Poland Today Business Review+ No. 028

No. 028 / 31st March 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Polpharma teams up with the Strüngmann brothers to devel-op and sell biosimilars page 2

MANUFACTURING Bilfinger gets EUR 60m power engineering contract from Dalkia page 4

PROPERTY & CONSTRUCTION

Skanska launches Wrocław of-fice project Green Day page 5

Griffin expands Warsaw port-folio with four new acquisi-tions page 6

SERVICES & BPO

Business services firms took up 200,000 sq.m of offices in re-gional cities last year page 7

TRANSPORT & LOGISTICS

Danish Prime Cargo to estab-lish distribution centre in Szczecin, create up to 120 jobs page 8

US Prologis returns to specula-tive development with large Wrocław project page 9

CONSUMER GOODS & RETAIL

Retail sales increase by 7% in February, fastest since May 2012 page 10

RETAIL PROPERTIES

Atrium completes EUR 120m shopping centre in Lublin page 11

Polish investor breaks ground on retail park in Bielsko-Biała page 12

POLITICS & ECONOMY

Polish exports to Russia and Ukraine may drop by a fifth in 2014, minister says page 13 Unemployment drops to 13.9% in February page 13

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

The government believes the new oil hub will boost Poland's energy security. Photo: PERN

PERN breaks ground on new oil hubPERN breaks ground on new oil hubPERN breaks ground on new oil hubPERN breaks ground on new oil hub Poland's oil pipeline operator PERN has officially commenced the construction of a large new terminal for transshipment and storage of crude oil in the Port of Gdańsk. Phase one of the PLN 820m project is to reach completion by the end of 2015. page 3

Orco to sell its flagship failure Złota 44Orco to sell its flagship failure Złota 44Orco to sell its flagship failure Złota 44Orco to sell its flagship failure Złota 44 Nearly six years after it launched the project, developer Orco has admitted that its luxury residential tower Złota 44 in Warsaw was a fiasco and seeks to sell the building. page 4

Partnerzy medialniOrganizatorzy Partnerzy

Środa, 9 Kwietnia 2014, Villa Foksal, ul. Foksal 3/5, Warszawa

8.30 -11.30

weekly newsletter # 028 / 31st March 2014 / page 2


Polpharma teams up Polpharma teams up Polpharma teams up Polpharma teams up with thewith thewith thewith the StrüngmannStrüngmannStrüngmannStrüngmann brothers brothers brothers brothers to develop to develop to develop to develop and marketand marketand marketand market biosimilarsbiosimilarsbiosimilarsbiosimilars

The leading Polish generic drug maker Polpharma has teamed up with Germany's Santo Holding GmbH, owned by billionaires Andreas and Thomas Strüngmann, to create a joint venture that will focus development and marketing of biosimilars. The two partners are to share the costs and risk involved in de-velopment of biosimilars and use their market pres-ence in different regions (Polpharma in Central and Eastern Europe and Santo Holding in Germany, West-ern Europe and South America) to subsequently sell their creations. According to their managers, the two groups complement each other from both a strategic and geographical point of view. Biosimilars also known as follow-on biologics are bio-logic medical products whose active drug substance is made by a living organism or derived from a living or-ganism by means of recombinant DNA or controlled gene expression methods. Biosimilars are officially approved subsequent versions of innovator biophar-maceutical products made by a different sponsor fol-lowing patent and exclusivity expiry on the innovator product. They are seen as particularly effective in can-cers treatments and immune system disorders. With a global turnover of more than USD 1bn, some 7,000 employees, and seven factories in Poland, Rus-sia, and Kazakhstan, Polpharma is one of the world's 20 largest generic drug makers. In Poland alone the company employs more than 1,600 people and has an-

nual sales revenues of approximately PLN 1.5bn. Its product range includes some 600 items and its six R&D centers are working on a further 400 products. The newest R&D unit, opened in 2012 in the Gdańsk Science & Technology Park, specializes in biosimilars. As for Polpharma's new partner, Santo Holding, it was established by Andreas Strüngmann and his twin brother, Thomas, who together founded generic drug maker Hexal AG in 1986, to sell the business nearly two decades later (along with their 68% stake in U.S.-based Eon Labs) to Novartis for USD 7.5bn. Since then they've been investing primarily in German bio-tech and pharma via a family entity, Santo Holding, with a focus on cancer research. The brothers, who hail from South Africa, established a neuroscience re-search center in Frankfurt named after their father, Ernst Strüngmann. "This is an important step that will speed up the de-velopment of our company. Due to their lower price, the biosimilars that will be the outcome of our cooper-ation will give many seriously ill patients access to ef-fective therapy. The joint venture is also a starting point for a potential cooperation with the Strüngmann group also on other innovative biologics," Polpharma's CEO Jerzy Starak, said in statement. The first biosimilar development project in the Santo-Polpharma joint venture will be a drug conceived by the Munich-based Formycon AG. Santo Holding signed an exclusive, worldwide licensing agreement with Formycon AG, obtaining rights to the biosimilar FYB201 in December 2013. Under the deal, Formycon received a single-digit million euro up-front payment and will be entitled to additional payments based upon the attainment of specific regulatory and sales results. "We welcome the new partner, through whom it will be possible to considerably increase the turnover po-tential and the market penetration of our biosimilar,"

Nicolas Combé, CFO of Formycon AG, commented on Polpharma becoming a 50% license partner in this first Formycon development project alongside Santo Hold-ing.


Enterprise Investors Enterprise Investors Enterprise Investors Enterprise Investors buysbuysbuysbuys stake in stake in stake in stake in Estonian Estonian Estonian Estonian kayak manufacturer kayak manufacturer kayak manufacturer kayak manufacturer

Enterprise Venture Fund I (EVF), the venture capital fund managed by the Warsaw-based private equity company Enterprise Investors (EI), has purchased 32.8% of shares in Estonia's Tahe Outdoors, one of Europe's leading watersports companies. The total value of the transaction came to EUR 3.4m. Tahe Outdoors is a top European manufacturer and distributor of quality watersports equipment, with 25 years of experience. It offers a full range of kayaks, ca-noes, paddles and related accessories under five brands: Tahe Marine, Egalis, Zegul, Trapper and Belu-ga. The company has two factories in Estonia and one in France, and currently employs 90 people. Tahe Outdoors' sales network covers more than 35 countries worldwide, including markets as exotic as Chile, Ven-ezuela, Taiwan, South Korea, Singapore, Papua New Guinea and Martinique. "The company is a growing and profitable business that is systematically gaining market share. It is al-ready the biggest kayak supplier in Scandinavia – Eu-rope's most demanding market," said Alek Wasiukiewicz, Vice President at Enterprise Investors in charge of the investment. "Tahe's modern produc-tion facility is one of the company's many competitive advantages. Moreover, its production and transport


cost structure as well as shorter delivery times give Tahe an advantage on the European market over Asian and American producers." "This partnership will safeguard the company's strate-gy to become the European leader in watersports equipment," commented Janek Pohla, President of Tahe Outdoors. "It confirms the quality of our value proposition, which we have built by developing our brands and modernizing our value chain. We will con-tinue to introduce the industry's newest materials and cutting-edge technologies." More focus on Poland Enterprise Investors is one of the largest private equi-ty and venture capital firms in Central and Eastern Eu-rope. Active since 1990, the firm has raised eight funds with total capital exceeding EUR 2bn. To date the funds have invested EUR 1.6bn in 132 companies across a range of sectors and exited 104 companies with total gross proceeds of EUR 2.1bn. In a recent in-terview for the Polish press agency PAP, EI's CEO Jacek Siwicki said the company has some EUR 200m to spend on investments and could float some of the companies from its portfolio on the Warsaw Stock Ex-change. Siwicki confirmed that EI is currently analyz-ing a number of potential takeover targets. "A clear two-thirds of our resources is invested in Po-land and I think we could exceed this level in connec-tion with the situation in the East," Siwicki said. "The realistic assumption is that we will rather conduct transactions in Poland than elsewhere."

ENERGY & RESOURCES

PPPPERN breaks ground ERN breaks ground ERN breaks ground ERN breaks ground on on on on PLN 820mPLN 820mPLN 820mPLN 820m crude crude crude crude oil oil oil oil terminal in Gdańskterminal in Gdańskterminal in Gdańskterminal in Gdańsk

Poland's oil pipeline operator PERN Przyjażn has broken ground on a new terminal for transshipment and storage of crude in the port of Gdańsk. The cere-mony last week was attended by Prime Minister Don-ald Tusk and Treasury Minister Wlodzimerz Karpiński, who emphasized the project's importance for Poland's energy security. "I am very pleased that the diversification of energy supply in Poland has become reality. We are striving to achieve diversity and self-sufficiency of energy sector and adapt it to the needs of the 21st century," said Donald Tusk. PERN's Gdańsk project will be implemented in two stages. Phase one will include the development of 6 tanks for crude oil with a capacity of 62,500 cb.m each (375,000 cb.m in total) along with all the necessary auxiliary infrastructure. According to PERN, their completion will enable the company to handle and store crude oil as well as provide a range of additional services. The second stage will see the construction of tanks for storing petroleum products, chemicals, JET-A aviation fuel as well as bio-additives, with a com-bined capacity of 325,000 cb.m. Simultaneously a rail-way siding and a road tanker station will be built at the site. "It is the first investment of this kind in Poland and one of 16 similar projects that are being currently im-plemented around the world. Owing to the terminal, Poland will join a group of countries that actively par-

ticipate in the global trade in crude oil, fuels and chemical products. It provides an opportunity to boost the competitiveness of the Polish economy and offer flexibility in the case of a fuel shortage on the market," commented Treasury Minister Włodzimierz Karpiński.

PERN's new sea hub in Gdańsk will significantly im-prove Poland's energy security. Image: PERN Przyjażń

The first stage of the Gdańsk Crude Terminal is being developed at the cost of PLN 415m by an international consortium led by Polish IDS-BUD under the "design and build" formula. The project is to be operational by the end of 2015. The entire undertaking, with a total price tag of PLN 820m, should be completed in 2018. The Warsaw-based IDS-BUD was established by Marek Stefański, the founder and former shareholder of Polish engineering firm Pol-Aqua. In 2012 IDS-BUD posted net earnings of PLN 13m on turnover of PLN 437m, but its current order book is worth in excess of PLN 1.2bn. The state-controlled PERN Przyjaźń operates a net-work of pipelines, transporting Russian crude oil for the largest producers of fuels in Poland, as well as in Germany. The two lines of the Przyjaźń pipeline, span


from Adamowo, on the Polish-Belarussian border, to Płock in central Poland, and then to Schwedt in Ger-many. Apart from its network of crude oil pipelines, PERN also owns a number of product pipelines, used for transporting liquid fuels produced by refineries. This network radiates from Płock towards Warsaw, Poznań and Częstochowa. Last but not least, it pro-vides crude oil storage with three storage depots (Płock, Gdańsk, Adamowo) with a combined capacity of 3m cb.m. In 2012 PERN turned over PLN 1.18bn and posted net earnings of PLN 279m. The company em-ploys more than 2,400 staff.

ENERGY & RESOURCES

Bilfinger gets EUR 60m Bilfinger gets EUR 60m Bilfinger gets EUR 60m Bilfinger gets EUR 60m power engineering power engineering power engineering power engineering contract from Dalkiacontract from Dalkiacontract from Dalkiacontract from Dalkia

The French-owned utility Dalkia, one of the key in-vestors in Poland's district heating sector, has awarded a EUR 60m contract for the modernization of a ther-mal power plant in Łódź to German construction and engineering company Bilfinger. Following the planned installation of two steam generators with low-emission firing systems, the emission levels at Dalkia's Łódź cogeneration unit will live up to EU limits. Bilfinger began work on the project in March and plans to complete it in two years. In addition to design and engineering, the scope of the contract includes also delivery, assembly and commis-sioning of the plant components. According to Bilfinger, the upgrade will boost the plant's specs and service life to that of a brand-new unit, increasing the safety of heat supply for the city of Łódź, while im-proving air quality by reduction of nitrogen oxide emissions into the atmosphere.

"With the new order, we can further expand our posi-tion as a highly qualified service provider in the Polish power plant market", says Joachim Enenkel, the re-sponsible Member of the Executive Board at Bilfinger SE. "Demand for services for conventional power plants remains high, especially in Eastern Europe." Due to their age, a significant share of Eastern Euro-pean power plants have to be retrofitted with modern technology, and in recent years Bilfinger has made substantial investments to better explore opportuni-ties created by this marketplace. Its subsidiary Bilfinger Power Systems last year acquired Polish flue gas cleaning specialists ELWO, which designs, produces and installs of electrostatic precipitators and bag filters for conventional power plants. Members of the Bilfinger Berger Group have ob-tained a number of lucrative retrofit contracts in Po-land's power industry in recent years. Bilfinger is cur-rently modernizing ten of the twelve boilers at Eu-rope's largest coal-fired power plant in Bełchatów, Po-land. The latest EUR 78m contract for modernization of boiler 2 was awarded to Bilfinger's subsidiary Bab-cock Borsig Steinmüller GmbH in July last year, with delivery scheduled for January 2016. In September 2013, the Würzburg-based Babcock Noell GmbH and Bilfinger Infrastructure SA joint-ly won a EUR 120m contract for the retrofit of three flue gas desulfurization units at PGE's Turów lignite & biomass-fuelled plant in Bogatynia. All major compo-nents are to be provided by Babcock Noell GmbH, with the Warsaw-based Bilfinger Infrastructure SA being responsible for the construction work for the foundations and buildings including their inner instal-lations and the gypsum storage for the flue gas clean-ing units. In both cases the client was Poland's top energy utility PGE which operates mainly lignite & hard coal-fired

power plants stations, even though recently it has made some moves towards the development of natural gas-based and renewable energy sources as well as nu-clear power. PGE is heavily investing in environmen-tally friendly equipment and in the modernization of its power stations. Headquartered in Mannheim, Bilfinger Berger is a multinational German company specialized in civil & industrial construction, engineering and related ser-vices. In the recent years it has participated in many key infrastructure development projects in Poland. With approximately 70,000 employees globally, the company turned over EUR 8.5bn last year. With a workforce of 9,800 staff, the Bilfinger Power Systems is a subgroup of Bilfinger SE. Numerous German and international companies operate under the Power Sys-tems umbrella, which concentrates on the power gen-eration sector.


Orco to sell Złota 44, Orco to sell Złota 44, Orco to sell Złota 44, Orco to sell Złota 44, admits the luxury admits the luxury admits the luxury admits the luxury residential residential residential residential tower was tower was tower was tower was a a a a financial disasterfinancial disasterfinancial disasterfinancial disaster

The ailing European developer Orco Property Group has finally admitted what most market observ-ers have known already for quite a while – what a spectacular fiasco the Złota 44 residential high-rise has been for the company. In the full year financial re-port, published last week, Orco said it would sell the project, leaving its completion to the new owner. "The luxury residential project Zlota 44 was exposed as a major financial failure for the Group in the fall of


2013. There are many causes of this situation, includ-ing lack of bank financing due to covenants default, termination of the general contractor, unsuccessful sales re-launch on the local Warsaw residential mar-ket. Therefore, late in 2013 the Board of Directors de-cided to terminate this strategy, suspend the works and later to sell the entire project as is and not to com-plete the development. On 26 March 2014, a short term option was granted to OTT Properties (an entity related to the former management) to acquire the pro-ject; no new losses would be generated for the Group in case of exercise of that short term option," Orco said.

Złota 44 has been a disappointment both for Orco's shareholders as well as fans of Daniel Liebeskind's architecture. Image: ARUP

Designed by the Polish-born celebrity architect Dan-iels Liebeskind, Złota 44 were meant to become War-saw's new landmark, but so far it has been nothing but a disappointment, both for the developer, as well as most Varsovians, as the final look of the sail-shaped edifice only remotely resembles the sleek glass struc-ture they remember from the drawings Orco distribut-ed prior to obtaining the residence permit back in 2007.

Złota 44 aimed to be the most luxurious apartment building in Poland, offering a wide range of additional services and facilities available exclusively to its resi-dents, including a 25m indoor swimming pool, sauna, and spa. Located between the Palace of Culture and the Central Railway Station, the 192m high tower were to become Europe's second-tallest all-residential sky-scraper, with 54 storeys and 251 apartments. However, its completion has been delayed several times and sales of apartments have been rather disappointing. Meanwhile, Orco ended up on the verge of bankruptcy with Czech billionaire Radovan Vitek rescuing the col-lapsing business with an equity boost. Last year, its revenue decreased to EUR 146m from EUR 245m in 2012. The loss in fair value adjustments on investment properties and the impairments of development assets recognized in the income statement amounted to EUR 193m over 2013 with the Złota 44 project alone being responsible for EUR 121m worth of impairments. Orco's net loss amounted to EUR 227m last year, com-pared to EUR 42m in 2012. Its gross asset value stood at EUR 1.035bn last year, down by EUR 313m from the prior year, largely due to a like-for-like drop in assets' value.


Skanska launches Skanska launches Skanska launches Skanska launches Green Day office Green Day office Green Day office Green Day office pppproject in Wrocławroject in Wrocławroject in Wrocławroject in Wrocław

Swedish developer Skanska Property Poland has officially opened its latest office project in Wrocław: Green Day, which has been fully leased to a single ten-ant: Credit Suisse Center of Excellence. Skanska sold the project in the autumn of last year, five months be-fore its completion, to a fund managed jointly by In-

vestec Bank and GLL Real Estate Partner, for EUR 43.4m. The building has been LEED Gold pre-certified and is currently undergoing final certifica-tion, in line with Skanska's green building policy. Built in slightly less than two years at Wrocław's Szczytnicka St., Green Day has a total GLA of 15,930 sq.m, of which office space makes up 14,500 sq.m, all of which has been taken up by the Credit Suisse shared services unit. The small retail section will in-clude a canteen, café and convenience store operated by HDS Polska. The fit-out of the interiors is current-ly being finalized.

Green Day is home to the Wrocław-based Credit Suisse Center of Excellence. Image: Skanska Property Poland

"Green Day is a great commercial success – we leased the whole office space to Credit Suisse and sold the building to an investment fund five months ahead of its completion," commented Katarzyna Zawodna, President of Skanska Property Poland. "Wrocław is emerging as an important investment market in the commercial property sector and I believe that Skanska’s projects have played a role in this. We are very pleased because we are interested in Wrocław with regard to further developments."


Green Day is Skanska Property Poland’s third office project in Wrocław – over the past few years the com-pany has completed Grunwaldzki Center near the Reagan Roundabout (sold to RREEF) and two Green Towers buildings situated at Strzegomska Street (sold to PZU). Construction of the Dominikański office building is also underway in Wrocław, where total leasing area will be around 40,000 sq.m. The first lease has already been signed by Deloitte. Skanska Property Poland is very active in Poland's other regional cities, with investments in Poznań, Łódź, Kraków and Katowice, where it has recently broken ground on its largest Polish office project to-date, the 46,000 sq.m Silesia Business Park. In War-saw, the developer is currently finalizing work on Atrium 1, its flagship office project in the city centre, which the Swedes have recently sold to the German open-ended property fund Deka Immobilien-Global for EUR 94m (see BR+ No. 011 page 5). Scheduled to reach completion in the coming weeks, Atrium 1 will offer 18,000 sq.m of leasable office and retail space. Currently the building is 75% leased, with Santander Group subsidiary BZ WBK as the key tenant. The 12-year contract for 12,200 sq.m signed in September 2013 was the largest lease agreement in Warsaw's Cen-tral Business District in recent years. Atrium 1 will house the new headquarters of BZ WBK along with the bank's flag-ship branch. The remaining space will be occupied by the property consultancy CBRE as well as the developer, Skanska Property Poland itself. Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world's leading project development and construction groups, which currently has 57,000 employees in se-lected home markets in Europe, the U.S. and Latin America. Skanska’s revenue in 2013 totaled SEK 136bn (EUR 15.8bn).


Griffin Griffin Griffin Griffin expands expands expands expands Warsaw portfolio with Warsaw portfolio with Warsaw portfolio with Warsaw portfolio with fourfourfourfour new acquisitionsnew acquisitionsnew acquisitionsnew acquisitions

Griffin Group, a property investment group operating in Central and Eastern Europe, has considerably ex-panded its Warsaw portfolio in recent weeks with the acquisition of a shopping centre and three office build-ings for an estimated PLN 350m. Perhaps the most interesting of the four acquisitions is the Jupiter shopping centre, which Griffin bought along with 2.5 hectares of land, from Spain's Catalunya Banc for an undisclosed amount. The property in question is located at Towarowa St., right by the Rondo Daszyńskiego station on the new subway line, in the heart of Warsaw's booming office district of Wola. Although its previous owner secured a plan-ning decision that allows for the construction of two high-rise buildings on the plot, Griffin said it was con-sidering a number of possible options with regard to the future redevelopment of the Jupiter site. For the next two to three years, the existing shopping centre will continue to operate, Griffin Group said in the statement. The size of the new project that Griffin Group will de-velop on the Jupiter site is not known yet, but accord-ing to Emil Domeracki, senior associate, land agency, at Colliers International, the plot could probably house up to 80,000 sq.m of leasable space. If Griffin Group is actually planning to develop that much space on the site, this would mean that the company paid approximately EUR 40m, or even more, for the prop-erty, Domeracki said adding that the plot in question in well located and enjoys good visibility.

According to Mikołaj Martynuska, senior director, de-velopment consultancy, at CBRE, Griffin Group may choose not to develop high-rise buildings on the Jupi-ter site because of the large number of office towers that are planned by other developers in the neighbor-hood. A large-scale retail project would be an ideal so-lution for this location, he said. The urban develop-ment of both the entire modern Wola district and the Towarowa corridor, as well as strong market funda-mentals would support such a scheme. To a certain ex-tent, also a classic mixed-use development with sever-al mid-rise buildings featuring approximately 10-12 floors of offices. Besides Jupiter, Griffin has acquired three office buildings in Warsaw over the past few weeks for a combined PLN 200m, the company said. Following the transactions, Griffin's office portfolio in Warsaw includes nine properties. The first of the two acquisitions is Bliski Office Center, located at Żurawia street in Warsaw’s Central Busi-ness District. With Eurozet and Mini SA among its key tenants, the building offers ca. 4,900 sq.m of office space. The transaction was financed in part by mBank Hipoteczny, the mortgage arm of the German-owned mBank and the seller was Ireland's Castle Carbery Properties. In a separate transaction, Griffin pur-chased Nordic Park, a class-A, 8,260 sq.m office prop-erty located on Krzuczkowskiego St., in the Powiśle area. The two transactions totaled PLN 130m. At the end of February Griffin added Company House II, a 9,379 sq.m building in Warsaw's Aleje Jerozolimskie office corridor, bringing its total expenditures in ex-cess of PLN 200m. The building's main tenants are Microsoft and Agfa. The transaction was co-financed by Westdeutsche ImmobilienBank AG, which was also the creditor to the previous owner of the proper-ty, AXA Real Estate. Griffin had earlier acquired a twin building, Company House I, occupied by Philips.


Property empire in the making Griffin Group was founded in 2006 as a joint-venture between Polish Cornerstone Partners and British Chelsfield Partners, as a platform to manage funds focused on real estate investment in Central and East-ern Europe, mainly in Warsaw. A year ago the global private equity giant Oaktree Capital Management joined the project with a view to create a long-term platform for real estate-related investments in Poland, including direct purchases of assets, development pro-jects and lending activities. Griffin and Oaktree had been cooperating since 2010 with the private equity partner providing the Warsaw-based property inves-tor with some EUR 150m for acquisition of several key assets, including Hala Koszyki, Meble Emilia, Renoma shop-ping center, office buildings in Warsaw and a land bank for residential development. Following the takeover of Chelsfield's stake in Griffin, as a share-holder, Oaktree pledged to invest a further EUR 200m into their projects.

Company House II is one of the three office build-ings Griffin Group acquired so far this year. Image: Griffin

Besides a number of office buildings, Griffin's assets assets include also a 5.5ha site in Warsaw's western

Bemowo district together with a zoning permit and plans for a residential development totaling 90,000 sq.m. Together with Belgian developer Immobel, Griffin acquired seven investment sites from Poland's press distributor Ruch. Other projects include an in-vestment site and a historic tenement house on War-saw's Szucha street, a stone's throw from the Prime Minister's office, a 37ha site in Wilanów district and Prima Court office building in Warsaw. In December last year Griffin obtained PLN 18.2m worth of EU funding that will enable the company to transform a former Polonez Hotel in Poznań (acquired from Orbis for PLN 23m) into a private student dormi-tory. The project is to open by the end of this year and according to Griffin, it will be "competitive in terms of quality and price" in comparison with existing univer-sity dorms. Perhaps the most publicized investment by Griffin was its 2012 acquisition of state-owned furniture retailer Meble Emilia, which owns a handful of attractive in-vestment sites in Warsaw, including the Emilia store, sandwiched between the Warsaw Financial Center and the Intercontinental hotel. The new owner seeks to knock down the two-story socialist-era building and erect a new skyscraper at the site. Griffin took over al-so the Hala Koszyki project in downtown Warsaw from Irish developer Quinlan Private Golub, which had sought to build retail space and apartments at the site. After demolishing a historic market hall in 2006 (which is to be reconstructed following completion of an underground parking lot), Quinlan (which in the meantime changed name to Avestus Real Estate) changed the project's profile to offices and Griffin plans to follow in their footsteps, aiming to break ground on the project in the coming months. Another high-profile acquisition by Griffin was the Renoma shopping center in Wrocław, which the fund acquired for EUR 117.6m from Centrum Develop-

ments&Investments. The recently expanded land-mark property includes 31,000 sq.m of retail GLA and 10,000 sq,m of office space. In downtown Katowice, Griffin is developing a 21,000 sq.m shopping centre Supersam, with 100 retail outlets, cinema, fitness cen-ter, food court and 400 parking spaces. The project, most of which has already been pre-let, is to reach completion in 2015.

SERVICES & BPO

Business services firms Business services firms Business services firms Business services firms ttttook ook ook ook up 2up 2up 2up 200000,000 sq.0,000 sq.0,000 sq.0,000 sq.m m m m of offices in of offices in of offices in of offices in regional regional regional regional cities last yearcities last yearcities last yearcities last year

Besides being one of the key sources of jobs for Polish graduates, the country's thriving Business Process Outsourcing industry is a crucial driver of growth in the office sector, particularly in regional cities. Ac-cording to the property consultancy JLL, business ser-vices providers leased more than 220,000 sq.m of of-fice space last year alone, most of which outside . The total office space volume occupied by foreign-owned business services companies operating in Poland, tops approximately 1.2m sq.m, JLL said. "JLL’s analyses show that in 2013 business services sector companies leased approximately 200,000 sq.m of office space outside Warsaw, which is, when the capital city is excluded, about 50% of Poland's total demand for office space. If we take Warsaw into con-sideration, the business services sector companies’ share in 2013's total office space demand was approx. 20%," said Anna Młyniec, Head of Office Agency and Tenant Representation.


"Over 120,000 specialists work in foreign-capital busi-ness services centers operating in Poland which trans-lates into a 20% increase y/y. This means that the most optimistic scenarios forecast by ABSL have come true," commented Jacek Levernes, President of the outsourcing lobby ABSL and Member of Executive Management Board HP Europe.

IBM leased more than 12,000 sq.m in Katowice last year, including 9,000 sq.m at Echo Investment's A4 Business Park, pictured above.. Image: Echo Investment

The business services sector continues to be among the fastest developing segments of the Polish econo-my. According to the forecasts by ABSL, this growth is set to continue with business services centers generat-ing between 15- 20,000 new vacancies per year, hitting 150,000 by 2016. To satisfy its growing appetite for new talents, the business services sector continues to enter new regional markets in Poland, boosting de-mand for new offices in larger markets (excluding Warsaw ) - Krakow, Wrocław, Poznań, Katowice, Tri-City, Łódź, Lublin, Szczecin, as well as in smaller cit-ies. "Virtually since the very start of Poland's outsourcing sector, business services centers have been and con-tinue to be key occupiers of office space outside War-saw. This kind of lease agreements typically concern a large volume of space, comparable to the space occu-pied by the largest financial and telecommunication companies. The process started with pivotal contracts

– signed several years ago by, e.g., HP and Credit Suisse in Wrocław, Shell and State Street in Kra-kow and by Infosys in Łódź. Today, companies from the business services sector occupy approx. 50% of the total office space volume in Krakow, 36% in Łódź and 35% in Wroclaw," added Mateusz Polkowski, Associ-ate Director, Research and Consultancy. Some of the largest leases signed by BPO tenants in Poland last year included: IBM Global Services De-livery Polska (total approx. 12,000 sq.m, Katowice), Lufthansa Airline Accounting Center (8,500 sq.m, Kraków), ING Services Polska (total approx. 7,300 sq m, Katowice) and Cisco (7,000 sq m, Kraków).


Danish Prime Cargo to Danish Prime Cargo to Danish Prime Cargo to Danish Prime Cargo to establish distribution establish distribution establish distribution establish distribution centre in Szczecincentre in Szczecincentre in Szczecincentre in Szczecin, , , , create up to 120 jobscreate up to 120 jobscreate up to 120 jobscreate up to 120 jobs

International forwarder Prime Cargo is joining a growing number of Danish companies that have dis-covered the advantages of Poland's northwestern Szczecin region as a distribution hub for the Nordic region. The company has recently inked an agreement with global industrial property developer Prologis for a built-to-suit facility at Prologis Park Szczecin. The 11,200 sq.m warehouse is to reach completion in Q3 at a total cost of roughly EUR 12m, a third of which will be on Prime Cargo's side. "The warehouse will be built to serve as distribution center for our Scandinavian clients. The facility will be designed to handle both business to consumer distri-bution, such as e-commerce, and business to business

operations," Jesper Bejstrup, CFO at Prime Cargo tells Poland Today. Prologis Park Szczecin is a fully-leased, modern distri-bution centre in northwest Poland totaling 41,800 sq.m. It is located within the Goleniów Industrial Park off the S3 motorway, about 40km east of the German border and seven kilometers from Szczecin-Goleniów Airport. Other Prologis customers at the park include: Swedwood, Rhenus Logistics, KIM HURT, and DB Schenker. "We have been through a very detailed process of se-lecting the optimal site for our facility. The local au-thorities have been very helpful in this process and the access to a reliable and stable workforce in this area was an important factor behind our decision. As was the proximity to Scandinavia, because it is key for us to offer our clients a very competitive process time from receipt of order to delivery to the customer, either by road or by sea," says Mr. Bejstrup. "We will be opera-tional August 2014, and we expect to employ approx. 120 people in the peak season. As more customers are attracted to the facility the number of employees is expected to increase." Founded in 1998 and based in Kolding, Prime Cargo is a privately-owned third-party logistics operator, with 10 global offices and four distribution terminals in Denmark totaling 80,000 sq.m. With a total workforce of 475 employees, the company had revenue of ap-proximately EUR 90m in the financial year 2012/13. Its air shipping volume came to 13,000 tons last year with a further 660,000 cb.m shipped by sea. The Szczecin area has attracted a number of Western European e-commerce operators in recent years as a perfect handling hub for Germany and Scandinavia. The Rhenus Contract Logistics unit in Prologis Park Szczecin is in fact the distribution center for German online retailer Limango, handling more than


30,000 parcels a day. Danish online fashion retailer SmartGuy Group (operator of the stylepit.com web-site) has recently launched a distribution center in Goleniów near Szczecin, creating more than 150 jobs. Another European e-tailer to have chosen Szczecin for distribution is MyTrendyPhone, a company of Dan-ish origin that sells mobile phone accessories online. With a modern warehouse stock of merely 49,000 sq.m as of end of 2013 (according to Cushman & Wake-field), Szczecin remains one of Poland's smallest re-gional industrial property markets, but the robust take-up of 27,000 sq.m last year signaled a potential for considerable growth in the future. Last year saw the delivery of warehouse A of North-West Logistic Park (7,000 sq.m) with subsequent stages of the pro-ject being under construction. The vacancy level in the Szczecin area stood at 7.5% as of end of last year.


US Prologis returns to US Prologis returns to US Prologis returns to US Prologis returns to speculative speculative speculative speculative development with development with development with development with large Wrocław projectlarge Wrocław projectlarge Wrocław projectlarge Wrocław project

You know things are looking up for the Polish econo-my when commercial property developers are building speculative again. US-owned Prologis, one of the leading players on the global industrial property mar-ket, has just broken ground on a 27,000 sq.m ware-house unit at its Prologis Park Wrocław V site, without first securing any leases for the project. "Responding to positive signals from the market we have embarked on new investments both in the BTS as well as speculative formula," Bartosz Mierzwiak, Sen-

ior V-ce President & Market Officer Prologis Poland tells Poland Today. "Our ongoing projects at the mo-ment include a 11,200 sq.m BTS scheme for Prime Cargo in Prologis Park Szczecin as well as a 27,000 sq.m speculative development in Prologis Park Wrocław V. We are considering further speculative projects in regions where unoccupied warehouse space is becoming scarce Thanks to our proprietary land bank in key locations we can develop a ware-house in a matter of months." At the moment, Prologis Park Wrocław V includes four BTS buildings with a combined floor space of 90,000 sq.m, developed for Eko Holding, Neonet, Tradis, and UPM Raflatac. According to Prologis, the park can be expanded by a further 125,000 sq.m of warehouse space.

Prologis Park Wrocław V is located in Nowa Wieś Wrocławska, directly by the Wrocław ring road and 3km west of the Wrocław Bielany exit, near the junc-tion of A4 (Berlin-Wrocław-Ukraine) and S8/E57 ex-pressway. Image: Prologis

With its active engagement in five countries across the region (Poland, Czech Republic, Hungary, Slovakia, and Romania) and a portfolio totaling more than 3.6m

sq.m, Prologis is the primary operator of distribution facilities in Central & Eastern Europe (as of 31 Decem-ber 2013). Last year alone, the company leased 1.15m sq.m of industrial distribution space in the region, in-cluding 595,000 sq.m in renewals and 363,000 sq.m in new leases. Prologis’ occupancy in the CEE was 89.5% as of Dec. 31, 2013.

"Few developers can react to market demand as quickly as Prologis, thanks to our large land bank in key locations," Bartosz Mierzwiak, Senior V-ce President and Market Of-ficer at Prologis Poland tells Poland Today. Image: Prologis

In 2013 Prologis in CEE began construction of three new facilities totaling 75,300 sq.m in the region, in-cluding the first speculative facility since 2009 in the Czech Republic - fully leased within two months of construction - a 17,800 sq.m facility at Prologis Park Wrocław V for Neonet, and a 7,000 sq.m facility at Prologis Park Janki for ROHLIG SUUS Logistics. "Over the coming months we aim to focus our activity on key markets, in response to a growing demand from tenants. We expect that due to improving economic conditions as well as an increasing consolidation and reorganization of supply chains, clients will be seeking new space as well as extend and expand their existing leases. Hence, we will continue to focus on markets where supply is limited. It is worth noting, that small-er markets, such as Szczecin and Gdańsk, remain ac-


tive and Poland's continuously expanding road infra-structure generates demand for distribution centers in new regions," says Bartosz Mierzwiak. Prologis, Inc., is the leading owner, operator and de-veloper of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of December 31, 2013, Prologis owned or had investments in, properties and development projects of approximately 52.9m sq.m in 21 countries. These properties are leased to more than 4,500 customers, including third-party logistics providers, transporta-tion companies, retailers, manufacturers, and other enterprises. Wrocław is booming Poland's 5th largest warehouse market, Wrocław saw a number of large deals signed last year with its total industrial space stock likely to exceed 1m sq.m this year. At the end of 2013 the figure stood at 780,000 sq.m. The key elements driving demand for warehouse space in the Wrocław region are its strategic location, sizeable and relatively affluent local market, and well-developed transport infrastructure. Three Special Economic Zones with numerous investors represent-ing FMCG, automotive, aviation and manufacturing industries operate in the region. Two of Amazon’s three Polish distribution centers developed by Panattoni and Goodman will be con-structed in Wrocław and will deliver more than 220,000 sq.m of new space to the market this year. These transactions pushed the region’s total take-up in 2013 to 482,000 sq.m – a twofold rise on 2012 – ac-counting for more than 20% of Poland’s total take-up, according to consultancy Cushman & Wakefield. Some 259,000 sq.m is under construction with the largest projects underway including BTS Amazon (123,000 sq.m) developed as part of Goodman Wrocław South Logistics Centre, another phase of

Prologis Park Wrocław V (35,000 sq.m), and a BTS scheme for Polaris Industries (33,000 sq.m). Head-line rents remain stable at EUR 3.0–3.9/sq.m/month. The highest concentration of warehouse space in the Wrocław region is along the A4 motorway (Bielany Wrocławskie, Kąty Wrocławskie, Kobierzyce, Krajków) and national road no. 8. "Wrocław's location in the heart of Central Europe, with its proximity to Germany and the Czech Repub-lic, makes the area an increasingly popular warehouse location for companies providing cross-border logis-tics services. This has been fostered by the gradual de-velopment of the road network. Today, the capital of Lower Silesia enjoys convenient motorway connec-tions with Germany and Upper Silesia. However, the future looks even brighter with two projects, the S8 express road, connecting Wrocław with Łódź and Warsaw due to be completed this year and the S5 to-wards Poznań, whose construction is planned in the next few years already influencing the market in northern Wrocław. In addition, the planned S3 ex-pressway between Legnica and the Czech border will further increase the international accessibility of the region," says Michał Śniadała, Senior Consultant, In-dustrial Agency, at JLL.

CONSUMER GOODS & RETAIL

RRRRetail sales etail sales etail sales etail sales increase by increase by increase by increase by 7% in February, fastest 7% in February, fastest 7% in February, fastest 7% in February, fastest since May 2012since May 2012since May 2012since May 2012

Polish retail sales rose at an annual rate of 7.0% in February, on a 0,6% monthly fall, the Central Statisti-cal Office (GUS) said last week, beating average proejctions. The Polish news agency (PAP) analyst survey had shown consensus expectations for a 6.2%

y/y increase and a 1.4% m/m decline. In real terms, Polish retail sales were up by 7.0% y/y in February af-ter a 5.0% y/y increase in January, GUS added. In the whole of 2013 retail sales rose by merely 2.3% from the prior year. "February brought an acceleration of the retail sales growth to 7% y/y, the highest level since May 2012. This was partially due to high sales of passenger cars registered as commercial vehicles and low statistical base. However, according to our estimates, retail sales excluding cars and fuels also accelerated – to 4.2%y/y (the highest growth rate since August 2012)," BZ WBK bank wrote in a commentary

Retail sales in Poland (y/y)

-5%

0%

5%

10%

15%

Aug 11 Feb 12 Aug 12 Feb 13 Aug 13 Feb 14

Source: GUS

"High growth rate of sales and, in general, of consumer demand is underpinned by recovery of the labor mar-ket, which results in faster growth of personal income and improving consumer confidence. Recent data are in line with our scenario of economic recovery, driven not only by net exports, but also by consumption and investment. These figures support our scenario of GDP growth in Q1 by slightly above 3% and by 3.5% y/y in the entire 2014," the analysts concluded.


RETAIL PROPERTIES

Atrium Atrium Atrium Atrium completes completes completes completes EUR 120mEUR 120mEUR 120mEUR 120m shopping shopping shopping shopping centre in Lublincentre in Lublincentre in Lublincentre in Lublin

Retail property company Atrium European Real Estate has completed its first major greenfield devel-opment, Atrium Felicity, in the eastern Polish city of Lublin. The 172,000 sq.m project is the largest and most modern shopping centre in this city of 350,000. Built in approximately 17 months by Strabag and of-ficially opened on March 20th, Atrium Felicity attract-ed 220,000 visitors over the first four days of its opera-tions. "The total investment costs for Lublin are estimated at approx. EUR 120m," Ljudmila Popova, head of busi-ness development and investor relations at Atrium, told Poland Today. According to Atrium's Warsaw press office, the company spent EUR 13m on redevel-opment of the traffic network in the surrounding area. Atrium Felicity offers 75,000 sq.m of gross leasable ar-ea of retail across 120 units. The centre is 95% occu-pied, with a further four stores in solicitors’ hands. The shopping centre is anchored by a 20,000 sq.m hy-per market which was pre-sold to Auchan in 2011, a 12,600 sq.m Leroy Merlin DIY store and a 3,500 sq.m Saturn electronics store . It also houses a number of popular fashion brands such as H&M, the Inditex Group (Zara, Bershka, Stradivarius, Pull & Bear, Mas-simo Dutti), C&A and LPP Group (Reserved, Mohito, Sinsay, Cropp, House and Home&You). In addition, Tommy Hilfiger and New Yorker are among many brands which have chosen Atrium Felicity as the loca-tion for their first stores in Lublin in Atrium Felicity.

As shopping alone is not enough to keep large retail schemes busy, the investor is hoping the project to be-come a dominant family or social destination for Lu-blin residents. To this aim, Atrium Felicity has come up a comprehensive leisure offering with 15 cafés and restaurants, free wifi and a nine screen Cinema City complex which will be the first in Lublin and only the second in Poland to offer the new 4D experience. Atrium Felicity has been designed and constructed in line with the up – to - date standards of efficiency and sustainability, and an application has been made for a BREEAM rating. Atrium is hoping the centre will at-tract visitors from the nearny cities of Zamość and Chełm ans estimates the project's total catchment area at some 470,000 people.

Some 70,000 people visited Atrium Felicity on its opening day. Image: Atrium

"The opening of the Atrium Felicity shopping centre today is an important milestone in both Atrium's his-tory, being our first major greenfield development, and for the city of Lublin, as its largest and most modern retail and leisure centre. The fact that Atrium Felicity has been delivered almost fully occupied to such a wide range of strong international and regional retail brands is testament to the quality and location of the

centre itself and the hard work and expertise of our leasing teams. I am confident that Atrium Felicity will be a great success and be seen as an exciting and desir-able retail and leisure proposition for both residents of and visitors to Lublin," said Rachel Lavine, Chief Ex-ecutive Officer of Atrium.

Atrium is a leading real estate company focused on shopping centre investment, management and devel-opment in Central and Eastern Europe. The company is based in Jersey and dual listed on the Vienna and Euronext Amsterdam Stock Exchanges. As at 31 De-cember 2013 the Group owned 153 shopping centers and retail properties, with a market value of EUR 2.4bn, diversified across seven countries with a total gross lettable area of 1.3m sq.m. In 2013, Atrium pro-duced a gross rental income of EUR 203.5m. Prior to the opening of Atrium Felicity, Atrium owned 22 properties in Poland with a gross lettable area of 423,000 sqm and a market value of EUR 1.2bn. Last year, Atrium's Polish unit generated Gross Rental In-come of EUR 78.9m, marking an increase by close to 7% on the prior year (+1% in like-for-like terms). Atri-um's largest investment in Poland last year was the EUR 151.7m acquisition of Galeria Dominikańska in Wrocław. On the development side, besides the Lublin project, the company is expanding its Atrium Coperni-cus property in Toruń, which will get an additional 17,300 sq.m of GLA and 640 parking spaces by the end of the year. Ms. Popova declined to comment on the capex involved in the Toruń project.

The 2014 will be a truly busy year for developers in Lublin, as another major retail project, Tarasy Zamkowe, is soon to be delivered near the city's Old Town. Scheduled to open in Q4 2014, the EUR 95m shopping and entertainment project will comprise up to 38,000 sq.m of rentable space divided into ca. 150 retail units. The investor behind Tarasy Zamkowe is Austria's Immofinanz.


RETAIL PROPERTIES

Polish investor Polish investor Polish investor Polish investor breaks breaks breaks breaks ground on ground on ground on ground on retail park retail park retail park retail park in Bielskoin Bielskoin Bielskoin Bielsko----BiałaBiałaBiałaBiała

Kraków-based developer Biuro Inwestycji Kapitałowych (BIK), has broken ground on its third retail project, Retail Park Bielsko, in the southern Polish town of Bielsko-Biała. With a total GLA of 6,300 sq.m and 230 parking spaces, the scheme is to reach completion at the break of Q3 2014. Built by one of Poland's top construction firms Erbud, Retail Park Bielsko will include a free-standing Biedronka supermarket as well as the retail park sec-tion with 11 units, including a PEPCO discount textile retailer, Rossmann drugstore as well as an electricals outlet, footwear store, a healthcare centre and phar-macy. Retail Park Bielsko will feature also a 1,129-sq.m De-cathlon Easy, a new smaller format the French big-box sports goods retailer has recently introduced to the Polish market. So far Decathlon has opened three outlets under the Easy logo in Poland (in Katowice, Chorzów, and Rybnik) and plans to increase their number to 10 by the end of next year. Ranging between 1,000 and 1,500 sq.m in size, Decathlon Easy outlets carry only sports goods manufactured under the pri-vate labels of Decathlon's parent, the Oxylane Group (for instance Tribord, Quechua, Domyos, Kalenji). Backed by Polish capital, BIK has been developing lo-gistics properties since 2000 and its current portfolio includes some 85,000 sq.m of commercial space in Kraków, Ożarów Mazowiecki, Pruszcz Gdański, Sos-nowiec, Chorzów, and Puławy. In 2010 the company

decided to diversify into retail properties and medical facilities. Last year it opened a 2,700 sq.m retail park in Puławy, anchored by Biedronka, Media Expert, PEPCO, and Drogeria Aster, and in 2011 completed a 3,500 sq.m elderly care unit in Chorzów.

Retail Park Bielsko will include a free-standing Biedronka supermarket and 11 other outlets. Image: BIK

"We decided to diversify into small retail parks, meas-uring between 3,000 and 6,000 sq.m, in small and me-dium-sized towns," commented BIK's Business Devel-opment Manager Krysztof Mucha. "The demand for such properties in those locations is very high at the moment. As an investor, we can see the potential in small towns and local communities, and we tailor our properties to meet the expectations of customers in these markets. Projects like Retail Park Bielsko should be close to the customer and answer to their daily needs." A few months ago (see BR+ No. 008 page 9) BIK em-barked on the construction of Galeria Dzierżonów, in the Silesian town of Dzierżoniów (50km south of Wrocław). Scheduled to open in Q3/Q4 2014, the Galeria Dzierżoniów strip mall will feature 25 retail & service units with a combined GLA of 5,000 sq.m as well as 105 parking spaces.

DATA BOX: RETAIL PARKS IN 2013

The supply of large-scale non-food stores in Poland both in retail parks and as free-standing buildings – re-tail warehouses – comprises a total of nearly 2.5m sq.m. The largest scheme completed in 2013 was the Europa Centralna Park in Gliwice offering 40,000 sq.m. In Poznań, 14,000 sq.m was added to IKEA Park Franowo while Szczecin saw the completion of Marcredo Center (14,000 sq.m). Several smaller retail parks also came onto the market last year, including Park Handlowy Szombierki in Bytom, Multishop in Sochaczew, Pasaż Wiślany in Grudziądz, Dekada in Grójec and Vendo Park in Nysa. Poland’s total retail park stock reached 800,000 sq.m, of which 70,000 sq.m was added in H2 2013. More than 60,000 sq.m is currently under construction in small retail parks in small and medium-sized cities such as Era Park in Radomsko and Marcredo Center in Piekary Śląskie. Occupier demand in retail parks remains stable with key tenants from the following sectors: DIY (Castorama, OBI and Leroy Merlin), household appli-ances and electronics (Media Expert and RTV Euro AGD), furniture and home accessories (Agata Meble and Jysk) and sports equipment (Martes Sport). The retail offer of such schemes is completed by drug-stores (Rossmann and Hebe), accessories (Pepco), and discount fashion and footwear (Takko, KIK, Deichmann and CCC). The vacancy rate in retail parks stands at approx. 3.7%. Rents at retail parks are stable at EUR 6–8/sq.m/month for large units and EUR 9–13/sq.m/month for medium-sized space with the high-est rents in large retail parks in Poland’s largest con-urbations and the lowest in small schemes in small cit-ies. Source: Cushman & Wakefield


POLITICS & ECONOMY

Polish exports to Polish exports to Polish exports to Polish exports to Russia and Ukraine Russia and Ukraine Russia and Ukraine Russia and Ukraine may drop by a fifth in may drop by a fifth in may drop by a fifth in may drop by a fifth in 2014, minister says2014, minister says2014, minister says2014, minister says

The prolonging crisis in Ukraine is beginning to im-pact Poland's foreign trade. According to figures pro-vided last week by Economy Minister Janusz Piechocinski, Polish exports to Russia in the year to March 18 fell by around 7.3% in annual terms to some USD 2.17bn. Exports to Ukraine in the same period fell 6.3% y/y. Polish exports to Russia in 2013 amounted to USD 10.8bn and to Ukraine - USD 5.72bn, together representing according to data from the Central Statis-tical Office (GUS). "The slowdown in exports can be traced down to a de-cline in the Russian economy, deepened by the crisis around Ukraine," Piechocinski told reporters, adding that the weakening of the ruble in the past months has negatively affected imports to Russia, according to da-ta from the country's Federal Customs Service. "The economic weakening combined with the current geo-political crisis have a strong effect on the ruble, which is losing considerably both against the dollar and the euro - the Russian currency has already lost 11-12% against the main currencies this year. That, in turn, significantly hampers Russian imports from partners outside the former Commonwealth of Independent States, hence also trade with Poland," the deputy prime minister told the Polish Press Agency PAP. The scale of Russian exports decline varies depending on the category of goods, with over 40% declines in pork, fresh fruit, chemical substances, reagents, poly-

mers, jewelry, metallurgic products, tools, refrigera-tion devices, construction machines, engines, electro-technical machines, farming machines, turbines, roll-ing stock parts, casting devices and toys. Piechociński told PAP the full-year decline in Polish exports to Russia and Ukraine in USD terms may amount to some 20-25%. "In Ukraine's case the result is much harder to predict as the forecast is burdened by a significant degree of uncertainty as to further developments in the social and economic situation in the country." According to central bank head Marek Belka, who called the 1-2% depreciation of zloty negligible, Po-land's economy has so far been nearly unaffected by the Ukrainian crisis, with exports being the only area of concern at the moment. "There may be problems, there already are, with ex-ports to Russia and Ukraine," Belka said in a televised interview pointing to the declining competitiveness of Polish exports due to the recent weakening of the ru-ble and the hryvnia. The two countries bought some 8% of all Polish exports last year. The NBP governor has said in recent weeks that the Ukrainian crisis may force the Poles to rethink their reluctant position on the potential adoption of euro. According to Belka, the Ukrainian crisis has not al-tered the economic balance but has brought to light the political side of the debate. "The Ukrainian crisis has shown that it is good to be where decisions in the EU are taken, and it seems to me that they are taken in a circle of insiders," he said. "The situation in Ukraine should remind Poles that there is that political plane of the euro debate. I want-ed to highlight that."

POLITICS & ECONOMY

Unemployment drops Unemployment drops Unemployment drops Unemployment drops totototo 13.9% 13.9% 13.9% 13.9% in Februaryin Februaryin Februaryin February

Poland's registered unemployment rate declined to 13.9% in February from the prior-month level of 14.0%, according to the Central Statistical Office (GUS) figures released last week. The unemployment rate figure was slightly below the Labor Ministry's prior estimate of 14.0%. "The decline in registered unemployment rate was deeper than expected. In February the figure reached 13.9% versus 14% in January 2014 and 14.4% in Febru-ary 2013. The number of unemployed persons amounted to 2.256m and was lower by 4,800 than in the previous month and by 80,800 as compared the same period of 2013," BZ WBK economists said in their weekly commentary. "The number of unemployed people fell in monthly terms, and such a development is untypical for this month (last time we saw it in 2008) and is suggesting that recovery on the Polish labor market is gaining steam. In upcoming months we expect this downward trend in registered unemployment to continue. The improvement will come from not only further eco-nomic recovery, but also from increase in seasonal works," the bank added. According to Eurostat's preferred Labor Force Survey methodology, January unemployment in Poland stood at 10.5% and was lower than the EU 28 average of 11.3%. The two countries with the highest unemploy-ment rate in Europe are Spain (26.3% in January and Greece (27.3% in December).


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Nov '13 Dec '13 Jan '14 Feb '14

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

Food & bev +1.9 +0.3 +1.5 +0.7 +1.8 +1.6 +1.6 -0.2

Alcohol, tobacco +3.6 +0.1 +3.7 0.0 +3.4 +0.8 +2.2 +1.4

Clothing, shoes -4.9 -0.2 -4.9 -0.6 -5.0 -3.7 -4.7 -1.7

Housing +1.8 +0.1 +1.8 0.0 +1.9 +0.2 +1.9 +0.1

Transport -2.3 -1.2 -0.9 0.4 -1.2 -1.5 -1.1 +0.4

Communications -11.7 -4.9 -11.6 0.0 -7.8 -0.3 -3.2 +0.4

Gross CPI +0.6 -0.2 +0.7 +0.1 +0.5 +0.1 +0.7 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Fe

b 1

2

Ap

r 12

Ju

n 1

2

Au

g 1

2

Oc

t 12

De

c 1

2

Fe

b 1

3

Ap

r 13

Ju

n 1

3

Au

g 1

3

Oc

t 13

De

c 1

3

Fe

b 1

4

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Oct '13 Nov '13 Dec '13 Jan '14 Feb '14

m/m (%) +3.6 -5.8 +17.3 -21.3 -0.6

y/y (%) +3.2 +3.8 +5.8 +4.8 +7.0

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 n/a

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-Feb

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 18.4 +0.8

Commenced 142.9 158.1 162.2 141.8 127.4 16.5 +56.4

U. construction 670.3 692.7 723.0 713.1 694.0 687.5 -1.5

Completed 160.0 135.7 131.7 152.5 146.1 23.7 -4.9

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q4 2013 +2.7% 442,167 -1.5%

Q3 2013 +1.9% 393,725 -1.9%

Q2 2013 +0.8% 389,244 -2.3%

Q1 2013 +0.5% 370,089 -3.1%

2013 +1.6% 1,631,764 -1.5%

2012 +1.9% 1,595,225 -3.7%

2011 +4.5% 1,528,127 -5.0%

2010 +3.9% 1,416,585 -5.1%

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

Indicator 2010 2011 2012 2013 *2014

GDP change +3.9% +4.5% +1.9% +1.6% +3.5%

Consumer inflation +2.6% +4.3% +3.7% +0.9% +1.1%

Producer inflation +2.1% +7.6% +3.4% -1.3% +0.1%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.5% -0.6%

Nominal gross wage +3.9% +5.2% +3.7% +3.4% +4.7%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.6%

EUR/PLN 3.99 4.12 4.19 4.20 4.09

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

GGGGross Wagesross Wagesross Wagesross Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q4 2012 Q1 2013 Q2 2013 Q3 2013

A B A B A B A B

Coal mining 8,427 192 6,060 138 6,290 143 6,061 138

Manufacturing 3,522 154 3,491 152 3,560 155 3,625 158

Energy 6,535 198 6,196 188 5,828 177 6,021 183

Construction 3,829 163 3,556 152 3,693 157 3,766 160

Retail & repairs 3,365 143 3,432 146 3,421 146 3,408 145

Transportation 3,816 135 3,439 122 3,547 125 3,589 127

IT, telecoms 6,379 166 6,685 174 6,707 174 6,654 173

Financial sector 6,044 136 6,356 143 6,702 151 6,109 137

National average 3,878 154 3,741 149 3,613 144 3,652 145

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14

m/m (%) -0.8 +9.4 +14.3 -2.9 +21.5 -64.0 +18.7

y/y (%) -11.1 -4.8 -3.2 -8.9 +5.8 -3.9 +14.4

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

Ju

n 1

1

Se

p 1

1

De

c 1

1

Ma

r 1

2

Jun

12

Sep

12

De

c 1

2

Ma

r 13

Jun

13

Se

p 1

3

De

c 13

Ma

r 14

60

80

100

120 Co nsumer confid ence (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 PriceProducer PriceProducer PriceProducer Pricessss

Month Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14

m/m (%) -0.3 +0.1 -0.7 -0.3 -0.1 0.0 -0.1

y/y (%) -1.1 -1.4 -1.4 -1.5 -1.0 -1.0 -1.4

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 PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14

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

y/y (%) -1.9 -1.8 -1.8 -1.7 -1.7 -1.7 -1.6

Year 2007 2008 2009 2010 2011 2012 2013

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

Industrial OutputIndustrial OutputIndustrial OutputIndustrial Output

Month Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14

m/m (%) -4.5 +9.6 +6.0 -6.2 -9.7 +2.9 -1.8

y/y (%) +2.2 +6.2 +4.4 +2.9 +6.6 +4.1 +5.3

Year 2007 2008 2009 2010 2011 2012 2013

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

weekly newsletter # 027 / 24th March 2014 / page 15

TTTTraderaderaderade

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

EXPORTS in PLN bn IMPORTS in PLN bn

Jan 2014 y/y (%)

share (%)

2013 share (%)

Jan 2014 y/y (%)

share (%)

2013 share (%)

Food and live animals 5,692 +4.4 10.6 69,304 10.9 4,066 +3.5 7.6 47,906 7.4

Beverages and tobacco 599 -8.0 1.1 8,624 1.4 275 -17.9 0.5 4,150 0.6

Crude materials except fuels 1,547 +4.9 2.9 15,744 2.5 1,908 +0.9 3.6 21,585 3.3

Fuels etc 2,713 +5.4 5.0 30,013 4.7 7,191 +17.7 13.5 75,539 11.7

Animal and vegetable oils 176 +56.6 0.3 1,864 0.2 187 -15.3 0.4 2,646 0.4

Chemical products 4,833 +7.8 9.0 59,103 9.3 7,585 +0.3 14.3 92,917 14.3

Manufactured goods by material 10,662 +2.5 19.8 129,915 20.3 9,221 +3.7 17.3 112,392 17.3

Machinery, transport equip. 20,448 +14.8 37.9 239,434 37.5 16.711 +3.0 31.4 216,608 33.4

Other manufactured articles 7,198 +8.1 13.3 82,816 13.0 4,685 +1.1 8.8 58,210 9.0

Not classified 94 n/a 0.1 1,782 0.2 18,091 n/a n/a 16,242 2.6

TOTAL 53,962 +8.4 100 638,599 100 53,226 0.0 100 648,195 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan 2014

share *2013 share No Country Jan 2014

share *2013 share

1 Germany 14,097 26.1% 159,622 25.0% 1 Germany 10,999 20.7% 139,334 21.5%

2 UK 3,488 6.5% 41,503 6.5% 2 Russia 7,852 14.8% 79,601 12.3%

3 Czech Rep. 3,394 6.3% 39,421 6.2% 3 China 5,497 10.3% 60,914 9.4%

4 France 3,313 6.1% 35,745 5.6% 4 Italy 2,357 4.4% 33,703 5.2%

5 Russia 2,140 4.0% 34,058 5.3% 5 Netherlands 1,856 3.5% 25,005 3.9%

6 Italy 2,391 4.4% 27,450 4.3% 6 France 1,971 3.7% 24,533 3.8%

7 Netherlands 2,269 4.2% 25,292 4.0% 7 Czech Rep. 1,869 3.5% 23,778 3.7%

8 Ukraine n/a 2.8% 18,037 2.8% 8 USA 1,209 2.3% 17,350 2.7%

9 Sweden 1,723 3.2% 17,498 2.7% 9 UK 1,295 2.4% 16,861 2.6%

10 Slovakia 1,293 2.4% 16,795 2.6% 10 Belgium 1,309 2.5% 14,913 2.3%

Source: Central Statistical Office (GUS) *) preliminary estimates

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 28 March 2014

100 USD 303.74↓

100 EUR 416.77 ↓

100 GBP 504.66 ↑

100 CHF 341.94 ↓

100 DKK 55.82 ↓

100 SEK 46.83 ↓

100 NOK 50.59 ↓

10,000 JPY 296.88 ↓

100 CZK 15.22 ↓

10,000 HUF 134.70 ↑

100 USD/EUR against PLN

300

350

400

450

12 A

pr 13

24 Jun 13

30 A

ug 13

7 N

ov 13

21 Jan 14

28 M

ar 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Nov '13 Dec '13 Jan '14 Feb '14

Monetary base 153,672 164,010 161,544 158,330

M1 538,837 555,851 546,487 548,033

- Currency outside banks 113,718 114,401 113,455 114,680

M2 934,713 960,361 947,443 954,284

- Time deposits 412,469 421,160 418,259 423,296

M3 953,446 978,924 962,416 968,442

- Net foreign assets 148,702 143,430 140,617 135,759 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 Nov '13 Dec '13 Jan '14 Feb '14

Loans to customers 906,298 903,890 914,189 914,068

- to private companies 262,396 259,061 263,063 263,941

- to households 563,157 562,381 567,984 567,257

Total assets of banks 1,627,119 1,601,293 1,628,197 1,616,891

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

PLN (up to 1 year) 4.6% 4.5% 4.5% 4.5% 4.3% 4.2%

PLN (up to 5 y ) 5.1% 4.9% 4.9% 4.9% 4.9% 4.9%

PLN (over 5 y) 4.9% 4.8% 4.8% 4.8% 4.7% 4.8%

PLN (total) 4.9% 4.8% 4.8% 4.8% 4.7% 4.8

EUR (up to 1m EUR) 1.9% 1.8% 2.0% 1.9% 1.9% 2.0%

EUR (over 1m EUR) 3.5% 3.2% 2.5% 3.0% 2.9% 3.6%

Warsaw Inter Bank Offered Rate (WIBOR) as of 28 Mar 2014

Overnight 1 week 1 month 3 months 6 months

2.60%% 2.60% 2.61% 2.71% 2.74%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.59% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 28 Mar '14

Change 21 Mar '14

Change end of '13

↑ Alior Bank 87.74 +3% +8%

↓ Asseco Pol. 46.5 -2% +1%

→ Bogdanka 124.65 0% -1%

↑ BZ WBK 413.7 +3% +7%

↓ Eurocash 38.84 -2% -19%

↑ Grupa Lotos 36.8 +1% +4%

→ JSW 43.99 0% -17%

→ Kernel 28.75 0% -24%

↑ KGHM 107 +7% -9%

↑ LPP 8947 +5% -1%

↑ mBank 537 +4% +7%

↓ Orange Pol. 10.30 -3% +5%

↑ Pekao 192.5 +4% +7%

↑ PGE 19.2 +4% +18%

↑ PGNiG 4.3 +2% -17%

↑ PKN Orlen 42.09 +4% +3%

↑ PKO BP 41.89 +2% +6%

↑ PZU 424 +4% -6%

↓ Synthos 4.89 -3% -11%

→ Tauron 5.23 0% +20%

Source: Warsaw Stock Exchange

Key indices

as of 28 March 2014

WIG Total index

55551111,,,,831831831831....67676767 Change 1 week +3% ↑

Change end of '13 +1% ↑

WIG-20 blue chip index

2,2,2,2,433433433433....74747474 Change 1 week +3% ↑

Change end of '13 +1% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

20 D

ec 13

21 Jan 14

12 Feb 14

6 M

ar 14

28 M

ar 14


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New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Feb 2014 *

Monthly wages (PLN)

Jan-Feb 2014**

Unemploy-ment

Feb 2014

New dwellings Jan-Feb 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 100.8 103.3 4,061 3,663 160.5 13.7 2,682 99.3

Kujawsko-Pomorskie (Bydgoszcz) 108.6 112.9 3,324 3,132 157.0 18.8 1,116 86.7

Lubelskie (Lublin) 106.8 80.0 3,801 2,996 140.1 15.0 729 73.6

Lubuskie (Zielona Góra) 118.5 105.2 3,397 2,964 62.6 16.3 596 86.0

Łódzkie (Łódź) 102.6 110.1 3,686 3,110 158.9 14.6 1,111 108.5

Małopolskie (Kraków) 95.6 97.0 3,659 3,286 172.4 12.1 2,570 77.7

Mazowieckie (Warszawa) 107.2 100.0 4,457 4,793 295.4 11.4 5,028 107.3

Opolskie (Opole) 105.5 145.9 3,481 3,449 54.3 14.9 332 100.6

Podkarpackie (Rzeszów) 104.8 120.3 3,347 2,991 160.3 16.9 1,105 117.3

Podlaskie (Białystok) 106.1 118.8 3,207 3,666 73.4 15.5 564 120.5

Pomorskie (Gdańsk-Gdynia) 105.9 101.2 3,866 3,415 120.0 13.9 1,312 66.5

Śląskie (Katowice) 100.5 108.9 4,708 3,460 218.3 11.7 1,681 93.0

Świętokrzyskie (Kielce) 115.1 62.6 3,325 3,150 94.3 17.1 524 133.7

Warmińsko-Mazurskie (Olsztyn) 105.6 129.7 3,295 2,950 120.4 22.3 956 116.9

Wielkopolskie (Poznań) 110.3 93.2 3,685 3,593 152.6 10.0 2,437 103.6

Zachodniopomorskie (Szczecin) 113.0 87.0 3,418 3,332 115.5 18.5 965 82.8

National average 104.7 101.1 3,930 3,967 2,255.9 13.9 23,708 95.1

*) 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 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13

in Poland 1,861 1,381 2,886 175 -3,020 -1,794

Polish DI 310 -550 -1,203 957 2,588 -1,529

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 14,832 4,716

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

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

Period 2010 2011 2012 Q1 '13 Q2 '13 Q3 '13

Trade balance -8,893 -10,059 -5,313 -139 1,203 1,017

Services, net 2,334 4,048 4,816 1,274 1,686 1,047

CA balance -18,129 -17,977 -13,332 -2,313 486 -2,027

CA balance vs GDP -5.1% -5.0% -3.7% -3.1% -2.3% -2.0%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q4

10

Q2

11

Q4

11

Q2

12

Q4

12

Q2

13

Q4

13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, Q4 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 563,000 17,000

22.3% 3.6–5.1

Warsaw suburbs 2,063,000 12.5% 2.1–2.8

Central Poland 1,021,000 80,000 15.2% 2.1–3.3

Poznań 1,023,000 215,000 4.4% 2.5–3.15

Upper Silesia 1,431,000 37,000 9.3% 2.4–3.3

Wrocław 780,000 259,000 11.7% 2.6–3.1

Tri-city 184,000 46,000 9.2% 2.8–3.3

Kraków 141,000 0 4.0% 3.3-4.0

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 2H'13 Retail rents**2H'13

Q3 '13

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 8,146 +3.4% 11.5-25.5 11.75% 80-90 85

Kraków 5,989 -13.1% 13-15 4.90% 35-45 78

Katowice 5,898 +9.0% 13-14 7.30% 35-45 56

Poznań 6,351 -6.7% 14-16 14.20% 35-45 55

Łódź 4,780 -3.8% 12-14 14.40% 35-45 25

Wrocław 5,997 -4.3% 13-15.5 11.75% 35-45 40

Gdańsk 6,398 -1.2% 13-15 11.20% 35-45 31

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

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

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

Feb10

Oct10

Jun11

Feb12

Oct12

Jun13

Feb14

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

Poland Today Business Review+ No. 028