally unadjusted) in Q1 2014 to 3.3% in Q2 2014. The Finance Ministry lowered its 2015 growth forecast to 3.4% from 3.8%.


Poland Today EventsPoland Today EventsPoland Today EventsPoland Today Events

For more information about Poland Today events, please visit: www.poland-today.pl/events

Upcoming events:Upcoming events:Upcoming events:Upcoming events:

November 18, 2014 Tęczowy Młyn Hotel and Kielce Racing Track Kielce

AUTOMOTIVE SECTOR MARKET LEADERS MEETING What is the state of play in Poland’s automotive market? Is Poland’s automotive industry shifting into higher gear? What are the influences driving the market? What are newest technologies? Find out the answers to these questions and more at a meeting of leaders in Poland’s automotive sector organised by DNB Bank Polska S.A. The conference will feature the latest automotive sector report by DNB Bank and Deloitte, while experts and leading figures in the industry will offer their own views on market trends. It will also provide unique networking opportunities with automotive sector decision makers. Also, the newest technologies will be presented – BMW’s hybrid models i3 and i8. And on top of that, participants will have the chance to experience an adrenaline rush by driving the Lamborghini Gallardo SE (520HP), the Ferrari 458 Italia (570HP) the Hummer H2 (325HP) and the BMW 3 (230HP)!

November 26 Sala Sesyjna, Town Hall, ul. Sukiennice 9 Wrocław

PRIMETIME WROCŁAW Poland’s entrepreneurial capital? Wrocław, under open and steady political leadership, has blazed a business trail in Poland. But with others catching up fast, can the city maintain its entrepre-neurial edge? Sponsorship opportunities still available!

To sponsor or attend any of Poland Today events, please call Magdalena Gawlikowska on +48 602-223-634 or e-mail [email protected]

Recent events:Recent events:Recent events:Recent events:

MEDIA PATRONAGE

CanadaCanadaCanadaCanada----Poland Poland Poland Poland innovation panel innovation panel innovation panel innovation panel spotlights builspotlights builspotlights builspotlights building ding ding ding entrepreneurial entrepreneurial entrepreneurial entrepreneurial ‘ecosystem’‘ecosystem’‘ecosystem’‘ecosystem’

While the Polish economy has long relied on the fruits of liberalisation to maintain strong growth, today’s Po-land needs to encourage small-business growth to keep up. And as it quite literally faces these ‘first-

world problems’ for the first time, the Polish business community is turning to Canada to help crack the nut of innovation. At the Warsaw Stock Exchange on October 24, over 100 business, political, and media minds gathered to hear Polish and Canadian experts discuss best prac-tices for creating a successful environment for innova-tion. Kicking off the event were two leaders with first-hand experience: President Bronisław Komorowski and Canadian Governor General David Johnston. Today

Canadian Governor General David Johnston and Polish President Bronisław Komorowski.

Photo: Poland President Komorowski framed the task for Poland’s future as “changing from an imitation-based economy to an innovated-led economy,” and held up Canada’s private sector as a model example. Governor General Johnston led with a breakdown of what’s needed to encourage innovation, drawing on his experience at Ontario’s University of Waterloo, a hub of student-driven entrepreneurship. Explaining the success of America’s Silicon Valley and other cen-tres of innovation, Johnston gave five ingredients: elite


universities, favourable immigration, climate and liv-ability, a culture of risk-taking and what he called the “Bohemian effect” — a mixture of talent, technology, and tolerance. Asked by Andrew Kureth, editor of Poland Today, who was hosting the conference and moderating the panel discussion, how Poland was faring on these and other measures, the panelists were soberly optimistic. Inno-vation in Poland is lower than it should be, said Boż-ena Lublińska-Kasprzak, president of the Polish Agency for Enterprise Development, but it’s moving in the right direction. “We have to look at where we started,” she said.

Over 100 business, political, and media minds gath-ered to hear Polish and Canadian experts discuss best practices for creating a successful environment for innovation. Photo: Poland Today

Marek Borzestowski, partner at the venture capital firm Giza Polish Ventures, said that while the “venture capital market in this country is still too shallow,” he sees promise of further growth and an influx of foreign players.

Wojciech Szapiel, CEO of Polish Investment Fund, noted that capital per se isn’t the only piece of the puzzle. “We’re trying to bring smart capital,” he said. “Money is not the game-changer. The game-changer is those entrepreneurs with vision.” The theme each of the panelists returned to was the concept of an “ecosystem” – the interplay between capital, talent, ideas and public policy. The panel dis-cussed how to further encourage the growing commu-nities of business incubators and angel investors, and what kinds of regulation and government involvement are needed. To these efforts, Governor General Johnston said in conclusion, the Poles should add “the essence of en-trepreneurship and innovation: an open mind.”

by Yoni Wilkenfeld Poland Today was a media patron of this event

PRIMETIME WROCŁAW

Breakfast examines Breakfast examines Breakfast examines Breakfast examines Wrocław’s economic Wrocław’s economic Wrocław’s economic Wrocław’s economic success and addresses success and addresses success and addresses success and addresses challenges on the challenges on the challenges on the challenges on the horizonhorizonhorizonhorizon

Long known as Silesia’s capital of culture, Wrocław, western Poland’s largest city, is now making its name as a premier place to do business. How the city became a model of economic success and what challenges re-main were the topics of discussion during Poland To-day’s forum at the Villa Foksal restaurant in Warsaw on October 29.

The conference featured two speakers, Dariusz Os-trowski, president of the Wrocław Agglomeration De-velopment Agency (ARAW), and Jarosław Prawicki, head of sales & marketing at UBM Group Poland, and was attended by an audience of Polish and interna-tional business leaders. Ostrowski discussed Wro-cław’s successes and challenges as a city administra-tor, while Prawicki offered a view from the private sector.

Dariusz Ostrowski, President of ARAW, The Wrocław Agglomeration Development Agency. Photo: Poland Today

Initially a locus for call centres and simple business-process outsourcing, Wrocław is now home to a bur-geoning high-tech sector, featuring international be-hemoths like Siemens, HP, and IBM among others. Thanks to an open and active local government hospi-table to investment, the city’s economy is booming. “We think the city has huge potential … even bigger than Krakow,” said Prawicki. Close to Prague and Ber-lin, the city is a natural meeting place for firms looking to do regional business. “Geography is a determining factor,” said Ostrowski, “Wrocław is in a perfect loca-tion.”


Wrocław is largely populated by Poles from across the country – a regional diversity that speakers said added to the character of the city as an entrepreneurial hub of activity. “This mix of people means that the city has to search for its own place and identity,” said Prawicki. “The people in Wrocław are not original to the city. They chose to come. We have a mixture of people who helped to rebuild this city from scratch after World War II,” added Ostrowski.

Jarosław Prawicki, Head of Sales & Marketing, UBM.

Photo: Poland Today

While attendees recognized Wrocław’s rich history and impressive economic success, they had concerns as well. With so many large investors already present in Wrocław, the unemployment rate is low. In order to attract new investors, the city will also have to attract more people to fill workplaces those new businesses could potentially create. “Our concern is the size of the skilled professional labor force in Wrocław. We fore-see this as a possible problem in the coming years,” Prawicki said.

Guests at the Wrocław breakfast in Warsaw. Photo: Poland Today

Ostrowski said that Wrocław was acting to resolve those concerns, noting that increasing partnerships between the business community and young educated people is a top priority for the city. As the meeting came to a close, Polish business leaders received a better sense of where this city’s success came from and where it’s going. The discussion con-tinues November 26 in Wrocław at Poland Today’s ‘Primetime Wrocław’ event.

by Gabriel Rom


OPINION

Poland falling behind Poland falling behind Poland falling behind Poland falling behind in ease of doing in ease of doing in ease of doing in ease of doing businessbusinessbusinessbusiness

by Poland Today Editor Andrew Kureth

Poland has done a lot of patting its own back this year, and not without reason. A quarter century removed from its transition from communism and authoritari-anism to capitalism and democracy, the country is the biggest success story of the former Eastern Bloc. While 25 years ago it seemed a pipe dream that Poland could enter the European Union, this year its prime minister was elected ‘president of Europe’. Poland’s transformation has been breathtaking. But the country cannot afford to rest on its laurels. The global competition for investment, capital and tal-ent continues, and Poland must continue to improve its economic, social and political structures if it is to succeed in reaching its full potential. This was made abundantly clear in the World Bank’s 2015 edition of its ‘Doing Business’ report, which was released just last week. Poland took 32nd place in the ranking of 189 economies – respectable enough – but a drop of two places from last year. Lamentably, the World Bank’s comments make it sound as if Poland had improved. Here is what Marina Wes, World Bank Country Manager for Poland and

the Baltic Countries, had to say: “This year’s Doing Business ranking reflects the ongoing reform efforts Poland has undertaken to substantially enhance the quality of the business climate and accelerate post-crisis economic growth.” And while Poland undoubtedly has done well over the years, since last year it has done poorly. The World Bank points out that Poland has enacted legislation in three areas making it easier to do business: in ‘Getting Electricity’, ‘Registering Property’, and in ‘Trading Across Borders’. But a closer look belies these seeming improvements. Despite it being easier to obtain elec-tricity, Poland still dropped three positions in that category from last year (from 61st to 63rd). In register-ing property, despite legislative improvement, Poland stood still, in 39th place. On the upside, the changes making it easier for Poland to trade across borders brought it up in that category, from 46th place to 41st. Nevertheless, Poland fell in the overall ranking, mean-ing other countries are making their economies more business friendly at a faster pace than Poland is. That should be cause for concern. Moreover, Poland does poorly in the all-important category of ‘Starting a Business’, where it ranks 85th. While it now may be slightly easier to get electricity for your business, that will hardly matter to investors who see that Poland is fourth from last in the EU for ease of setting a company up. In Poland it takes 30 days to start a business – the average in the advanced-country OECD club is nine. It costs nearly 13% of in-come per capita to set up a business in Poland, while the OECD average is 3.4%. These are big leaps that Po-land will need to make if it wants to compete with the West. Investors will further be put off by Poland’s poor re-cord when it comes to ‘Enforcing Contracts’ (52nd place) or ‘Resolving Insolvency’ (32nd place) – issues related to the country’s sluggish and inefficient court

system which has been a drag on business for years. The Economist put these two data points together in a chart for countries in Europe. In ‘Resolving Insol-vency’ Poland is clearly shown as third worst in Europe. It is shown as fifth worst in ‘Enforcing a Con-tract’. Together, Poland scores as the fifth worst in the EU overall. The title of The Economist’s chart is: ‘Where not to invest in Europe.’ Where Poland has consistently scored worst is in the category of ‘Dealing with Construction Permits’. Po-land dropped two places in that category from last year, to 137th – in the bottom third of countries ranked. There are 19 construction permit procedures required in Poland, compared to an OECD average of 12. It takes 212 days – the better part of a year – to deal with these procedures in Poland; the OECD average is 150. At our Poland Transformed conference in May, former prime minister and government economic ad-visor Jan Krzysztof Bielecki mentioned this problem, saying the deeper you dig into Poland’s construction permitting procedures, the more you find the coun-try’s entire construction law should be overhauled. I guess Poland had better get started then. The government’s reaction to this year’s ‘Doing Busi-ness’ ranking comes off as more back-patting: the statement on Prime Minister Ewa Kopacz’s page reads “Poland leading region in ‘Doing Business’ ranking”. Clearly, this is missing the point. Poland can no longer be satisfied with leading the region – it has established that position. It now must become a leader in Europe. Only that will allow Poland to reach the development levels of the West that its citizens so earnestly desire. To do so will take more than self-congratulation. It will take a cool-headed attitude and a critical eye. It will take hard work. But most importantly, it will take political will.

A n n a M a r i a M c Ke eve r, D i re c to r fo r C E E + 4 4 2 0 7 1 2 1 5 0 5 6 | a n n a . m c ke e ve r @ g l o b a l re a l e s t ate. o rg www.globalrealestate.org/CEE2014

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The CEE Region’s most Senior Level Real Estate Investment Meeting

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A GLIMPSE OF THE DISCUSSION TOPICS

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The 10th annual

Árpád TörökCEOTRIGRANIT MANAGEMENT CORPORATION

Dr Edgar RosenmayrMD/Board MemberKULCZYK SILVERSTEIN PROPERTIES

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Christopher ZeunerMD - CEE Acquisitions LASALLE INVESTMENT MANAGEMENT

Florian NowotnyCFOCA IMMOBILIEN ANLAGEN AG

Martin Schlichting VP & Head of Int’l Clients & Cross Border FinanceERSTE GROUP

Katarzyna Zawodna Managing DirectorSKANSKA PROPERTY POLAND SP. Z O.O.

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WARSAW 1-2 DECEMBERS O F I T E L V I C T O R I A

GRI meetings provide a forum for the world’s leading real estate players to develop valuable relationships, find new business partners, and strengthen their global networks.


KEY STATISTICS

Consumer PricesConsumer PricesConsumer PricesConsumer Prices

Data in (%) Jun '14 Jul '14 Aug '14 Sep '14

Sector y/y m/m y/y y/y m/m y/y y/y m/m

Food & bev -0.9 -0.3 -1.7 -1.1 -2.1 -1.6 -2,0 +0.1

Alcohol, tobacco +4.0 +0.1 +4.0 0.0 +3.8 0.0 +3.6 0.0

Clothing, shoes -4.7 -0.8 -4.9 -2.8 -5.1 -2.7 -4.7 +1.1

Housing +1.6 -0.1 +0.6 0.0 +0.6 +0.1 +0.5 +0.1

Transport -0.6 -0.2 -1.0 +0.8 -1.5 0.0 -3.2 -1.0

Communications +1.3 +2.4 +2.6 +1.2 +3.9 +1.3 +4.0 0.0

Gross CPI +0.3 0.0 -0.2 -0.2 -0.3 -0.4 -0.3 0.0

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Sep 14

y/y m/m

Retail TurnoverRetail TurnoverRetail TurnoverRetail Turnover

Month May '14 Jun '14 Jul '14 Aug '14 Sep '14

m/m (%) -2.7 -1.1 +4.7 -1.1 -0.9

y/y (%) +3.8 +1.2 +2.1 +1.7 +1.6

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 685.7

y/y (%) +4.3 +5.5 +11.6 +5.6 +2.3

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2009 2010 2011 2012 2013 Jan-Sep

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 120.3 +14.8

Commenced 142.9 158.1 162.2 141.8 127.4 114.6 +17.0

U. construction 670.3 692.7 723.0 713.1 694.0 709.4 +0.1

Completed 160.0 135.7 131.7 152.5 146.1 100.1 -2.9

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product (ESA2010)

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q2 2014 +3.3% 413,457 -1.2%

Q1 2014 +3.4% 397,429 -1.2%

Q4 2013 +2.7% 455,528 -1.3%

Q3 2013 +2.0% 405,554 -1.9%

2013 +1.7% 1,662,052 -1.3%

2012 +1.8% 1,615,894 -3.6%

2011 +4.8% 1,553,582 -5.0%

2010 +3.7% 1,437,357 -5.1%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator 2011 2012 2013 *2014 *2015

GDP change +4.5% +1.9% +1.6% +3.1% +3.1%

Consumer inflation +4.3% +3.7% +0.9% +0.1% +0.8%

Producer inflation +7.6% +3.4% -1.3% -1.1% +0.9%

CA balance, % of GDP -5.0% -3.7% -1.4% -1.7% -2.6%

Nominal gross wage +5.2% +3.7% +3.4% +3.5% +4.1%

Unemployment** 12.5% 13.4% 13.4% 11.8% 11.5%

EUR/PLN 4.12 4.19 4.20 4.17 4.09

Sources: NBP, BZ WBK, PKO BP, GUS *) projections **) year-end

GrossGrossGrossGross WagesWagesWagesWages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q3 2013 Q4 2013 Q1 2014 Q2 2014

A B A B A B A B

Coal mining 6,061 138 8,615 196 6,333 144 6,382 145

Manufacturing 3,625 158 3,690 161 3,663 160 3,743 163

Energy 6,021 183 6,736 205 6,358 193 6,020 183

Construction 3,766 160 3,895 166 3,706 158 3,884 166

Retail & repairs 3,408 145 3,456 147 3,544 151 3,577 153

Transportation 3,589 127 3,913 138 3,666 130 3,650 129

IT, telecoms 6,654 173 6,695 174 6,987 181 6,835 177

Financial sector 6,109 137 6,602 148 6,747 152 6,738 151

National average 3,652 145 3,823 152 3,895 155 3,740 149


Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Mar '14 Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14

m/m (%) +24.2 +3.2 +14.0 +16.9 +0.9 -5.4 +19.8

y/y (%) +17.4 +12.2 +10.0 +8.0 +1.1 -3.6 +5.6

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +15.5 +12.1 +5.1 +4.6 +11.8 -0.6 -12.0

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Jul 13

Oct 13

Jan 14

Apr 14

Jul 14

Oct 14

60

80

100

120 Consumer confidence (left axis) Economic sentiment (right axis)

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

Producer PricesProducer PricesProducer PricesProducer Prices

Month Mar'14 Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14

m/m (%) -0.2 -0.2 -0.2 -0.1 -0.1 +0.3 +0.1

y/y (%) -1.3 -0.7 -1.0 -1.8 -2.1 -1.5 -1.6

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +2.0 +2.2 +3.4 +2.1 +7.6 +3.3 -1.3

Construction PricesConstruction PricesConstruction PricesConstruction Prices

Month Mar'14 Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14

m/m (%) -0.2 -0.1 -0.1 0.0 0.0 0.0 0.0

y/y (%) -1.6 -1.5 -1.5 -1.4 -1.2 -0.9 -0.8

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +7.4 +4.8 +0.2 -0.1 +1.0 +0.2 -1.8

IndustIndustIndustIndustrial Outputrial Outputrial Outputrial Output

Month Mar '14 Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep'14

m/m (%) +9.4 -2.3 -1.7 -0.1 +2.0 -8.5 +16.5

y/y (%) +5.4 +5.4 +4.4 +1.7 +2.3 -1.9 +4.2

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +10.7 +3.6 -3.5 +9.8 +7.7 +1.0 +2.2


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Aug

2014 y/y (%)

share (%)

2013 share

(%) Jan-Aug

2014 y/y (%)

share (%)

2013 share

(%)

Food and live animals 47,583 +4.7 10.8 69,304 10.9 32,301 +4.4 7.3 47,906 7.4

Beverages and tobacco 6,653 +17.4 1.5 8,624 1.4 2,752 +4.9 0.6 4,150 0.6

Crude materials except fuels 11,094 +2.8 2.5 15,744 2.5 14,207 -1.9 3.2 21,585 3.3

Fuels etc 18,587 -6.2 4.2 30,013 4.7 49,238 +1.1 11.1 75,539 11.7

Animal and vegetable oils 1,303 +6.8 0.3 1,864 0.2 1,746 -0.9 0.4 2,646 0.4

Chemical products 40,967 +4.2 9.3 59,103 9.3 66,751 +6.5 15.0 92,917 14.3

Manufactured goods by material 88,764 +2.3 20.1 129,915 20.3 79,720 +7.0 17.9 112,392 17.3

Machinery, transport equip. 166,823 +5.4 37.8 239,434 37.5 146,209 +3.1 32.8 216,608 33.4

Other manufactured articles 59,131 +10.3 13.4 82,816 13.0 43,864 +15.2 9.8 58,210 9.0

Not classified 597 n/a 0.1 1,782 0.2 8,838 n/a 1.9 16,242 2.6

TOTAL 441,502 +4.6 100 638,599 100 445,626 +4.4 100 648,195 100

Poland's ten largest trading partners, ranked according to 2013

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Aug

2014 share 2013 share No Country

Jan-Aug 2014

share 2013 share

1 Germany 114,332 25.9% 162,548 25.1% 1 Germany 96,855 21.7% 142,161 21.7%

2 UK 28,057 6.4% 42,138 6.5% 2 Russia 50,762 11.4% 79,578 12.1%

3 Czech Rep. 27,311 6.2% 40,110 6.2% 3 China 44,877 10.1% 61,127 9.3%

4 France 24,906 5.6% 36,367 5.6% 4 Italy 23,545 5.3% 34,940 5.3%

5 Russia 19,751 4.5% 34,069 5.3% 5 Netherlands 16,733 3.8% 25,409 3.9%

6 Italy 19,763 4.5% 27,958 4.3% 6 France 17,139 3.8% 25,041 3.8%

7 Netherlands 18,050 4.1% 25,707 4.0% 7 Czech Rep. 15,305 3.4% 24,054 3.7%

8 Ukraine n/a n/a 18,020 2.8% 8 USA 10,635 2.4% 17,431 2.7%

9 Sweden 12,527 2.8% 17,581 2.7% 9 UK 11,431 2.6% 17,184 2.6%

10 Slovakia 11,080 2.5% 17,099 2.6% 10 Belgium 11,044 2.5% 15,137 2.3%


CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 31 October 2014

100 USD 334.59 ↑

100 EUR 420.43 ↓

100 GBP 535.03 ↓

100 CHF 348.60 ↓

100 DKK 56.48 ↓

100 SEK 45.46 ↓

100 NOK 49.83 ↓

10,000 JPY 299.85 ↓

100 CZK 15.14 ↓

10,000 HUF 136.87 →

100 USD/EUR against PLN

300

350

400

450

19 N

ov 13

30 Jan 14

8 A

pr 14

17 Jun 14

26 A

ug 14

31 Oct 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Jun '14 Jul '14 Aug '14 Sep '14

Monetary base 173,096 164,008 167,008 166,104

M1 572,376 570,507 574,529 578,485

- Currency outside banks 120,828 122,209 124,986 124,389

M2 980,090 985,769 1,003,128 1,003,354

- Time deposits 426,351 434,256 448,037 444,514

M3 996,171 1,002,137 1,020,561 1,021,824

- Net foreign assets 290,786 301,207 304,359 310,172 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Jun' 14 Jul' 14 Aug' 14 Sep' 14

Loans to customers 940,703 939,641 950,774 954,978

- to private companies 276,709 274,549 277,482 280,248

- to households 578,639 581,447 587,136 590,208

Total assets of banks 1,667,783 1,678,129 1,718,251 1,737,728

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Mar '14 Apr '14 May '14 Jun '14 Jul '14 Aug '14

PLN (up to 1 year) 4.5% 4.4% 4.4% 4.5% 4.4% 4.4%

PLN (up to 5 y ) 4.9% 4.8% 4.8% 4.8% 4.7% 4.8%

PLN (over 5 y) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

PLN (total) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

EUR (up to 1m EUR) 1.9% 2.0% 2.0% 1.9% 1.7% 1.6%

EUR (over 1m EUR) 3.3% 3.0% 2.7% 3.4% 3.1% 2.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 31 Oct 2014

Overnight 1 week 1 month 3 months 6 months

2.08% 2.03% 2.00% 1.96% 1.95%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.00% 3.00% 1.00% 2.25%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 31 Oct

'14

Change 24 Oct

'14

Change end of

'13

↑ Alior Bank 74.8 +4% +9%

↓ Asseco Pol. 50 -1% -11%

↑ Bogdanka 111.8 +1% -2%

↓ BZ WBK 381.5 -5% -30%

↓ Eurocash 33.19 -5% -27%

↑ Grupa Lotos 26.04 +1% -46%

↑ JSW 28.95 +13% -30%

↑ Kernel 26.5 +3% +10%

↑ KGHM 129.9 +4% +12%

↑ LPP 10,049 +2% 0%

↓ mBank 498.6 -1% +3%

↑ Orange Pol. 10.1 +1% -2%

↓ Pekao 176.1 -2% 36%

↑ PGE 22.1 +3% -2%

↑ PGNiG 5.03 +1% +2%

↑ PKN Orlen 41.93 +3% -5%

↑ PKO BP 37.45 +4% +12%

↑ PZU 505 +2% -24%

↓ Synthos 4.18 -2% +20%

↑ Tauron 5.26 +4% +9%

Source: Warsaw Stock Exchange

Key indices

as of 31 October 2014

WIG Total index

55553333,,,,949949949949....58585858 Change 1 week +1% ↑

Change end of '13 +5% ↑

WIG-20 blue chip index

2,2,2,2,444463636363....58585858 Change 1 week +2% ↑

Change end of ' +3% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

56,000

1 Aug 14

26 A

ug 14

17 Sep 14

9 O

ct 14

31 Oct 14


Poland Today Sp. z o. o.

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today.pl

Publisher Richard Stephens

Financial Director Arkadiusz Jamski

Creative Director Bartosz Stefaniak

New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Sep 2014 *

Monthly wages (PLN)

Jan-Sep 2014**

Unemploy-ment

Sep 2014

New dwellings Jan-Sep 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 102.7 109.7 4,381 4,237 125.7 10.9 9,505 78.7

Kujawsko-Pomorskie (Bydgoszcz) 104.6 109.1 3,449 3,312 126.4 15.7 4,448 96.6

Lubelskie (Lublin) 102.2 83.6 3,740 3,088 113.9 12.4 3,882 88.2

Lubuskie (Zielona Góra) 115.5 104.8 3,482 3,083 47.4 12.8 2,170 97.3

Łódzkie (Łódź) 100.9 110.5 3,748 3,335 128.4 12.1 4,673 101.0

Małopolskie (Kraków) 100.9 105.7 3,842 3,389 137.3 9.8 11,126 100.0

Mazowieckie (Warszawa) 100.0 107.1 4,629 4,970 254.6 10.0 21,956 111.1

Opolskie (Opole) 106.0 119.9 3,654 3,567 42.7 12.0 1,315 100.6

Podkarpackie (Rzeszów) 102.4 112.2 3,422 3,126 132.3 14.3 4,691 107.0

Podlaskie (Białystok) 107.2 119.2 3,330 3,940 60.3 13.1 2,836 103.5

Pomorskie (Gdańsk-Gdynia) 108.5 119.9 4,039 3,485 95.2 11.2 6,768 79.7

Śląskie (Katowice) 101.0 108.1 4,577 3,556 178.7 9.8 7,375 94.6

Świętokrzyskie (Kielce) 107.9 101.5 3,444 3,335 76.0 14.3 2,481 141.5

Warmińsko-Mazurskie (Olsztyn) 104.7 111.5 3,297 3,170 93.9 18.2 3,020 100.9

Wielkopolskie (Poznań) 106.4 102.8 3,758 3,794 118.0 7.9 9,875 101.2

Zachodniopomorskie (Szczecin) 103.9 103.3 3,557 3,500 91.1 15.2 4,017 99.7

National average 103.4 107.4 4,016 3,821 1,821.9 11.5 100,138 98.1

*) Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14

in Poland 2,886 175 -3,020 1,885 -2,899 2,771

Polish DI -1,203 957 2,588 -1,449 1,575 562

Year 2008 2009 2010 2011 2012 2013

in Poland 10,128 9,343 10,507 14,896 4,763 -4,574

Polish DI -3,072 -3,335 5,484 -5,935 -607 3,684

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2011 2012 2013 Q4 '13 Q1 '14 Q2 '14

Trade balance -10,059 -5,175 2,309 138 159 71

Services, net 4,048 4,642 5,249 1,941 1,684 2,013

CA balance -18,519 -14,191 -4,984 -1,324 -1,403 -553

CA balance vs GDP -5.0% -3.7% -1.3% -1.3% -1.1% n/a

Source: NBP, BZ WBK, PKO BP

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q3 1

1

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3 1

4

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2014

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 617,000 8,000 14.7% 1–5.0

Warsaw suburbs 2,137,000 14,000 11.3% 1.9–3.2

Central Poland 1,107,000 59,000 11.7% 1.9-3.1

Poznań 1,100,000 316,000 1.9% 2.3–2.9

Upper Silesia 1,576,000 57,000 7.9% 2.3–3.1

Wrocław 939,000 315,000 6.2% 2.4–3.0

Tri-city 215,000 45,000 4.2% 2.2–3.7

Kraków 159,000 11,000 1.9% 3.5-4.0

Homes & CHomes & CHomes & CHomes & Commercialommercialommercialommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'14 Retail rents**1H'14

Q2 '14

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 7,924 -2.0% 11 -25 13.35% 100-120 148

Kraków 6,389 +6.0% 13.5-14.5 3.6% 35-40 78

Katowice 5,602 -3.7% 11.5-13.8 5.4% 35-40 50

Poznań 6,552 +3.3% 14-15 11.5% 35-40 62

Łódź 4,936 +2.6% 11.5-12.5 10.6% 35-40 78

Wrocław 6,092 +2.0% 14.15 10.9% 35-40 45

Tricity 6,092 -4.9% 12.8-13.5 11.5% 35-40 40

*avg, offer-based ** EUR/sq.m/month; Prime units 100-150 sq.m

Country Credit Country Credit Country Credit Country Credit RatingsRatingsRatingsRatings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Sep11

May11

Jan12

Sep12

May13

Jan14

Sep14

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

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