Investing in Poland 2019

BNP PARIBAS REAL ESTATE GUIDE TO In collaboration with: INVESTING IN POLAND 2019

Real Estate for a changing world THE TALLEST BUILDING IN EUROPEAN UNION IS DO YOU KNOW... BUILT IN WARSAW The Varso Place complex, which is under construction in the Warsaw’s Central Business District, will be composed of three office buildings, the highest of which is going to reach 310 meters. The top 27.0M 34.0M 45.9M floors will offer restaurant 27.0M 34.0M 45.9M 40% and publicly available 40% panoramic terrace. 2014 2016 2018 Growth of warehouse 2014 2016 2018 stock in 2017 – 2018 OVER FIVE YEARS WHERE YOU CAN FIND AIR TRAFFIC IN POLAND ONE OF THE LARGEST GREW BY 69% WAREHOUSES IN EUROPE? In 2018 Polish 14 international Improving road infrastructure, good land airports recorded increases availability and competitive labour costs of activity and altogether handled have fuelled the boom in the logistics almost 46m passengers. market in Poland. Only in two years the The largest airport in Central Europe total warehouse stock grew by 40% and – Warsaw Chopin Airport served over reached 15.7 m2. Today the e-commerce 17.8m people what translates into 13% giant, Amazon, operates in Poland five growth y-o-y. modern, international fulfilment centres, with further locations in the pipeline.

€7.3bn %73% transacted in 2018 73 THE RECORD VOLUME OF NEARLY POLAND IS ONE OF THE TOP €7.3BN WAS TRANSACTED IN 2018 PERFORMERS IN TERMS OF Real estate total transaction volume reached WELL-BEING GROWTH. nearly €7.3bn in 2018, surpassing the record According to BCG’s Sustainable Economic of the previous year by 43%. For the last Development Assessment (SEDA) Poland is three years it has been observed steady one of the top performing country in terms intensifying interest from Asian investors, of well-being growth. Improvements of such as from Malaysia, China, Singapore and categories such as Income, Employment, South Korea. Infrastructure allow to move upwards in the well-being ranking over the last decade. Poland, starting at a much lower level, has surpassed Greece and almost caught up with Italy. 4 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 5 POLAND FOREWORD BY NUMBERS Poland POPULATION1 POLAND WILL CONTINUE INVESTMENT MARKET2 PROPERTY MARKET2 TO BE ON THE RIGHT TRACK 38.4m 2 The largest population 10.4m m OFFICE €7.3bn across the CEE markets, 2 NO. 1 CAPITAL 6th largest country in EU RETAIL DESTINATION IN CEE 14.6m m In terms of volumes 2 WAREHOUSE invested in real estate 15.7m m in Central Europe across Poland, which offer a wide scope of investment opportunities.

TRI-CITY Due to highly skilled and educated employees proficient in numerous languages, Poland has Olsztyn EU FUNDS SZCZECIN become the BPO/SSC hub in Europe, for banking, (2014-2020 BUDGET) Bydgoszcz financial and ITC sectors in particular. With Toruń Białystok MARCIN KLAMMER a steady growth in the number of BPO / SSC Gorzów Wlkp. Chief Executive Officer locations, Poland has been steadily fortifying its €75bn net POZNAŃ Central and Eastern Europe leading position in the region. The largest beneficiary WARSAW BNP Paribas Real Estate of EU funding For a couple of years the buoyant Polish ŁÓDŹ economy, e-commerce growth and globalization Zielona Góra Over the last five years the Polish economy of trading and manufacturing has been Radom grew exponentially by 22% and has enhanced 4 WROCŁAW boosting development of the industrial and INFLOW OF FDI Częstochowa Lublin its positive perception among investors. logistics segment. In addition, due to a steady Kielce Opole Although we will most probably see a lower improvement of the road infrastructure, new $12bn GDP growth in 2019 relative to 2018, there is logistics clusters have emerged, i.e. the western KATOWICE Average of $12bn over pocket of positives, such as steady growth of belt of Poland, along the Polish-German the last four years KRAKÓW Rzeszów employment and wages, inflow of new FDIs, border, which captures interest of numerous stable industrial production and retail sales e-commerce operators in particular. Bielsko-Biała growing at a fast pace, which allow us to believe GDP GROWTH5 Even the retail segment, albeit the ban on that prospects are very promising. Sunday trading has generated the uncertainty 2016 The Polish real estate sector enters 2019 with in this industry, performs well due to the 3.6% TOP BPO/SSC/R&D NUMBER OF CITIES ABOVE very strong fundamentals. In 2018 investors huge general growth of purchasing power and LOCATION3 400,000 INHABITANTS1 Warsaw, Kraków, Tri-City, deployed an all – time record volume of nearly household spending. 2017 4.9% Łódź, Wrocław, Poznań, €7.3 billion. In particular, a 60% surge in logistics The country with its strategic location connects Szczecin, Katowice* investments proved that investors have realized 1,236 centres 8 the West with the East and provides a wide 2018 employing 279,000 people the untapped potential of the Polish market 5.1% Cities with population spectrum of opportunities for businesses from and their appetite for products is expected 200-400k inhabitants diversified segments – from industrial and *conurbation to remain high. Importantly, it is not only 1. GUS 2017 / 2. BNP Paribas Real Estate H2 2017 / 7 logistics to PropTech solutions and innovations. 3. “Business Service Sector in Poland 2018” ABSL / Warsaw that attracts global investors, but 4. World Investment report / 5. National Bank of Poland, Cities with population there is a wide pool of other regional markets Poland is the place to invest. preliminary figure for 2018 16 100-200k inhabitants 6 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 7

POLAND OVERVIEW TOP 6 REASONS TO INVEST IN POLAND

1 2 3 THE LARGEST STRONG DOMESTIC POLYCENTRIC ECONOMY IN CEE MARKET STRUCTURE AND WELL Poland holds the leading Sizeable population coupled DEVELOPED TRANSPORT position in the CEE region with falling unemployment INFRASTRUCTURE 4 5 6 in terms of GDP. The size of and rising purchasing power While Warsaw still remains national economy has doubled which is strongly fuelled by the key business centre of the since Poland accessed EU in climbing wages and growth of country, Poland has many strong SKILLED ESTABLISHED TOP BPO/SSC/IT/R&D 2004. Over the last decade, social benefits has propelled regional clusters. Other major LABOUR POOL AT PROPERTY MARKET LOCATION IN EUROPE GDP per capita expressed in domestic demand. Purchasing metropolises such as Kraków, COMPETITIVE COST Although the modern Over the course of the last Purchasing Power Standards Power in Poland has grown by Wrocław, Tri-City, Katowice, The proportion of people property market in Poland six years the number of service climbed from 50% of EU 23%, compared to 2013. Poznań, Łódź, and even smaller with higher education level started to develop just 25 centres in Poland increased average to 70% in 2017*. regional cities such as Bydgoszcz, reached 27% in 2018. Backed years ago, today it embraces more than 3 times, and at the Toruń, Rzeszów and Bielsko-Biała by almost 400 universities, a wide selection of modern beginning of 2018 reached among others, have developed Poland offers a large pool of assets in all sectors. A variety 1,236, of which 748 were of business friendly environments skilled, talented and foreign of projects in all categories foreign origin. At the same and have attracted many speaking professionals for all offers plenty of opportunities time, the number of jobs in foreign investors. Improved business sectors. for both occupiers and the business services sector road infrastructure gives easy investors. Underpinned by tripled and achieved 278,000. connections to Western and solid occupier demand which employees. ABSL forecasts Eastern markets. translates into healthy vacancy that total employment in the levels, the market develops outsourcing sector in 2020 will at a stable rate. exceed 340,000 jobs.

*Eurostat 8 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 9

POLAND OVERVIEW POLAND BIG EIGHT

WARSAW

OVER THE PAST TWO DECADES WARSAW HAS EVOLVED RAPIDLY INTO A BUSTLING ECO- NOMIC CENTRE OF CENTRAL EUROPE REGION. Numerous banks and financial services, international business and management consultancies, Galeria Młociny by Echo Investment and EPP, a large shopping & leisure complex, will open in Warsaw in Q2 2019. insurance companies, media and advertising agencies, research institutes, law firms and retail sectors. It offers the largest stock of modern companies, among others, have been attracted by office, retail and warehouse / logistics space and the growing economic strength, friendly business provides a solid occupier base for all property environment and thriving property market of the a new bridge to the south of the city, all trigger 1,770,000 types. Last year Warsaw’s office stock exceeded Population1 (2,597,000*) city, strongly fuelling further economic develop- transformation of the capital and the entire region 5.4 million sq m, with further 740,000 sq m in the ment of Warsaw. and create new business locations. Passenger air construction phase and planned delivery spread transport, served by two airports, has been re- evenly over the next 36 months. Best ever take- 1.5% Improvements in the transport infrastructure, 2 cording two-digit growths for a couple of years. up volume recorded in 2018 coupled with dilut- Unemployment rate those already carried out and those still ongo- ed new supply have caused a steep drop in the ing, such as extension of ring roads and motor- The property market in Warsaw is the most vacancy rate in the office sector, which now stands ways, the second metro line and construction of established one across the CEE capitals in all at 5.5 pp less than at its peak two years ago. 230,300 Students3

Given the large consumer market, an unemploy- KEY FACTS ment rate at well below 2% and annual purchasing €1,454 OFFICE RETAIL LOGISTICS power of €13,535 per capita**, the modern retail (6,196 PLN) 4 Total modern stock (sq m) 5,461,700 1,986,400 3,927,000 sector in the Warsaw agglomeration flourishes. It Average gross salary Prime headline rents city centre (€/sq m/mth) 22,5 110–130 2.5–5.35 offers a variety of retail formats with a wide repre- Prime yield 4,75% 4,25% 6,25% sentation of international and national retail

Source: BNP Paribas Real Estate, as of Dec. 2018 *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, as of Nov. 2018 **GFK 2018 10 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 11

769,000 Population1 (1,045,000*) 2.4% Unemployment rate2 143,613 Students3 €1,240 (5,287 PLN) Average gross salary4 KRAKÓW

KRAKÓW BENEFITS FROM A PERFECT BLEND old of 1 million sq m, and ranks as the sec- OF HISTORICAL HERITAGE AND ATTRACTIVE- ond largest market in Poland, after Warsaw. NESS FOR INTERNATIONAL INVESTORS. Strong academic base, convenient road and air connec- Another advantage of the city and its region, tions to Western Europe and a booming office mar- contributing to its investment attractive- ket have all contributed to turning the city into one ness, is the presence of the Kraków Special of the leading destinations for business services in Economic Zone which includes companies such as the whole of Europe (ranked 2nd) and the 8th best Brembo, Valeo, Motorola, Assa Abloy, Shell and Man location globally**, specifically for modern tech- among others. Forest by HB Reavis, an office campus with 78 000 sq m of leasable space including open ground floors, a public square and green areas the size nology companies. The number of BPO, SSC, IT and of two football pitches at the intersection of the districts of Wola, Śródmieście and Żoliborz. R&D centres is increasing at a rapid pace, to 195 lo- In 2018 Kraków Balice International Airport, the cations in 2018 (according to a report by ABSL***). second most important airport in Poland, hit an- brands and entertainment operators. In 2019 the nearly 4 million sq m. Construction of new fast The office sector in Kraków, propelled by other record serving 6.7 million passengers, 16% market will grow even further with the delivery of roads to the east of the city is expected to create strong tenant demand, exceeded the thresh- more than in 2017. a large shopping & leisure facility in the northern new locations for the warehouse and logistics sec- area of the city (Galeria Młociny). tor which in the future may become a bridgehead KEY FACTS towards Eastern Europe. OFFICE RETAIL LOGISTICS Warsaw and its wider region, mostly in the south – west of the city, is also the key and largest lo- Total modern stock (sq m) 1,257,500 776,400 481,600 cation of warehouse and logistics space, reaching Prime headline rents city centre (€/sq m/mth) 15.0 45–60 3.0–4.0 Prime yield 6.00% 5.25% 6.50%

Source: BNP Paribas Real Estate, as of Dec. 2018 ** 2017 Tholons’ Top 100 Outsourcing Destinations *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 *** Association of Business Service Leaders in Poland 12 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 13 WROCŁAW TRI-CITY

WROCLAW WITH ITS PICTURESQUE HISTORI- businesses, thus attracting numerous investors. THE CITIES OF GDAŃSK, GDYNIA AND SOPOT Networks, DGC One, Ciklum and Luthansa Systems. CAL BUILDINGS, new architectural structures, The office sector in the city is to a great extent FORM A CONURBATION KNOWN AS THE TRI- Deepwater Container Terminal (DCT) in Gdańsk is modern office and retail properties, and natural propelled by high interest from operators of CITY. With a population of nearly 750,000 it is the the largest container hub in the Baltic Sea, and the beauty of its surroundings is one of the key regional BPO, SSC, IT and R&D centres and in mid-2018 largest market in the northern Poland. The local only facility of this type in the region having direct business and tourist destinations in Central Europe. exceeded the threshold of 1 million sq m, thus economy, still strongly based on industries such ocean connectivity with Asia. In May 2011 DCT becoming the third largest market in the country. as shipbuilding, petrochemical industries as well started handling the world’s largest container The city’s economic development is fuelled by the as food processing, has been gradually transform- ships such as Maersk Line’s E-type class vessels, convenient transport links to Western Europe, Wrocław along with its wider region are an im- ing into a market with a higher share of know- thus becoming the only such terminal located east proximity to the Czech Republic and Germany, as portant manufacturing centre, academic hub and how based sectors such as electronics, telecom- of the Danish Straits. DCT is very well connected well as its well-educated population. For longer key business services destination, most notably munication, IT engineering and financial services. to the rail and road network, thus making Tri- than a decade, the stable local authorities have for finance and information technology compa- City an important intermodal transportation hub. been investing in the development of the city’s nies such as Capgemini, Hewlett Packard, Google, The region, often called the Polish Silicon Val- infrastructure and enhancing the quality of its McKinsey, IBM, Volvo and Nokia Network. ley, enjoys strong presence of BPO/SSC and IT for- Furthermore, the tourism sector remains a key public space, as well as strongly cooperating with eign companies including: Thomson Reuters, GE, driver for the local economy due to the coastal Nordea, Sii, Sony, PwC, Intel, Bayer, ThyssenKrupp, location and its rich history. QLOC, Amazon Development Center, Intitek, Entel

KEY FACTS KEY FACTS OFFICE RETAIL LOGISTICS OFFICE RETAIL LOGISTICS Total modern stock (sq m) 1,054,200 862,100 1,690,100 Total modern stock (sq m) 775,000 960,400 484,000 Prime headline rents city centre (€/sq m/mth) 15.0 50–60 2.7–3.6 Prime headline rents city centre (€/sq m/mth) 15 45–55 2.9–3.5 Prime yield 6.00% 5.00% 6.25% Prime yield 7.00% 5.25% 6.50%

Source: BNP Paribas Real Estate, as of Dec. 2018 Source: BNP Paribas Real Estate, as of Dec. 2018 639,000 802,000 Population1 (800,000*) Population1 (1,043,000*) 1.8% 2.5% Unemployment rate2 Unemployment rate2 114,825 81,338 Students3 Students3 €1,210 €1,337 (5,156 PLN) (5,697 PLN) 4 4 *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 Average gross salary *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 Average gross salary 14 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 15

538,000 688,000 Population1 (833,000*) Population1 (964,000*) 1.2% 5.5% Unemployment rate2 Unemployment rate2 110,346 72,019 Students3 Students3 €1,268 €1,080 (5,406 PLN) (4,604 PLN) Average gross salary4 ŁÓDŹ Average gross salary4

ŁÓDŹ IS AN IMPORTANT ACADEMIC CENTRE city attracts investors from banking and finance POZNAŃ AND INTENSIVELY DEVELOPING CITY SUP- and new technology sectors such as Fujitsu Tech- PORTED BY STRONG INDUSTRIAL TRADI- nology Solutions, Cybercom, Veolia, Infosys and TIONS. Its strategic geographic location close ABB, which boosts the image of Łódź as a modern POZNAŃ BENEFITS FROM ITS LOCATION CLOSE SmithKline, Roche, Bridgestone and Mars, val- to the major motorway junction (A2 with A1), and vibrant municipality. TO THE GERMAN BORDER AND CONVENIENT ue the positive business aspects of Poznań and only 130 km from Warsaw, coupled with strong TRANSPORT LINKS TO WESTERN EUROPE. consequently choose the city for location of efforts of the local authorities aimed at at- Strongly supported by the local authorities, the The city along with its wider region are known their BPO/SSC and R&D modern service centres. tracting investors, as well as the large supply central area of the city is undergoing an urban as an automotive cluster with companies such of well-qualified staff, have strengthened the renewal process aimed at reinventing the heart as Volkswagen, MAN, Solaris, Delphi Automo- In addition to the well-developed retail and city’s profile as an attractive business location. of Łódź as a contemporary urban cluster called tive Systems, Honda and Bridgestone / Firestone. office sectors, the warehouse and logistics seg- “Nowe Centrum Łodzi” with modern office, Moreover, the Poznań International Fair hosts ment in the region of Poznań has been stead- Various types of incentives are available for in- residential, commercial and leisure facilities. numerous world renowned exhibitions, which ily fortifying its market position, boosted by vestors, especially for those willing to set up busi- Large investment projects implemented here subsequently spur the hotel and tourism industry. strong demand from the automotive sector and ness in the Łódź Special Economic Zone. Due to included the opening of the new Łódź Fabryczna Numerous companies, such as MAN, Glaxo- e-commerce operators. the influx of foreign investment, the region has underground train station and EC1, the Centre for become a major destination for household-appli- Culture, Art, Education and Science. Furthermore, ance companies, with headquarters of Whirlpool, new office and residential developments are KEY FACTS BSH and Indesit situated here. Additionally, the in progress. OFFICE RETAIL LOGISTICS Total modern stock (sq m) 479,100 888,300 2,030,200 KEY FACTS OFFICE RETAIL LOGISTICS Prime headline rents city centre (€/sq m/mth) 15 50–60 2.8–3.5 Total modern stock (sq m) 468,900 696,900 2,492,400 Prime yield 7.00% 5.50% 6.25% Prime headline rents city centre (€/sq m/mth) 14.0 45–55 2.5–3.7

Source: BNP Paribas Real Estate, as of Dec. 2018 Prime yield 7.00% 5.50% 6.25% *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 Source: BNP Paribas Real Estate, as of Dec. 2018 *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 16 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 17

tor, has been supporting growth of innovative companies, ICT start-ups and SMEs since 2000. KATOWICE SZCZECIN The city offers a favourable blend of skilled professionals, affordable labour costs and KATOWICE IS THE ADMINISTRATIVE, ECO- The economy of the region, strongly led by coal OWING TO ITS PERFECT LOCATION CLOSE well-developed infrastructure, thus attract- NOMIC AND CULTURAL HEART OF THE UP- mining and heavy industry in the past, has been TO THE GERMAN BORDER and good transport ing numerous service centres, ICT, R&D and PER SILESIA REGION WHICH IS THE SECOND transforming into a busy destination for compa- links with Western Europe and Scandinavia, biotechnology companies such as DGS Business LARGEST URBAN ZONE IN POLAND, inhabited nies from the high technology sector (IBM, Rock- Szczecin has gained recognition as a business Services, Tieto Poland, Arvato Polska, BrightOne, by nearly 2.2 million residents, thus forming a well Automation and Yamazaki Mazak) and BPO / destination of large potential and has subse- Consileon, Diebold Nixdorf, Coloplast Business large consumer market and providing a wide SSC service centres (e.g. Capgemini, Ericsson, Ac- quently attracted substantial foreign investment. Centre, READ-GENE, Avid Technology and Aply. pool of qualified professionals. The area is com- centure, Arvato Bertelsmann and Knauf).

posed of a number of cities and towns, tightly Its convenient location and coastal land- The R&D centres to be found in the region, connected by extensive transport infrastructure Given the region’s strategic location and effi- scape of outstanding natural beauty are strong including the ICT cluster in Western Pomerania and business relations. Due to its location at the cient road network, it is the second largest, after points which every year attract visitors from and the “Green Chemistry” cluster, deal with im- junction of main transport routes. i.e. the A4 and Warsaw I & II, industrial hub in the country, and at Germany and Scandinavia, thus boosting the plementation and support of innovative activities. A1 motorways, the region is conveniently acces- the same time one of the major Central European local economy. warehouse & logistics clusters. The region has sible from most parts of Poland and Western and The warehouse and logistics markets is buoyant attracted huge Amazon distribution centres and is The local authorities support new technol- Southern Europe. as a result of e-commerce growth, and has been a highly popular location for operators from the ogy sectors, develop the region’s infrastruc- becoming a hot location for e-commerce giants, such automotive sector. ture and encourage cooperation between the as Amazon and Zalando, which operate their distri- business sector and academic institutions. bution centres there to serve online customers from KEY FACTS Technopark Pomerania, a business incuba- OFFICE RETAIL LOGISTICS European markets. Total modern stock (sq m) 519,300 1,523,600 2,625,200 KEY FACTS Prime headline rents city centre (€/sq m/mth) 14,50 50–60 2.7–3.4 OFFICE RETAIL LOGISTICS Prime yield 7.50% 5.50% 6.50% Total modern stock (sq m) 159,400 393,300 618,800

Source: BNP Paribas Real Estate, as of Dec. 2018 Prime headline rents city centre (€/sq m/mth) 13.5 40–50 3.0–3.8 Prime yield 8.00% 6.00% 6.50%

Source: BNP Paribas Real Estate, as of Dec. 2018 295,000 403,000 Population1 (2.13m*) Population1 (558,000*) 1.6% 2,5% Unemployment rate2 Unemployment rate2 94,251 35,043 Students3 Students3 €1,331 €1,176 (5,672 PLN) (5,012 PLN) 4 Average gross salary *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 Average gross salary4 *Agglomeration, 1. GUS, as of June 2018, 2. GUS, as of Dec. 2018, 3. GUS, 2017, 4. GUS, 2018 18 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 19

POLAND OVERVIEW BRANDS YOU KNOW I N L O C AT I O N S Billennium Gino Rossi Citibank YOU MAY NEVER Transcom WorldWide TRI-CITY Michelin HAVE HEARD OF Ikea SŁUPSK BYTÓW Drutex TCZEW POGORZELICA International Paper Ikea British-American Tobacco Ikea Asseco SZCZECIN GOLENIÓW Atos RESKO Cybercom KWIDZYŃ AUGUSTÓW Comarch Flex Amazon Philips Lighting iQor OLSZTYN Intive KOŁBASKOWO LUBAWA Ikea Ikea STEPNICA Quad Graphics Nokia CERI International Teleplan LG Electronics Transcom WorldWide GARDNO WIELBARK Keylite Bridgestone PESA SoftServe PIŁA Ikea OLSZTYNEK Dobroplast STARGARD Zalando MŁAWA Zalando ZAMBRÓW Samsung Electronics BYDGOSZCZ BIAŁYSTOK Poland Manufacturing TORUŃ Solvay Advanced Silicas OSTRÓW Amica Ikea WRONKI PRZASNYSZ MAZOWIECKA Atos WŁOCŁAWEK Solaris Bus & Coach OpusCapita ABB BOLECHOWO PKN Orlen ORLA Grant Thornton PŁOCK Qumak Kross Ikea Manpower ADB Mondi ŚWIECICE WARSAW Forte GlobalLogic Kruger POZNAŃ WRZEŚNIA ZIELONA GÓRA MARS ZBĄSZYNEK Pratt & Whitney SOCHACZEW Volkswagen Ikea ŁÓDŹ Asseco ORANGE Iron Mountain POLKOWICE KALISZ Sii KONSTANTYNÓW Kantar Millward Brown Convergys International CCC Xeos Wielton LG Chem Wrocław ŁÓDZKI intive Heesung Electronics Phlexglobal Indesit RADOM Dong Yang ŚRODA ŚLĄSKA WIELUŃ Comarch LUBLIN WROCŁAW RADOMSKO ZF TRW KOBIERZYCE Comarch Asseco Borgers Electrolux ABB Deloitte CE Business Services ZŁOTORYJA OŁAWA KIELCE Pilkington JAWOR CZĘSTOCHOWA Black Red White G2A OPOLE Nestle Mercedes-Benz KŁODZKO Call Center Inter Galactica SANDOMIERZ Pratt & Whitney UJAZD Transition Technologies STALOWA WOLA BIŁGORAJ Unicall Atos KATOWICE Valeo Hispano Suiza BorgWarner KRAKÓW MTU Aero Engines Capgemini Ikea Future Processing TYCHY SĘDZISZÓW Soft System ista Shared Services CHRZANÓW UTC Aerospace Systems IFA Powertrain NIEPOŁOMICE RZESZÓW opta data BIELSKO-BIAŁA WADOWICE ROPCZYCE Comarch PwC Service NOWY Delivery Center Fiat Chrysler Automobiles Sanok Rubber Company MAN Trucks SĄCZ SANOK Comarch Aero Gearbox PSA Manufacturing International Fiat Chrysler Automobiles Maspex Fakro Newag 20 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 21

to the 2017 result, and comprised of the pur- remained very strong in 2018. A volume of over chase of e.g. High5ive and two buildings within €1.9 billion was traded representing a new re- Quattro Business Park in Kraków, Green2Day, West cord-breaking result in this sector and an increase INVESTMENT MARKET Link and Sagittarius Business House in Wrocław, by over 60% on 2017. The overall volume was OVERVIEW Silesia Business Park C&D in Katowice and Nowa strongly fuelled by portfolio transactions such as Fabryczna in Łódź. two portfolios of over 1.1 million sq m purchased from Hillwood and Prologis by Mapletree for Retail attracted 34% of the overall investment a total of €581 million and industrial assets bought value in 2018. A vast portion of the total retail by Blackstone from Goodman and Hines for a total volume of €2.5 billion was created by one port- of €325 million. folio deal – 28 retail assets (M1 shopping centres and stand-alone hypermarket and DIY retail Traditionally, the Polish property market has warehouses) sold by Apollo Rida / Axa / Ares to a succeeded in attracting capital from the US, the nearly €7.3bn +41% 21 24 consortium formed by Redefine, Pimco and Oak- UK and Germany. For the last three years, we transacted in 2018 y-o-y growth megadeals portfolio transactions Tree for €1 billion. A part of this portfolio was then have observed a steadily intensifying interest (over €100 milion each) resold to EPP. The largest transaction on a single from Asian investors, i.e. from Malaysia, China, asset was the purchase of Galeria Katowicka by Singapore and South Korea. The Polish real estate investment sector had a record-breaking Employees Provident Fund of Malaysia for €300 year in 2018. Wide availability of product coupled with high million. A considerable number of deals on small Prime yields across all sectors and asset classes investor demand resulted in the unprecedented level of convenience retail schemes were closed as well. were under pressure over 2018. Yields for best- nearly €7.3 billion, the volume surpassing the previous year’s in-class dominant shopping centres have com- outcome by 40%. The industrial and logistics sector in Poland has pressed substantially and today vary from 4.25% boomed for the last three years, and thereby in Warsaw to approx. 5.00% in other major mar- investor appetite for products in this segment kets. In the office sector, prime yields span from ffices were the top performing sector in assets, from top class properties to secondary around 4.75% in Warsaw to 6%–7% in major re- 2018, with €2.75 billion invested, which ac- class older buildings with substantial upside ANNUAL SECTOR SPLIT OF INVESTMENT gional markets. In the industrial sector, outstand- counted for 38% of total turnover. Warsaw potential. Major transactions in Warsaw includ- VOLUMES, IN % O ing prime and best performing assets with long- raised nearly 63% of the office investment volume. ed Warsaw Spire A (a share of 50% of shares), Office Retail Warehouse term lease contracts with e-commerce operators Regional office markets, however, have gained Warsaw Spire C, Gdański Business Centre C&D, Other are traded at around 5.25%, while in the case of investor appetite as they offer more attractive Generation X, Cedet, Małachowski Square, Skylight 2% 0% 7% 2% 1% 1% prime industrial properties of other type prime yields and wider selection of available product. & Lumen. The volume of approx. €1 billion 100% yields oscillate around 6.25%–6.50%. 17% 14% 12%

Purchasers were interested in a wide spectrum of traded on the regional markets was similar 17% 23% 26%

80% 23% ANNUAL PRIME YIELDS PER SECTOR, IN % 10% ANNUAL VOLUME OF INVESTMENT TRANSACTIONS, IN € M Office Retail Warehouse 18% 43% 55% € 7,000.00 60% 43% 10.00% 38%

€ 6,000.00 34% 9.00% 37% € 5,000.00 40% 8.00% € 4,000.00 7.00%

€ 3,000.00 57% 6.00% 20% 39% € 2,000.00 40% 38% 37% 34% 33% 5.00% € 1,000.00 4.00% € 0.00 0% 2008 2010 2004 2005 2006 2007 2009 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 2011 2012 22 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 23

over the next three years – are concerned, in 2017, and to 8.4% on average in the regional there are 740,000 sq m in Warsaw and 930,000 locations (from approx. 10% recorded a year ago). sq m in the eight regional markets, of which In the course of 2018 an uptick in prime rents OFFICE MARKET 50% will be delivered in the two leading for best-in-class assets in Warsaw City Centre OVERVIEW regional markets. cluster has been registered, and today they oscillate between €258 and €270/sq m/annum. As In Warsaw tenant demand is strongly fuelled a consequence of dropping vacancy rate coupled by professional services, followed by IT with limited new supply, the market bounced products & services, banking & insurance & back to the tenant-landlord equilibrium. investment and manufacturing sectors, while Prime headline rents in regional markets vary in the regional markets it is principally fostered between €180/sq m/annum in most developed by sustainable development of the BPO/SSC/ markets (such as Kraków, Wrocław and Tri-City) ICT sectors. According to ABSL, the number of 2 and €156–168/ sq m/annum in smaller regions. 10.37m m €21.5–22.5 4.75% €6.3bn service centres in Poland reached 1,236 in 2018, modern office stock prime headline rent prime office yield office investment in 15% more than in 2017. In the course of 2018, due to the improving oc- in Poland in Warsaw the last 3 years cupancy rate, the gap between headline and Diluted new supply coupled with buoyant occupi- effective rents has continued to close, with er activity have led to a steep drop in the vacancy In 2018 the office sector in Poland continued to show strong a further contribution in the form of a substan- rate both in Warsaw and the regional markets. momentum in Warsaw as well as smaller regional markets1. tial increase of construction and fit-out costs At the end of 2018 the vacancy rate in Warsaw recorded in the last two years. dropped to 8.7%, now standing at 3 pp less than enant demand, spurred by growing em- with highest net take-up results, outpaced only ployment, extensions of occupied space by London, Paris, Munich, Berlin and Frankfurt. T and relocations to better quality premises, remained unflagging. Overall gross take-up in At the end of 2018 the office market in Poland Poland exceeded 1.5 million sq m, of which net reached nearly 10.4 million sq m, of which 53% MODERN OFFICE STOCK IN WARSAW take-up constituted approx. 73%. In Warsaw is located in Warsaw. The second largest mar- AND REGIONAL MARKETS gross take-up reached 858,000 sq m, up 30% ket in the country is Kraków (above 1.26 million on the 10-year average and was the best ever sq m), followed by Wrocław with the 1 million sq 2.0% 1.5% total recorded in the city. More interestingly, m threshold exceeded in 2018. As far as schemes 4.5% Warsaw ranked among European office markets under construction – with delivery scheduled 4.5% 5.0%

VACANCY RATE (AT THE END OF 2018) WARSAW NET TAKE-UP (SQ M) 7.5% 53.0% 700,000 8.3% 8.7% 600,000 10.0% 500,000 400,000 12.0% 300,000 200,000 100,000 Warsaw Kraków Wrocław Tri-City Katowice 0 Poznań Łódź Lublin Szczecin Regions Warsaw 2016 2017 2018 Source: BNP Paribas Real Estate Source: BNP Paribas Real Estate Source: BNP Paribas Real Estate Browary Warszawskie by Echo Investment, a multifunctional destination project on a post-industrial area in the center of Warsaw. 1. Kraków, Wrocław, Tri-City, Katowice, Poznań, Łódź, Szczecin and Lublin 24 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 25

RETAIL FORMATS STOCK BY CITY SIZE

Outlet Centres RETAIL MARKET 2% 50–100k Below 50k OVERVIEW Retail Parks 8% 12% 7% Retail Warehousing 17% 15% 100–200k

73% 200–400k 55% 12% 14.6m m2 530 4.25% over €6.2bn modern retail stock shopping centres, prime retail yield retail investment outlet centres and volume in the last Traditional SC retail parks 3 years Major Agglomerations

The retail industry in Poland benefits from solid glomerations to small strip malls in towns with new compact store in Warsaw’s Blue City, while economic fundamentals. approx. 15–20 thousand of residents. Outlet Primark will enter the stage in 2019. centres operate in major big cities as well as in he significant increase in purchasing power country there is a plethora of locations – from smaller markets with a population of 200–400 Prime shopping centres benefit strongly from (+23% over the last five years), steadily grow- eight key cities to around 60 small towns with thousand of inhabitants. Retail parks account their leading market position and keep prime Ting retail sales (+22% over the last three years), 15–20 thousand of residents. The modern retail for approx. 8% of the country’s retail space and rents stable at €110–130 / sq m / month unemployment rate at its historically low, raising sector with over 14.6 million sq m of GLA across vary from large Ikea-driven complexes to small in Warsaw and between €45 and €60 in salaries and the positive attitude of consumers all all formats offers a wide range of opportunities neighbourhood destinations in small markets. other major agglomerations. Rental conditions underpin good performance of the retail sector. for brands of various selection, profile and posi- in lower class schemes have been tighten- The retail sector in Poland has reached a stage Poland provides a wide spectrum of opportunities tioning. Shopping centres vary from most mod- ing since customers’ shift towards conveni- of maturity, hence the pace of growth of the for all participants of the retail sector. Across the ern leisure-driven shopping malls in large ag- ence retailing, predominantly in neighbourhood market has slowed down considerably. Subdued discount stores. new supply of 2017–2018 and limited pipeline PRIME SHOPPING CENTRE RENTS (EUR/SQ M/MONTH) indicate an inescapable upheaval in traditional Vacancy rate in shopping centres located Warsaw retailing. Remodelling and refurbishment of on the main markets has been oscillating older schemes, usually aimed at inclusion of around a healthy 3–4% in recent years. Although Silesia new retail concepts as well as F&B and leisure the e-commerce has been steadily growing in Tri-City facilities, have become one of the major triggers value, its negative impact on stationary retail- Wrocław of the market development. ing is eroded by the stellar growth in private Poznań consumption in general. Despite the ban on In 2018 more than 30 new brands and re- Sunday trading effective from March 2018, Kraków tail concepts entered Poland, e.g. Bebe, Kocca, the results do not yet reflect major inflictions Łódź +21% Hunkemoller, Hummel, Fit/One and Orangethe- on performance of shopping centres. Szczecin Retail Sales Growth, ory Fitness. Discount chains such as TEDI, Dealz Cumulated 2016-20181 and Action are growing quickly. IKEA opened its 30.00 € 50.00 € 70.00 € 90.00 € 110.00€ 130.00€ 150.00€

Source: BNP Paribas Real Estate 1. Central Statistical Office 26 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 27

Over the last 3 years a growing popularity of VACANCY RATE Built-to-Suit (BTS) schemes has been observed 16% in Poland. Investors value building parameters 14% INDUSTRIAL MARKET tailored to their specific needs. The best exam- 12% OVERVIEW ple are the giants operating in the e-commerce 10% sector, e.g. Amazon and Zalando, which locate 8% 5.1% their modern, international distribution centres 6% in Poland. These schemes are among the largest 4% warehouse buildings both in Europe and globally. 2% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2 2 At the end of 2018 further 1.9 million sq m Source: BNP Paribas Real Estate 15.7m m 40% 1.9m m 5.1% were under construction. The high development the total modern growth in 2017–2018 under construction vacancy rate activity is particularly noticeable in western warehouse and and southern parts of Poland along main high DISTRIBUTION OF STOCK logistics stock speed roads. These locations create favourable conditions for companies interested in operat- For the last three years, strongly boosted by the buoyant Polish economy, ing not only in Poland but also wishing to open 18% e-commerce growth and globalization of trading and manufacturing, 25% distribution centres covering countries from the industrial and logistics sector in Poland has boomed. the entire Central Europe Region (Denmark, Germany, the Czech Republic, Austria, Hungary). 11% n the last two years alone the total stock ofm sqmMODERN WAREHOUSE STOCK, IN M SQ M modern warehouse market grew impres- In the last months of 2018 an uptick in rental Isively by 40% and at the end of Decem- 16 15.7 levels was observed, which reflects the limited 17% ber 2018 reached nearly 15.7 million sq m. 15 availability of warehouse space and an increase 13% in construction costs. 14 13.5 At the same time the vacancy rate has remained 16% 13 very low, recording a bare 5.1% at the end of 2018. 12 Such a low availability of free warehouse space 11.2 NET TAKE-UP, IN MILLION SQ M Warsaw Upper Silesia 11 results from strong tenant demand. The total vol- Central Poland Poznań 10 8 ume of net take-up in Poland reached the record 6.7 Lower Silesia Other Regional Markets 2016 2017 2018 6 level of 3.1 million sq m in 2018. It is the fourth 4 3.7 Source: BNP Paribas Real Estate 4 3.1 2.8 greatest result in the European Union, surpassed 2 1.6 only by the largest economies: Germany, France 0 Germany France UK Poland Netherlands Spain and the UK. Source: BNP Paribas Real Estate

Central Competitive High Schengen Developing Convenient ABILITY TO COVER MARKETS IN WHY location labour availability area transport road WESTERN EUROPE WITH COSTS OF POLAND? costs of land infrastructure accessibility CENTRAL AND EASTERN EUROPE 28 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 29

growth in Poland. How much weaker, however? however, some risks materializing, while some It is hard to give a precise figure. The difficulty fading off, the scale of the slowdown in Poland in predicting the pace of economic growth, but in 2019 is likely to be moderate. GDP growth POLAND: perhaps more importantly, the story behind one should remain within a 3–4% range, presum- RAINY CLOUDS OR SUNSHINE? particular GDP number stems from an unusu- ably with a stronger first and weaker second ally large set of plausible risk scenarios. Those half of the year. So while we will probably may, or may not, materialize, but their out- see more rainy clouds in the economy than in come would produce alternative scenarios for 2018, there should still be a lot of sunshine. the global economy, for Europe and for Poland. The important issue, however, is not the weath- er but the climate. Cyclical swings are natural TO NAME JUST A FEW OF THOSE SCENARIOS: phenomena in market economies, but their • will we see a fully-fledged trade war (the PRZEMEK GDAŃSKI long-term prospects, which matter more, are President of the US vs. China; the US vs. the Rest of the shaped by the climate for doing and innovating Management Board ECONOMIC OVERVIEW World), or not; business. Here the challenges for Poland are, Bank BNP Paribas, Poland AND OUTLOOK • will the UK leave the EU in an orderly without doubt, bigger. They include the demo- way (with a transition deal), or not, graphic change and an ageing society with ob- or will there be no Brexit at all; vious negative implications for public finances • will social tensions lead to major loosen- and the labour market. Businesses in Poland, he past year brought a pleasant surprise. abovementioned factors, namely exports and ing of fiscal discipline in France, or not; similarly to their competitors from abroad, have Poland’s GDP rose in 2018 by approx. 5%, corporate investments in particular. Global • will the fiscal stance in France affect to increasingly invest into new, less labour- T marking the fastest expansion since 2011. trade growth has been slowing already since policies in other Eurozone countries, intensive production technology to retain their Strong growth underpinned the labour market. last spring, curtailing new investment plans for including Italy; competitive edge. Energy, the prices of which The unemployment rate fell to an all-time low businesses worldwide. Moreover, the extremely • will populist parties emerge as win- soared last year, is another hot topic. How to and wages have been accelerating swiftly. As a accommodative monetary stance of the world’s ners of the European Parliament meet energy needs of an expanding economy, result, household spending continued to grow main central banks has been gradually tightened election in May, and could the results of this how to further improve the country’s energy at a healthy pace, and so did consumer and with interest rate hikes in the US and the wind- election undermine the current European efficiency and, at the same time, make energy mortgage loans. But, as much as overall GDP ing down of the ECB’s QE programme. However, consensus… production more environment-friendly are and consumption numbers were excellent news, even the very slow and gradual and carefully an- all questions which have to be addressed signs of an approaching slowdown have started nounced normalisation of monetary policies was The main near-term threats to the Polish econ- now to sustain Poland’s growth potential to emerge. Leading indicators, particularly on in- sufficient to push up risk premiums across coun- omy are foreign as opposed to home-made. in a long-run perspective. dustrial confidence, have fallen – some of them tries and asset classes, making funding invest- This has good reasons. During the post-crisis quite sharply, as of late. Moreover, the soft patch ments – and not only on financial markets, but period Poland managed to reduce or even re- in business surveys has been foreshadowed by also in real economy sectors, more expensive. move several macroeconomic imbalances, cyclical components of GDP, such as exports and such as fiscal and current account deficits, as corporate investments, which were relatively A less supportive external environment, includ- well as public debt and inflation, which were weak already for most of 2018. Their weak- ing rising uncertainty as to global growth pros- seen as actual or potential domestic risks few ness could explain why credit growth for Pol- pects, was the main reason behind weaker num- years ago. This makes Poland more resilient ish non-financial enterprises was rather mut- bers on Polish exports – which now account for to potential shocks from abroad, but still not ed, despite the stellar headline GDP numbers. more than 50% of the country’s GDP, and broadly fully immune to certain contagion from them. stagnant corporate investments last year. A In market economies GDP moves in cycles. The challenging external backdrop also sets the out- Using extreme risk scenarios as working as- repetitive patterns are usually driven by the look for 2019. We are likely to see weaker GDP sumptions makes little sense. Considering,

30 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 31 KEY LEGAL LAND REGISTER: IN POLAND, ALL INFORMATION EACH FILE IN THE LAND AND TERMS CONCERNING THE LEGAL STATUS MORTGAGE REGISTER OF REAL ESTATE, is divided into four parts concerning different can be found in the Land and Mortgage types of information on real estate. Register, which are publicly available online a. The first part holds geodetic and address or in court offices. data related to the real estate. b. In the second section, we can check information about property owners and perpetual EACH PROPERTY, usufructuaries. c. The third section contains data on must have its own file in the Land encumbrances on the real estate, such as and Mortgage Register. PERPETUAL USUFRUCT easements of land (i.e. who can pass through the plot), as well as pre-emption rights; FREEHOLD TITLE • The right of perpetual usufruct is an indirect d. The fourth part contains information on • Full legal and unlimited title to the land right that falls between ownership and other THIS IS OF KEY IMPORTANCE IN any mortgages established on the property. and buildings developed on it. limited property rights. THE PROCESS OF REAL ESTATE It should be carefully analysed when • A sale agreement must be drawn up as Perpetual usufruct may be established only ACQUISITION: purchasing real estate. a notarial deed. A real estate sale agreement on lands owned by the State or local a. The Land and Mortgage Register concluded in any other form is null and void. government units. provides information as to whether • Transfer of ownership must be registered • Unlike ownership, perpetual usufruct allows the entity from which we purchase in the Land and Mortgage Register, which for the use of real estate within the limits the property is in fact its owner. is maintained by the courts. defined by the terms of the agreement or b. The Land and Mortgage Register decision issued by the State. contains information as to whether a given • A perpetual usufructuary does not hold property is encumbered with third party ownership rights to buildings erected on LEASEHOLD TITLE rights or mortgages. the land. Land is handed over for perpetual • Allows for short- and long-term use of the usufruct for a period of 99 years; however, land/buildings/premises, it is permissible to conclude an agreement • Form of tenancy agreement or lease for a shorter period of at least 40 years. agreement exist. The perpetual usufructuary is obliged to pay an annual fee. • An agreement for perpetual usufruct, THE SYSTEM OF LAND similarly to an agreement for the sale of AND MORTGAGE REGISTERS, real estate, must be concluded in the form means that purchasing real estate in Poland of a notarial deed. is safe and transparent for buyers. In this way, • For real estate intended for housing purposes, the potential purchaser is able to thoroughly as of 1 January 2019, the right of perpetual examine the property before its acquisition usufruct has been transformed into the right and assess whether the transaction involves of ownership. unnecessary risk. 32 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 33

COMPARISON OF LAND AND MORTGAGE REGISTERS

POLAND GERMANY FRANCE

NAME The Polish Land and Mortgage Register (Rejestr SIMILAR TO THE POLISH LMR SYSTEM SIMILAR TO THE POLISH LMR SYSTEM Ksiąg Wieczystych) (“LMR”) is a public register that The German land register (Grundbuch) is a public regi- The French land register (Fichier Immobilier) enjoys good faith. ster that enjoys good faith. is a public register that enjoys good faith.

SCOPE OF INFORMATION On the basis of the LMR and a land register/cada- SIMILAR TO THE POLISH LMR SYSTEM SIMILAR TO THE POLISH LMR SYSTEM stral map (maintained by the local authorities), a On the basis of the land register and a cadastral map On the basis of the land register and the cadastral buyer can confirm the seller’s ownership of a certain (maintained by the local authorities), a buyer can map, a buyer can confirm the seller’s ownership of piece of land as well as discover the existence of en- confirm the seller’s ownership of a certain piece of land the land and check if there are any encumbrances cumbrances on the land (e.g. mortgages (compulso- as well as find out if there are any encumbrances on the on the land (e. g. mortgages, land charges, ry or contractual), land charges, pre-emption rights, land (e.g. mortgages (compulsory or contractual), land pre-emption rights, rights of way, etc.). rights of way, etc.). charges, pre-emption rights, rights of way, etc.).

BENEFITS To benefit from a right registered in the LMR, the SIMILAR TO THE POLISH LMR SYSTEM SIMILAR TO THE POLISH LMR SYSTEM buyer has to prove that he acted with due diligence Because the land register enjoys good faith, a buyer will The LMR not only ensures that the plot of land or and good faith in the process of the transaction. become the owner of the property even if it transpires right has been transferred to the seller and has not that the seller is not the correct owner, as long as the already been transferred to another party, but also, seller appears to be the owner in the land register, an in the event of purchase by two different persons, objection to the correctness has not been entered, and resolves the conflict by determining which of the the inaccuracy of the land register is not known to the two will be able to assert their title against the purchaser. seller, as a third party.

ACCESS TO THE LMR ARCHIVES Access to the LMR archives is restricted. To do so, RESTRICTED ACCESS FREE ACCESS the relevant person must first contact the LMR court The land register may be accessed only by persons Access to the LMR is not limited and can be made office in the district in which the property is located who can show a legitimate interest in consulting it (as by any person which completes a specific form. and show a power of attorney from the owner or specified above). To do so, they must first contact the perpetual usufructuary or have a legitimate interest land registry court in the district in which the property in consulting it. is located. Those persons may also apply for excerpts from the land register.

ONLINE VERSION AVAILABLE AVAILABLE, SUBJECT TO NOTES PROVIDED BELOW NOT AVAILABLE In 2010 the Polish authorities enabled free and uni- From the mid-1990s onwards, the paper version of the The specific form is sent by mail to the competent versal access to allow the public to review the LMR German land register has been gradually replaced by land register. in electronic form. an electronic version. Most registers and documents are However in 2019, notaries will have access to the available online today. online version of the LMR. 34 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 35

SHARE DEAL ASSET DEAL

SPV SPV

Lease agreement of the premises

CLAT 1% VAT 23% or CLAT 2%

he subject of the transaction is the sale n an asset deal, each asset is transferred of shares in the share capital of an SPV, as a single component, in particular a real T as opposed to its assets, which remain I property. These assets do not constitute an part of the SPV. The SPV remains the party to organised business that could immediately be all previously executed agreements, including operated by the buyer, and the buyer will not lease agreements, and therefore a separate automatically be a party to previously executed assignment of such agreements is not necessary. agreements. Such agreements should be either In fact, there is no need for an investor assigned or terminated; however, the buyer of to obtain new concessions, licences or leased property replaces the seller (current administrative permits. landlord) and becomes the new landlord by vir- tue of law. In general, the buyer becomes the shareholder of an SPV from the moment the final sale agree- The buyer is not liable for the seller’s obliga- ment is concluded; however, the parties may tions, unless they are secured by a mortgage. specify a different moment for the transfer The buyer’s liability is limited to the value of the of shares. mortgage (if the value of the mortgage is lower than the property) or to the value of the prop- The share purchase agreement should be erty (if the value of the property is lower than executed in writing with signatures notarised by the value of the mortgage). a notary public. This may be subject to some corporate consents. Under both an asset deal and sale of an enterprise or part thereof as a going concern, if a real property is held by an enterprise under the right of ownership, its acquisition is effective as of the date of execution of the sale agreement. If real property is held by the en- Kraków 36 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 37

terprise under the right of perpetual usufruct, a business activity. An enterprise consists of (the its acquisition is effective upon the buyer’s list is not exclusive): the name of the enterprise, entry into the land and mortgage register. ownership of immovable or movable property, rights under lease agreements and tenancy Sale of an enterprise which consists of real agreements, receivables (for example receiva- property as well as sale of real estate should be bles arising from lease agreements), cash, li- executed in the form of a notarial deed in order cences, permits, patents and business secrets. to be effective. Under Polish law, a notarial deed may only be prepared in Polish. Parties may not freely determine a transaction as a sale of an enterprise. If all the components Sale of an enterprise as well as sale of real subject to the deal constitute an operating estate is subject to corporate consents that business, the relevant provisions of the Polish should be obtained prior to the transaction. Civil Code regarding the transfer of an enterprise These types of acquisition may also be subject to will apply. a pre-emption right, which allows the acquisition to be conducted only after a relevant au- The agreement based on which an enterprise is thority fails to exercise its pre-emption right sold may only transfer assets. Obligations re- within a specified period. The pre-emption right main with the seller, unless the third party gives concerns real properties such as agricultural or consent to their assignment onto the buyer. This forest land (as an example). Also, if a transaction rule does not apply when parties to a specific involves a foreign company as the purchaser, agreement have already agreed on the assign- consent from the minister competent for admin- ment, directly in the wording of the contract. istrative affairs may be required. The buyer of an enterprise is liable jointly and severally with the seller for the seller’s obli- PURCHASE OF gations related to the enterprise (unless the buyer acting with due diligence was not aware AN ENTERPRISE of such obligations). In practice, the diligence of the buyer may be proven by the fact of the performance of all necessary investigations SPV (financial, commercial, legal etc.). The buyer’s liability is limited to the value of the acquired enterprise according to its condition at the time of the acquisition, and according to the prices Lease agreement applicable at the time of satisfying the creditor. of the premises The parties cannot contractually exclude the joint and several liability of the seller and the buyer with effect towards third parties. Never- CLAT 2% or 1% theless, they may contractually determine a de- scription of mutual settlements in this respect. nder the Polish Civil Code, an enterprise

is an organised group of tangible and in- tangible components designed to carry out Warsaw U 38 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 39

TRANSACTIONS TAXES

n Poland a purchase of real estate may The standard VAT rate is 23%. As a rule, VAT be subject to either VAT or tax on civil law is recoverable by the buyer. Iactions (“CLAT”). CLAT is payable only by the buyer, the tax rate CLAT applies to transactions that are either out is 2% and the tax is unrecoverable. of the scope of VAT (e.g. when the transaction involves the transfer of a going concern) or are exempt from VAT.

Real estate transactions are considered a transfer OTHER TAXES of a going concern if, in addition to real estate, the transaction involves e.g. the transfer of assets or real estate management agreements or wnership of buildings is subject to a 0.035% transfer of cash receivables connected with the tax levied on their initial value – so-called real estate. O “minimal CIT”. This tax is paid each month. The tax-free amount is PLN 10,000,000 (approx. Sale of undeveloped real estate is exempt from EUR 2,331,000). Certain types of buildings are VAT if the land sold is not designated for con- exempt from the tax, e.g. certain residential struction purposes (either under the local zoning buildings. The tax is deductible from monthly plan or an administrative decision), otherwise CIT tax advances; however, if the “minimal CIT” such transactions are subject to VAT. is lower than the CIT advances, the advances are set at the value of the “minimal CIT”. Generally, the sale of developed real estate is exempt from VAT if it is made before or during Profit on sales of real estate is subject to the its first occupation or within 2 years from its first standard 19% CIT rate. occupation. Parties may opt out of this exemption. Real estate tax in Poland applies to land, Transactions that are not covered by this buildings and structures. The tax on land and exemption may be further exempt from VAT if the buildings is levied based on their surface area purchaser had the right to deduct input VAT on while the tax on structures is levied based on the real estate and has not made improvements their initial value. The rates of real estate tax are to the real estate that would exceed 30% of its determined by local governments. initial value for income tax deprecation purposes. Parties cannot opt out of this exemption. Agricultural real estate is subject to agricultural tax and privately owned forests are subject to a forest tax.

Warsaw 40 INVESTING IN POLAND – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN POLAND 41

INVESTMENT MODEL Industrial investment sector in Poland IN THE HOTEL SECTOR Transactions in the warehouse properties sec- There is also no typical lease agreement for us- tor are structured in a variety of ways. Apart ing warehouse space – they vary depending on IN POLAND from typical share and asset deals, it is also the needs of the tenant and amount of leased popular to create joint-ventures involving the space. The lease term for space in multi-tenant establishment of a dedicated SPV between buildings is usually 3–5 years, but in single-ten- a “capital partner” providing funds neces- ant or BTS buildings it often exceeds 10 years. sary for the development of the warehouse and a “development partner” responsible for Although warehouse investments tend to be as- the construction and management of the in- sociated with sites far from city centres, con- Variety of investment models vestment. Such cooperation often involves struction of urban logistics facilities is becoming the construction of a portfolio of warehouses, more popular. In such cases, tenants lease less At present, there is no typical investment model with an earn-out mechanism for the ben- space, but pay higher rental fees per sq m due to for the Polish market. Transactions vary from efit of the development partner in the case of the convenience of the location. share deals to asset acquisitions, depending on timely completion of the warehouse build- the preferences of the parties to the transaction. ings and their satisfactory commercialisation. However, there is greater demand for transactions involving lease agreements than the sim- ple management agreement model. This is because some investors prefer not to be involved in the day-to-day operation of hotels. CONTACT

New challenges for Polish Hotel WOJCIECH KOCZARA KATARZYNA DĘBIŃSKA and Leisure lawyers Head of Real Estate in CEE Partner +48 22 520 5583 +48 22 520 8337 [email protected] [email protected] Hotel-related transactions are different to office ture a hotel transaction with great precision and and retail transactions and create new chal- market awareness. In addition to the transfer of lenges for advisors. In the asset structure, the contractors and employees, and making new ar- acquisition of a hotel is a complex undertaking, rangements with the hotel manager, in order to and includes a significant number of employees preserve constant and stable hotel operations it ANNA BRZOZA-OSTROWSKA LIDIA DZIURZYŃSKA-LEIPERT to be taken over and contracts to be assigned. is also necessary to focus on the local admin- Partner Partner +48 22 520 5598 In particular, the parties will need to assign a istrative aspects of business performance. This +48 22 520 5659 [email protected] [email protected] management agreement with an international applies in particular to permits for the hotel’s hotel brand, if one has been contracted to man- operation, such as a permit for the sale of alco- age the hotel, which is one of the most chal- hol, hotel permit (so-called categorisation deci- lenging parts of this kind of transaction. Inter- sion), and the decision on the registration of a national brands are particularly sensitive to hotel as a food and beverage sale point. There- About CMS problems with a hotel’s day-to-day operations, fore, the main role of a legal advisor is to lead We are over 800 qualified lawyers working in real estate and construction, spanning over 40 countries and 70 offices. The CMS Real Estate and Construction practice is the largest real estate specialist team in Europe and one of the as finances and reputation may be at risk. the transaction in such a way that ensures there biggest worldwide and provides full-service legal assistance in property and property finance matters.

is no gaps or delays which may impact the ho- CMS Real Estate and Construction Department in Poland employs over 30 lawyers and is one of the largest property Taking into consideration all the factors, it is tel’s operation. practices among law firms operating in Poland. We are the market leader in assisting property funds with the acquisition crucial from the legal point of view to struc- and disposal of prime real estate assets and acting for developers, banks and retailers and other lessors and occupiers of commercial, office and warehouse space, advising at every stage of the real estate. 42 INVESTING IN POLAND – 2019 BNP Paribas Real Estate KEY FIGURES* BNP PARIBAS REAL ESTATE MAP OF ROAD INFRASTRUCTURE IN POLAND 36 countries 43m m2 including of assets under 21 alliances management 5,400 in Europe employees

TRICITY Nearly OLSZTYN

A1 SZCZECIN m m2 BYDGOSZCZ €191 3,400 250m BIAŁYSTOK proflt before tax transactions during valued in Europe +20% vs 2016 TORUŃ the year

GORZÓW WLKP POZNAŃ * As of 31/12/2017 WARSAW

A2 A2

ŁÓDŹ

BNP Paribas Real Estate, one of the leading international real estate providers, offers its clients LUBLIN a comprehensive range of services that span the entire real estate lifecycle: property development, WROCŁAW A1 transaction, consulting, valuation, property management and investment management. With 5,400 employees, we support owners, leaseholders, investors and communities in their projects thanks to our KIELCE A4 local expertise across 36 countries. BNP Paribas Real Estate is part of the BNP Paribas Group. OPOLE As regards Central & Eastern Europe, we provide services in respect of Capital Markets, Property KATOWICE Management, Transaction, Valuation and Consulting.

A4 Existing motorways and express roads RZESZÓW Motorways and express roads under construcion KRAKÓW Planned motorways and express roads Existing main roads Existing roads Airports Seaports

BNP Paribas Real Estate Poland Sp. z o.o. Picture credentials: KRS 0000123245 Sąd Rejonowy dla M. St. Warszawy, Cover, P2, 6-7, 8,11-17, 35-38: Fotolia P3, P10: picture by courtesy of HB Reavis XII Wydział Gospodarczy KRS P9, P23: picture by courtesy of Echo Investment Regon 011890235, NIP 527-11-37-593 picture P5, 28, 39 BNP Paribas Real Estate picture library Capital: 14,200,000 PLN

BNP Paribas Real Estate is part of the BNP Paribas Banking Group

All rights reserved. This Guide is protected in its entirety by copyright. No part of this publication may be reproduced, translated, transmitted, or stored in a retrieval system in any form or by any means, without the prior permission in writing of BNP Paribas Real Estate Poland. CONTACTS

Marcin Klammer Igor Roguski Chief Executive Officer CEE Head of Industrial & Logistics CEE +48 22 653 44 00 +48 668 868 097 [email protected] [email protected] Erik Drukker Managing Director Agency & Valuation CEE, Fabrice Paumelle Board Member Head of Retail CEE +48 668 868 100 +48 606 676 576 [email protected] erik.drukker@ realestate.bnpparibas

Piotr Krawczyński Natasa Mika Head of Capital Markets CEE Head of Retail Leasing +48 784 333 932 +48 608 650 044 [email protected] [email protected]

Dr. Piotr Goździewicz, MRICS Michał Pszkit Director Capital Markets CEE Head of Property Management CEE +48 609 795 307 +48 600 074 354 [email protected] [email protected]

Mateusz Skubiszewski, MRICS Izabela Mucha Director Capital Markets CEE Head of Valuation CEE +48 609 795 340 +48 601 378 271 [email protected] [email protected]

Anna Baran, MRICS Patrycja Dzikowska Head of Residential, Capital Markets Head of Research & Consultancy CEE +48 604 286 075 +48 602 452 549 [email protected] [email protected]

Michael Richardson, MRICS Head of Corporate Services CEE +48 604 643 800 [email protected]

Małgorzata Fibakiewicz, MRICS Head of Office Agency +48 608 650 045 [email protected]

BNP Paribas Real Estate Poland Sp. z o.o. al. Jana Pawła II 25, @BNPPRE_PL 00-854 Warsaw, Poland Tel.: +48 22 653 44 00 www.realestate.bnpparibas.pl

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