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Investing in Poland: Part Two of a Three-Part Series
Investing in Poland: Part Two of a Three-Part Series
08.08.2018
EPP

This is the second part of a three-part series on the overall strategy of EPP. The first part was why investors should consider retail real estate as the best investment available in the retail sphere. If you missed it, you can read it here. Today, we’re going to look at the question I may get asked the most, but is also in many ways the easiest to answer: Why Poland?

Why Wouldn’t You Be Investing in Poland?

This is the question I feel compelled to pose to those who ask me about it. Poland is a gem, that a lot of people have (foolishly, in my opinion) overlooked because, in part, it’s been viewed as an “emerging economy” by investors, which many people believe is synonymous with “risky”. This could not be farther than the truth when you look at the country’s strong record over the last couple of decades. Furthermore, this is about to be put to rest, with the official rise of the country to developed country status.

Developed Country Status

Starting in September, FTSE Russell will be changing Poland’s ranking from Emerging Market to Developed Market status. This means Poland is joining the 24 best economies in the world including the United States, the UK, Japan and Australia. Poland is the first country from Central and Eastern Europe to receive this designation. More notably, as the 8th largest economy in Europe, this puts Poland shoulder to shoulder with Germany and France as equals. As the UK prepares to exit the EU, Poland’s importance is on the rise.

It’s Not Just about Status, It’s about the Numbers

While it’s nice that Poland is recognized as an economic powerhouse, the real story is in the numbers. There has been a trend in the news during the last year, of banks and economists revising their forecasts upward for the country. Because while Poland’s counterparts across Europe are facing a variety of issues, Poland’s burgeoning middle class continues to grow, and to spend which is propelling it further ahead.

Just last month ING revised their growth forecasts for Polish GDP upwards to 4.8-4.9%, stating “The Polish economy has proven to be resilient to the eurozone soft patch and significant drop in manufacturing orders in 1Q2018. Strong domestic demand, both consumption and investments have offset the weakness of external demand.”

It is this continued strong demand that we have been talking about for quite some time at EPP.

ING is not alone, earlier this year, S&P upgraded GDP growth forecasts from 3.8 percent to 4.5%. That’s on the heels of earlier upgrades by the IMF and the European Commission, which are also both predicting growth over 4 percent.

Outside the GDP Numbers

There are a number of other reasons things look good in Poland. The country’s retail markets aren’t oversaturated the way its western counterparts are. As we develop the retail real estate market here we have the advantage from learning from the mistakes made by the United States and the UK when they over-developed and focused on the wrong things.

A lack of a high street retail establishment in Poland allowed for the growth in shopping centres, which are the dominant format in the country with 71% of the market.

The Local Advantage

When it comes to retail, local always gives you an advantage. While there are certain macro principles that developing a strong retail asset has in common, the edge will always go to the company which understands the specific local market. This is one of the reasons we are a pure Polish play. There is a great deal of potential throughout the country, but as a completely Polish company, we understand the local markets better than our international peers and can bring more value to our retailers as well as the local customers.

If you would like to learn more about how we operate to maximize the potential of the Polish market, stay tuned for part three: why we operate the way we do.

Hadley Dean is CEO of EPP, the largest owner of retail real estate in Poland.