The driving force in the regions

The smaller thecity, themore important they are for its market – because they tend tolease not 200 sqm but 2,000sqm of office space. we are talking about companies in the bpo sector, for whom Our region has become less attractive of late, especially to those offering themost basic services. Lower costs can now be found in Asia, so tostay competitive we have to offer higher quality

Emil Góreckihe countries of Central and Eastern Europe were once seen as the perfect locations for Business Process Outsourcing (BPO) centres. This was due totheskills of their citizens, relatively clear rules for running businesses and moderate pay expectations. These days, however, thelatter factor is already athing of thepast. Bulgarians, Poles, Czechs and Hungarians still want towork, but at higher rates. Indians, Chinese, Malaysians and Thais donot have such requirements, and it is totheir countries that theBusiness Process Outsourcing sector is turning, according totheA.T. Kearney ‘Global Services Location Index 2009’ report. Where are our countries positioned now? You have tolook alittle lower down thetable. Bulgaria can be found in 13th position, whereas two years ago it was in 9th. Places 18 and 19 are taken byEstonia     . Everything of course depends on themethodology used. “Poland is still considered tobe agood place tolocate BPO centres. Ihave observed, however, atrend for moving simpler services toother countries, mainly totake advantage of lower costs. We, on theother hand, are moving in thedirection of servicing more and more specialist processes, which means employing people with higher qualif    

Areas of competition

Central European countries are still included on thelist of the 50 best locations for such operations. Between 2007 and 2009, thelevel of business friendliness only grew slightly in Romania, and actually fell in Russia, Poland, Hungary and Ukraine. The rating for thehuman resources sector only grew in Russia, but declined in Bulgaria, Estonia and Slovakia. Fortunately, these changes have only been slight. The cost factor is mainly responsible for this reshuffling of theratings. This trend has been growing in each of thecountries in theregion, and there are two main reasons for this: higher pay expectations and unfavourable euro, dollar and pound exchange rates for investors.

According toresearch byColliers International, theBPO sector accounts for only 2pct of thetotal office space in Warsaw and Kyiv. The level is better in Sofia and Bucharest, amounting toapp. 10pct. In themiddle of last year, thesector had thebiggest market share in Kraków, Wrocław, Łódź and Brno, taking up around half of all theavailable office space in Kraków and Łódź. “The Business Process Outsourcing sector is animportant factor in demand. It employs app. 45,000 people in Poland. If weassume that that each employee needs 9-10sqm of space, thetotal demand from this sector amounts toapp. 400,000-500,000sqm. Outsourcing centres are much more important in smaller urban centres, such as Lublin, Toruń or Łódź. In these cities, theoutsourcing sector has in fact created themodern space market,” claims Anna Kot, director of theoffice space department at Jones Lang LaSalle. She goes on toadd that employment in this sector is expected togrow byup to70,000 people over thenext 2-3years, which will create theneed for anadditional 250,000sqm of offices. There will also be re-negotiations of earlier contracts, consolidations and relocations of centres. “So there will be alot todo,” she laughs.

Asmaller city, abigger influence

According toColliers International’s research, BPO centres occupied around half of thetotal office space in Kraków and Łódź in themiddle of last year. In Wrocław therate fluctuated at around 20pct. In bigger cities BPO centres are often built outside thecity centre –but they doneed good transport connections. Such companies need tofeel secure when it comes tothecontinuity of their services, as very often they work 24 hours aday, and that is why double thenormal power supply is standard in their offices, as well as ahigh quality cabling system, raised floors, aminimum of two independent telecommunication operators, effective space arrangement and adequate lighting. Anna Kot of JLL insists that Poland’s competitiveness has not slipped during thecredit crunch. Jolanta Jaworska of theAssociation of Business Service Leaders in Poland has asimilar view.        

In support of this thesis it worth mentioning afew office lease transactions which were closed in theannus horriblis of 2009 and at thebeginning of this one. In theTriCity, Computerware took up 3,000sqm in Centrum Dmowskiego (owned by the Baltic Property Trust), while Goban moved into anarea of 1,000sqm in Łużycka Office Park (Allcon Investment). Sony Pictures will be locating its new premises on 1,250sqm in thesame building. Two service centres were opened in Kraków: Sabre on anarea of 1,600sqm in theKBP 100 office building (Kraków Business Park), and Hewitt (2,700sqm) in Diamante Plaza (Aldesa Polska). Yet it was Wrocław which enjoyed thetastiest morsels. Nokia Siemens Network leased 6,600sqm in Bema Plaza (Deka), while Hewlett-Packard signed up for 2,500sqm in Grunwaldzki Centre (Skanska Property Poland). In Poznań Roche took up 1,200sqm in theMalta (developed byEcho Investment).      Wojdyła Budownictwo) in Wrocław for anew IT centre, which will eventually employ app. 2,000 people. IBM already has anaccounting centre in Kraków, where it employs 1,200 people, as well as aresearch and development centre.

When IBM was looking for asuitable location, thecompany first took into consideration afew Polish cities and anumber of others in Central Europe. The first factor tobe assessed was theavailability of large numbers of suitably educated people. The next criterion was theavailability of alarge amount of readily available high quality office space. This limited thesearch area toa few cities. The decision was taken after more detailed criteria were taken into account. “Ihave studied theconditions offered toinvestors in our sector bydifferent countries. Poland is thebest in certain respects, such as theavailability of public assistance and theattitude of Polish civil servants toinvestment in theservice sector. However, it must be admitted that our competitiveness could still be improved,” notes Jolanta Jaworska.

The big boys are in town

For Hungary and Budapest in particular, thecontinued desire of large international corporations toopen their service centres in thecountry presents amajor prospect. “Service centres typically come second when it comes toleases on theBudapest                   tre niche is BP, which has set up shop in theHaller              have,” says Mr Papp. These involve high-capacity machinery, diesel generators or offices with open-plan layouts. The service centre segment of themarket is generally considered highly, not just for its present contribution, but also for how it will shape thefuture of theBuda market.