There is a battle for investments in Europe. Do we have a chance to win?

Warszawa – Plac Europejski fot. Walter Herz

Poland has every chance to become the largest beneficiary of the global economic transformation in Europe. We are more cost-effective than Western countries, we have good transport infrastructure and storage facilities, as well as educated staff. The upcoming months will show whether the largest global companies will transfer their production to our market on an even larger scale than before.

Disruptions in supply chains related to lockdowns in Asia and the Suez Canal obstruction, which generated serious delays in deliveries and an unprecedented increase in the costs of international transport made investors realize that the need for a change is clear.

Last year, thanks to the trend related to the allocation of production closer to the place of sale and the return of companies to locating operations in the country of origin, we gained a lot. In the field of direct foreign investments in the EU, only Germany and Sweden were ahead of us in 2021, although in 2019 we were winning in this respect with our western neighbors. However, we have already outdone Hungary and Romania, which we competed with not so long ago.

Record value of foreign direct investment

In 2021, according to Polish Economic Institute, Poland saw a record high value of foreign direct investment (FDI), ranking 14th in the world. USD 24.8 billion has been invested in our country, while in 2020 – USD 13.8 billion, and in 2019 – USD 13.5 billion. Investors from the BSS (IT + SSC) business services sector, research and development, the automotive, medical and electronic industries as well as companies from the electromobility sector have focused on the Polish market.

– We have strong assets to gain primacy on the continent and take advantage of the global economy reshuffle.  We can take advantage of the weakening position of Asia as the main global investment recipient as a result of the friction between the USA and China, and the trend of shortening supply chains and moving production and services to Europe – informs Bartłomiej Zagrodnik, Managing Partner /CEO of Walter Herz. – 2021 has already brought European industry an increase in investment by one third y-o-y. For example, Poland is a European leader in the production of household appliances, and Chinese giants in this industry, as well as Korean manufacturers who already have factories in our country, are considering a serious expansion of their production on the Polish market – adds Bartłomiej Zagrodnik.

Unfortunately, this year the business climate and investment environment deteriorated. Apart from the war in Ukraine, today we have to deal with a rapid increase in prices, which is driving up inflation, therefore forcing central banks to raise interest rates and translates into higher costs of financing investments. UNCTAD is already pointing to the first symptoms of a global slowdown and a decline in the value of greenfield investments and international project financing. The fight for foreign investments will therefore be even more fierce.

We have our reasoning

– Our qualifications are a strong argument for investing in Poland. Young, qualified people with ambitions and a solid approach to work, who are abundant in our country, and the development potential is additionally provided to investors by professionals who move to Poland from across the eastern border. Public investment incentives, including special investment zones established throughout the country, also lure to locate business in Poland. Our advantage is also the location and modern transport infrastructure connecting the main cities of the region, as well as still favorable labor costs compared to other European countries. We should also mention a good level of GDP and the sheer size of the internal market, which is also a great incentive for investors – says Kamil Kowalewski, Senior Negotiator w Walter Herz.

The good condition of our market is also confirmed by the indicators related to the lease markets. – The vacancy rate is dropping and the demand for commercial space is growing. The logistics sector is emerging on the market with record results. Warehouse investments are often carried out on a speculative basis, because there is a shortage of space, despite the rapid increase in domestic resources. Our warehouse market reinforces its position in Europe every year. In the first quarter of 2022, we delivered a quarter of the new supply of warehouse space on the continent. And the record absorption capacity of the Polish logistics market put us on the third position in Europe in terms of the amount of new demand in the first quarter of this year – informs Bartłomiej Zagrodnik.

Efficient logistics attracts investments

The long-standing high demand for warehouse space in our country has also been boosted by the increased activity of tenants from the manufacturing industry in recent months. This encourages investors to implement further projects, despite the considerable risk associated with the rapid increase in construction and investment financing costs. According to Walter Herz data, 4.8 million sq m. of warehouse space remains under construction in Poland.

Logistics real estate also spark particular interest in the investment market. After the record-breaking year for the Polish warehouse sector in 2021, in which investment transactions worth EUR 2.8 billion were concluded, the activity of investors on our market temporarily weakened due to macroeconomic turmoil and uncertainty related to the outbreak of war in Ukraine. However, business already sees the stabilization of the situation, supported by the presence of Poland in NATO and the EU structures.

The advisers believe that in the long term, investors’ interest in logistics facilities in our country will grow. This is evidenced by the demand for warehouses reported by the e-commerce sector, retail chains and production companies, as well as the improvement in the profitability of logistics real estate related to increases in rental rates on our market.