Optimism returns

Lower interest rates in the eurozone and the easing of monetary policy in Poland are expected to revive investment in the real estate market. A noticeable increase in the value of investment transactions in the sector is forecast for later this year.

The European Central Bank’s consistent interest rate cuts, along with the beginning of rate reductions in Poland and across the CEE region, are creating a positive environment for the development of new investments and transactions in the commercial real estate sector. Lower financing costs are improving project profitability and raising valuations, boosting the competitiveness of real estate as an investment asset class. The market anticipates a marked increase in transaction volumes across Europe in the second half of the year, along with heightened investor activity in Poland as monetary policy continues to loosen.

Following a series of rate cuts by the European Central Bank, the eurozone’s refinancing rate has dropped to 2.15 pct, with another reduction expected after the summer, possibly lowering it to 1.75 pct. The ECB’s interest rate cuts have already had an effect: in the second quarter of this year, the investment volume exceeded that of the same period in the previous year.

In Poland, after maintaining the reference rate at 5.75 pct for over a year, the National Bank of Poland lowered it in May and July to the current level of 5 pct. A further reduction is expected in September. The Monetary Policy Council (RPP) has signalled the possibility of more cuts this year, seeing room to lower rates by 25 to 50 basis points to 4.5 pct, given inflation's effective return toward target levels. This outlook is also supported by favourable economic conditions and an expected rise in GDP of 3.4 pct in 2025. According to economists, Poland could see interest rates fall to 3.5 pct by the end of 2026.

Growth Potential in Demand

Interest rate reductions increase financing availability and reduce its cost. Even the first rate cut led to a noticeable rise in investment volume in Poland in Q2 compared to Q1. The high number of recorded transactions points to robust investor activity, although the overall capital flow reflects a significant decline in the average transaction size.

Investors are primarily seeking stable long-term assets. At the same time, interest is growing in value-add properties, redevelopment projects, and investments with potential for repurposing and repositioning.

Investors are approaching the market selectively and carefully analysing their choices. In Poland, warehouse and logistics assets have regained popularity, with capitalisation rates remaining at 6.25–6.50 pct.

In the first half of this year, investor interest in office and retail properties was lower, with pricing expectations between buyers and property owners still misaligned. In the retail segment, acquisitions mainly involve retail parks, which offer annual returns of 7–8 pct.

Local Capital Driving Investment

CEE-based investors dominate the transaction market, accounting for nearly 40 pct of acquisitions in Poland. In addition to regional players, U.S. capital currently holds a 30 pct share of investment volume, followed by Western European countries, which contribute around 20 pct.

Polish capital is also playing an increasingly significant role in the real estate market. In the first half of 2025, domestic investors were responsible for over 14 pct of total investment volume.

Institutional investors remain relatively inactive across Poland and Europe, partly due to the downward revaluation of their assets, which makes them highly selective. However, with interest rate cuts underway, capital is expected to increasingly seek alternatives to low-yield bonds and deposits, with real estate regaining its status as a stable income-generating asset.

Lower investment costs resulting from interest rate reductions could help narrow the gap between seller and buyer expectations, potentially leading to a higher number of large-scale transactions in the near future. Cheaper financing will also stimulate the launch of new development and commercial projects. Still, due to ongoing geopolitical tensions, the scope of these initiatives remains difficult to predict. Nevertheless, we expect the second half of 2025 to bring a noticeable revival in real estate investment activity in Poland.