Poland, from zero to hero, an economy and property market

March 10, 2015

Over the last twenty five years Poland has transformed from a state-controlled economy, to one where market forces have buoyed up many private industries, which are now thriving.

Poland’s Business diversity and attraction

European Union accession in 2004 was a sort of coming of age and the country has since become a go-to spot in Europe, seen and used as a gateway to European markets, in more ways than one.

Geographically it makes perfect sense to have a base here as a distribution hub, with ease-of-access to the West and East. It has also become a low-cost outsource centre.

Krakow new BuildWage costs are not only lower in comparison with Western Europe, but also when ranked alongside Slovenia, Estonia, Slovakia, the Czech Rep., Hungary and Latvia. Only the likes of Romania, Lithuania and Bulgaria can compete on wage levels to Poland.

Poland a magnet for international business

Strong economic growth has been driven by international companies locating service centres or subsidiaries in Poland. This has not only helped boost industry, but also facilitated skills transfer to the Polish workforce, for example in areas of business management capabilities and technology. This trend is expected to continue and grow the business sector over the coming decade. It is also worth noting, the UK is a top investor in Poland, just behind Germany, which is seen as its traditional commercial partner.

The cities with the most experience of accommodating business service centres are: Warsaw, Krakow and Wroclaw.

In some city areas, Special Economic Zones (SEZ) have been set up and operating over many years, designed to create jobs and generate wealth locally. Certain conditions have to be met for a SEZ Licence to be granted, which, in turn, confers special business reliefs on participants e.g. tax relief- depending upon the invested funds and company size- can amount to up to 40%-60% of investment costs.

There are twelve of these SEZs, including Krakow, Katowice and Lódz.

Krakow boasts of businesses as diverse as telecommunications, like Motorola, to Business Services giants like Capgemini, IBM, through to energy companies like Shell, banks like HSBC, UBS and manufacturers like Electrolux. Poland is fast becoming a Pharmaceutical power hub with the likes of Pharmaceutical generics firm TEVA and Selvita.

Katowice has attracted many Telecommunications and Technology firms such as IBM, Oracle, Orange Poland, Rockwell Automation and the likes of Cap Gemini and financial service provider ING have a base there.

Lódz has attracted Procter and Gamble, ABB, and Dell, as well as nurturing a Bio Tech industry and hosting a Technology Incubator.

Poland’s Educated workforce

The Polish workforce is highly educated and growing. Annually 450,000 people graduate from Poland’s higher education institutions.

Few can rival the position of Poland in this respect, a great geographic location at the heart of Europe, a highly-educated workforce, with manageable labour costs, with no loss of quality in service delivery. In industries like financial services labour costs can be up to 75% lower than those in Germany, France and the UK* which represents real value-for-money.

Poland’s property market

The kind of things we look for in a strongly performing property market are: scope for good rental returns, capital growth and an array of decent exit options.

Given the strength and persistence of the economy, with both international and domestic firms doing well, they are in turn attracting staff to their business hubs or offices and paying white collar staff the wages to afford local rental apartments.

Given the growing white collar working class, they in turn will want to buy their own homes in Warsaw, or Krakow, once they have worked a while and saved, thus providing local demand for selling on property. A property exit strategy is no longer a one-horse-foreign-buyer-race. Real local buyers exist.

* Source:  McKinsey report on Poland 2025

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