Poland’s commercial real estate sector has just recorded what some reporters are calling it’s “best-ever” first-quarter, which is quite something to achieve over the precise period in which the world was waking up to the horrors of the COVID-19.
The record breaking three months saw €2.4 billion in transactions, almost three times that seen over the same period in 2019. Whilst transactions in the second quarter will undoubtedly be lower, for obvious reasons, my own company, First Property Group PLC, just added to the numbers by completing the sale of the ‘CH8’ tower block in the central business district of Warsaw, significantly boosting our cash pot for future investments.
There are some parallels between the current crisis and the 2008 crash, a disaster for the world economy that led to broadly negative media portrayals of the property investment and finance sectors due to widespread profligacy and reckless lending. Yet those looking past the headlines would have seen that Poland bucked the trend and did not dip into recession during the credit crunch. Some companies, including my own, continued to turn a healthy profit throughout as a result of judicious investing during the boom years and rigorous asset management thereafter.
When the pandemic began taking hold I was concerned about Poland but given the sensible, timely and decisive action taken by the Polish government and its various institutions I was quickly reassured. Their clampdown was proportional and prompt and they put in place social distancing measures ahead of the UK, despite having just a fraction of the cases. And, like the UK, they quickly instituted an emergency budget designed to head off a spiralling economic calamity of a similar size to our own, at about 10% of GDP.
They were fast, firm and ready to be bold by spending to minimise damage. But they also entered this period of uncertainty with a low government debt to GDP ratio of around 46%. This is expected to rise sharply to just under 60% but they will still have easily manageable debt levels and the ability to spend more if needs be. Interest rates, meanwhile, sit at 0.5% in Poland and can be cut if needed, unlike here in the UK, where they have already been slashed to 0.1% and cannot easily be cut again.
The bigger picture for Poland, visible before the crisis, is also one of consistent, sustainable growth. Suppressed for so long by a foreign ideology, Poland’s full economic potential is yet to be realised. Prior to the onset of the pandemic, unemployment was just 2.9%, with the nation nearing full employment, and GDP growth was more than twice that of Western Europe, as Poland entered into it’s 29th year of growth in 2020, a historical record matched only by Australia.
The capital’s CH8 tower, which we have just sold a majority stake in, was one of the first office skyscrapers to be built in the city in the mid-70s. It is situated near to the imposing grey of the Palace of Culture and Science, which has dominated the city’s skyline since the 1950s and remains associated with the dark days of Communism and brutality of Stalin, whom it was built in honour of. The contrasting sheer glass of the newer structure has housed banks and Western businesses, and in a way, has come to symbolise capitalism’s advance in Poland, which the Polish people and my company have mutually benefited from, generating jobs and further investment.