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39 (134) 2019
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Human Resources

The growing potential of Polish cities

By Jan Banasikowski, HR & location advisory expert, CBRE
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The ever-improving situation on the labour market and growing demand for modern office space prove that the Polish real estate sector is gaining momentum.

We can still observe the high absorption of the largest cities, such as Warsaw, Kraków and Wrocław, which provide companies with the possibility of expansion, and guarantee investors new places of business. Yet awareness of other Polish cities’ potential is growing; attractive alternatives for companies looking for locations that enable cost-reductions for a business activity.

Business services continue to be a driving force in Krakow and Warsaw

The best example of high attractiveness of Polish cities is the modern business services market in Kraków and Warsaw, the largest locations for this sector in Poland and with a significant role in the whole Europe, which is steadily growing for over 10 years. According to data from ASPIRE, the association which brings together representatives of the modern business services sector, there has been an increase in employment up to 20% annually in Kraków. The potential for development in Kraków and Warsaw remains high, despite the fear of market saturation, which has been present for several years now, and which is reflected in a noticeable increase in wages in the local labour market as well as possible recruitment and retention problems. These doubts have not yet been confirmed by foreign investors who are still considering Kraków and Warsaw as a potential place for business activities – especially in terms of centralisation of processes from other foreign locations.

An important role is played by the needs of the local employers who plan to increase employment and extend the scope of their current activity. The best confirmation of this trend is the continuous increase in demand for office space in Krakow (211,400m2 in Q4 2018) and in Warsaw (858,400m2 in Q4 2018), including demand for offices of the highest standard, located in A-class buildings, which in Krakow constitute 57% of all resources, and in Warsaw 53%.

The standard of the office attracts employees

The aspect of the standard of office space is important for understanding the dynamics of the development of the Polish office market. On the one hand, it is part of the competition for  employees, because the location and arrangement of the office is an important non-wage benefit. On the other hand, in parallel, there is an increase in the quality of services provided by companies operating in the largest service sectors in Poland – apart from Krakow and Warsaw, this is also an important factor for companies from Wrocław, Gdańsk, Poznań and Łódź. The level of supported processes, and an increase of experience and skills of employees cause that the popularity of the largest cities as places to work to grow. Surveys by recruitment companies on the readiness of employees to relocate between cities have begun to appear on the market.

High revenues generated by cities thanks to investment from companies from the modern business services industry, such as the 13 billion zlotys contribution to Kraków's GDP, translate into more urban investments in infrastructure raising the quality and standard of living of employees and residents. All these factors help attract further investments, a virtuous circle.

High position of Polish cities in the European rankings

Thanks to the dynamics of the city’s business development, Krakow – next to Dublin – has gained the status of one of the best European locations for business activity in the outsourcing services sector. According to criteria for assessing the city’s potential as defined by the Tholons Services Globalisation Index (where the access to experienced employees, operating costs, quality of life are assessed)Warsaw, Kraków and Wrocław   shouldbe distinguished. These cities face similar challenges (competition for labour), experiences (increase in the level of advancement of supported processes) and opportunities for further development (improving the quality of life in the city, meeting the needs of employees and residents in terms of quality of education and career opportunities). An important factor, which foreign investors particularly pay attention to, is the growing interest in the migration of employees from abroad, for whom costs and quality of life in the Polish cities are attractive, as well as the opportunity to gain work experience in global companies, which often would not be possible at home. Therefore, in Poland, we are observing the growing interest and influx of employees from South-west Europe, Eastern Europe and Asia.

Competition on the labour market in favour of employee

The labour market in Poland is becoming increasingly diverse. This is particularly evident in the production sector as well as in business services. The value of Ukrainian production and logistic workers and specialists for the Polish economy is widely appreciated, and without them many companies would have a problem with achieving their goals. However, in the face of decreasing unemployment, demographic challenges and the opening of Germany's borders to employees from Ukraine, we can see that the trend of the multicultural labour market is constantly gaining importance.

Interestingly, competition on the labour market in the production sector makes it necessary to raise the standards of the quality of space. Increasingly, companies present their activities in terms of improving the comfort of work, as an argument for choosing a specific employer in the region. The examples of solutions applied in the production sector include locating well-connected plants, arranging comfortable and employee-friendly areas (employee canteens, company kindergartens) and additional activities of employers). For example, one benefit that is gaining popularity is the Wellness offering, enabling regeneration after a day at work. The employer's implementation of employees’ expectations is particularly important from the perspective of new generations entering the labour market, who appreciate the standard of the workplace and the opportunity to combine employment conditions with a rapidly growing standard of living.

Investors target medium-sized cities

The largest cities in Poland usually acquire the most important investments and become the regional offices of global companies. Meanwhile, smaller centres try to attract new investments by offering lower costs of business activity, increasing standards of living (with much lower daily maintenance costs) and access to human resources and adequate infrastructure. Such arguments strongly appeal to companies that analyse variants of carrying out the expansion and transferring some of the processes to cheaper locations in other regional cities.

Academic centres where specialists (especially in fields such as languages, finance and IT) are trained, as well as places providing access to infrastructure and office space resources of a suitable standard are most frequently considered by investors. Locations with particular potential for business development are: Łódź, Lublin, Bydgoszcz, Białystok, Opole and Rzeszów. Thanks to the rapidly improving road and railway connections resulting from EU infrastructure funding, they can effectively compete for future investments with Poland's main agglomerations. Each successive investment creating attractive workplaces gives the opportunity for students and specialists to work in the place of their residence without the need to migrate to the larger centres in search for a job.

The potential of the medium-sized regional cities is beginning to be noticed by investors, developers and employers alike. After a thorough analysis, more and more companies from the modern Business Services Sector and the production sector are deciding to concern these selected centres in their further development.

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