Colliers: Investment trends for 2022

Rising energy prices and the risk of energy disruptions, the vaccination rate of the population, support for the EU, taxation issues and climate change, among others, are currently influencing investment decisions in Poland. 

  • The global economy has rebounded, and the Polish market has seen clear growth in many segments, including electromobility, which stimulates development of the Polish economy.
  • Investors are looking to shorten supply chains and are analysing locations in Europe with more interest than before.
  • There is a growing interest in flex offices, which provide companies with greater flexibility.

The year 2020 has proventhe strong impact the pandemic had on investment. Compared to the previous twelve months, its global value decreased by 35%. Against this background, the situation in Poland was very good, the decrease was even within the limits of statistical error. It’s too early to make any official summaries, but 2021 was certainly not worse in this regard.

The global economy has rebounded and the domestic market has seen marked growth in many segments. Contributing to this was the “unfreezing” of projects that were put on hold in 2020 while the outlook was uncertain. Developments in 2022 can be viewed with considerable optimism. Business has already tamed the problems arising from the pandemic, and new organizational and technological solutions have been implemented. However, new risks have also emerged. Some of these are going to affect the whole world, others are continent-specific and/or will severely impact the regional market in Poland.

An electromobility opportunity for Poland

Ensuring access to cheap electricity turns out to be a growing challenge for businesses. It’s a problem that is particularly important for energy-intensive industries – and companies in this sector have reestablished their interest in Europe after recent problems maintaining their supply chains. Electromobility has particularly promising prospects, and Poland is benefiting from the development of this industry. Already, the domestic production covers about 30% of the battery demand in the EU, Poland is also the largest European manufacturer of electric buses. Development plans go further, but rising energy prices and even more so the threat of power outages may discourage potential investors.

Paradoxically, Poland’s delay in the energy transformation may prove beneficial, at least in the short term. The dramatic increase in gas prices has raised the cost of electricity in Europe – Polish rates, previously among the highest ones, became almost the most attractive in the EU practically overnight. Warnings of the possibility of a winter blackout have been issued in many states. In that scenario, power generation from coal in Poland provides more stability than elsewhere. Long-term, however, a coal-powered energy sector will be a burden, not an asset. A realistic share of renewable energy sources in the energy mix is increasingly being considered by investors, especially in the electromobility sector mentioned above.

Powered by electricity

More battery factories for electric cars are being built in Europe. Poland, as one of the pioneers, has taken an important position in this market. Tesla’s Gigafactory Berlin-Brandenburg, located near Berlin, will give a further boost to the market as it requires sub-suppliers and cooperators creating an opportunity especially for Western Poland. In its favour are lower labour costs than across the border, the expertise of its employees and the short distance to the German capital.

Nearshoring drives warehouses

Many investors who would have built their factories in Asia Pacific a few years ago have begun to look to shorten supply chains and are analysing locations in Europe with more interest than before.

On the other hand, the development of e-commerce has greatly accelerated, which has directly increased the demand for warehouses. New space records are being set for both completed and planned projects. Customers still expect shorter delivery times, so the network of facilities needs to be denser. This means at least a few more years of continued growth for the warehousing sector. So far, investment has been concentrated in the western and central parts of the country.

Safe direction

The pandemic prompts entrepreneurs to be cautious. As a result, there is a growing interest in flex spaces in the office sector that can be adapted to suit changing business profiles and headcount. Fear of the impact of COVID-19 has also affected the policies of multinational companies. Some are limiting their activities in countries with very low vaccination rates. The massive outbreak of the disease in India has even prompted some players to exit the market and seek alternatives in safer regions of the globe – such as Central Europe. Spain and Portugal have also returned to the favour of investors.

Climate change

The wage gap between the Iberian Peninsula and Central Europe is blurring and becoming less significant. Climate change has become a new factor in site selection in recent years. The southern reaches of the continent will feel the rise in average temperatures much more acutely than Poland or the Czech Republic; the summer heat may hamper business operations and make employers less attractive among expats. This is important in terms of attracting the most talented and best-educated workers. Human resources are now a key enterprise resource.

The British example

Support for the EU in Poland is the highest in the Community. According to an October poll by CBOS, 90 percent of respondents do not want Polexit. At the same time, however, there is a growing group of people who consider such an unfavourable scenario to be possible. As recently as September 2021, about 30 percent of respondents considered Poland’s exit from the EU real; according to a United Surveys poll for RMF FM and “Dziennik Gazeta Prawna”, this share has increased to 42 percent. Although the risk seems negligible, it is drawing attention of foreign investors.

Tax turmoil

More likely, and equally important, are changes to the tax system. Recent changes are closely followed by the companies in the modern business services sector which are particularly impacted due to the high-paying jobs they create. The well-paid professionals will feel the fiscal pressure strongly. As a result, the wage pressures on employers will increase, consequently lowering the already very low margins of companies in this sector. Some of them may decide to leave Poland in this situation. In this sector, exiting is relatively easy; there is no costly physical infrastructure that ties a company to a specific location.

While there is an abundance of visible factors shaping the economy and investment climate, it is harder than ever to talk about the future today. It is still unclear when the world will ultimately deal with the effects of the pandemic, and the number of uncertainties leads one to be cautious in making long-term predictions.

Jan Kamoji-Czapiński

Associate Director, EMEA Location Strategy