Regional urban centers in Poland are returning to the path of growth. This is evidenced by the data on business development recorded in the first half of this year, and BPO/SSC sector investments may seriously conquer their position.
The BPO/SSC sector is doing well in the pandemic. What is more, it can significantly contribute to the recovery of the Polish economy and return to the path of growth (BPO/SSC stands for Business Process Outsourcing and Shared Service Center).
After strong turbulence, the business situation stabilizes. According to STR's calculations, two thirds of Europe has already returned to its offices. In France, more than 80 percent of people work regularly in offices, and in Germany, Italy and Spain more than 70 percent. In Poland this percentage is still at a low level. Analyses by Walter Herz show that similarly to the United Kingdom, where the ban on working in shared offices is currently in progress, in Poland only one third of employees have returned to work in the office.
Polish companies are mostly operating as before COVID, and some even exclude remote working. Some companies using offices have introduced a hybrid mode, which combines home office with office work, where half the team alternates. The position on returning to the office has been completely different for international corporations, which have introduced a complete home office and do not plan any changes in the near future. Among others, American companies operating in Poland, which are responsible for a significant part of employment, have decided to work from home on a permanent basis, which significantly affects the statistics.
Business services sector maintained continuity in Poland
Home office dominates the IT industry and the broadly understood marketing, advertising and communication, where remote work was already widespread before the virus. Companies from the business services sector have also rapidly moved into crisis conditions, which, thanks to the international fixation and use of solutions implemented in other markets, have moved into remote mode overnight, maintaining continuity of work.
The BPO/SSC sector is doing well in a pandemic. What is more, it can significantly contribute to the recovery of our economy and return to growth. According to the ABSL representatives, Poland has a chance to take over some of the processes carried out in other countries, thanks to the extensive facilities and network of centers conducting advanced projects, not only in Warsaw, but also in many regional centers.
Everything supports the fact that modern services for business, in which over 340 thousand people are already employed, will continue to grow. The direction of activities adopted in the present conditions foresees not only shortening and transferring supply chains within the European Union, but also business support services and processes supporting production located within it. The BPO/SSC sector, the second most important branch of the Polish economy in terms of employment, may paradoxically benefit from the pandemic. Remote working requires appropriate premises and access to technological infrastructure, stable Internet connection and mobile equipment, which India, being the world's mecca for outsourcing, cannot cope with during the lockdown. Therefore, the unprecedented in its current scale home office can change the global balance of power when it comes to these business areas.
All the more so because Microsoft and Google are about to revolutionize our digitalization market, investing many billions of PLN in Poland. The American giant will invest in the development of cloud computing and digitalization of Polish business in partnership with the National Cloud Operator. Google plans to create a state-of-the-art data center in our country.
BPO/SSC companies will migrate to stable locations.
Global outsourcing companies are likely to be looking for safer and more stable locations now, and Polish regional cities have a good chance of finding a short list of alternative locations. The same was already true after the financial crisis in 2008, after which many new BSS projects appeared in Poland and employment doubled. Moreover, today we have much more extensive facilities, experience and our country enjoys a better reputation than several years ago.
The key issue for investors, however, will be the regulations concerning the adaptation of labour law to the new reality and those related to the possibility of employing foreigners. In this respect actions have already been taken and the sector of modern business services will cooperate with the government on regulations supporting investors. The cooperation with ABSL will help to estimate the needs of investors and to determine the factors that will foster further development of investments creating new jobs in Poland.
Further expansion in the regions
- Companies from the business services sector have the prospect of development in Poland mainly associated with regional business centers cheaper than Warsaw. Mainly Krakow, which is the Polish capital of outsourcing, Wrocław, where IT reigns, but also with such agglomerations as Katowice or Łódź. Continuous development of the industry in the regions is confirmed by market data. In the first half of this year, companies from the BPO/SSC sector, which is the main recipient of offices in the regions, despite the health crisis leased almost 140 thousand square meters of space outside Warsaw, of which almost half in Cracow - informs Mateusz Strzelecki, Partner / Head of Regional Markets in Walter Herz. - Krakow - the capital of Małopolska clearly strengthens its position as a regional leader. This is also indicated by the increase in supply. In the first half of this year, a dozen or so buildings with about 180 thousand square meters of office space were put into use in the regional centers, most of which are also located in Krakow," he says.
The condition of the regions is best proved by the historically highest demand for offices recorded in the first half of this year. According to Walter Herz, IT companies are responsible for more than half of the lease volume generated outside Warsaw at that time. In Wrocław, thanks to the high absorption, which was higher in the first half of this year than the average from the previous four quarters, the level of office vacancies even dropped. And IT companies received more than 80 percent of the contracted space in this period. The first six months of this year were also particularly successful for Łódź, where over 50 thousand square meters of office space was leased.
Local business support
The investors are focused on the regions, because they offer lower costs of running a business than Warsaw, having at the same time a well-qualified staff, modern office facilities and a very good infrastructure enabling an attractive quality of life. In addition, companies investing in regional cities can count on the support of local authorities, which adapt their strategies to current conditions.
- The pandemic has changed the global economic order, the tools we used to attract investors have largely disappeared - there are no trade fairs, conferences or economic missions. Therefore, our strategy has evolved in the short term towards point-to-point promotional and informational activities corresponding to the current opportunities. Hence the recent digital campaigns: positioned on the Belarusian IT sector and, earlier, addressing the phenomenon of the return of industry from Asia - says Adam Pustelnik, First Vice-President of the City of Łódź. - What is the idea for Łódź in the context of BSSs in the long-term perspective? The key for me in this respect will be the universities in Łódź and the courageous use of the PPP format as a tool to improve the quality of life in the city in various fields. These three letters should be a symbol of a new economic opening for Łódź," adds Adam Pustelnik.
More projects in the sector of modern business services than a year ago are also conducted by the Polish Investment and Trade Agency (PAIH). Some of the more than 40 projects, which may bring even more than 7 thousand new jobs, are planned to be completed by the end of 2020. It also estimates that despite the pandemic, this year may be even better for the BPO/SSC sector than last year.
Moreover, representatives of PAIH pay attention to the quality of jobs created already this year. In the first half of last year, 400 high quality jobs were created in new projects, while as many as 536 of this year's jobs were created in R&D centers. The centers were launched, among others, by American software supplier Hyland, German IT company GFT and Alcon, Swiss contact lens market tycoon.
Source: Walter Herz - Polish entity operating in the commercial real estate sector in Poland. It provides comprehensive and strategic consulting services throughout Poland.