Interest Rate Cuts Stimulate the Commercial Real Estate Market in Central and Eastern Europe

ECONOMY

“The European Central Bank (ECB) cut interest rates for the seventh consecutive time in April, and central banks in CEE countries – including Poland – are following suit, albeit at different paces. As a result, more countries in the region are entering a phase of monetary easing. Colliers expects further ECB rate cuts in June and September, which would bring the deposit rate down to 1.75%”, comments Grzegorz Sielewicz, Chief Economist for the CEE region at Colliers and the author of the publication.

Poland – Dovish Turn Points to Upcoming Rate Cuts

Poland may begin its rate-cutting cycle as early as May 2025. After keeping the reference rate at 5.75% for over a year, the National Bank of Poland is signalling its readiness to ease policy, supported by falling inflation and lower energy price forecasts. While inflation still exceeds the central bank’s target, it is expected to return to target by year-end. Slower wage growth and a stronger zloty may further support easing. Forecasts suggest that the interest rate could drop to as low as 3.5% by the end of 2026 if inflation risks remain contained.

Czech Republic – Lower Rates Amid External Risks

The Czech National Bank has already begun easing, cutting rates by 325 basis points since the end of 2023. The Czech economy is showing signs of recovery, with GDP projected to grow by 2.2%, driven by domestic demand and rising real wages. However, external factors and structural challenges could limit the pace of growth. The CNB may continue with cautious rate cuts this year to avoid inflationary pressure or weakening of the Czech koruna.

Hungary – High Rates Despite Economic Headwinds

Hungary continues to hold one of the highest interest rates in the region (6.50%) due to persistent inflation and uncertainty. Although the country is emerging from recession, real estate market prospects remain constrained, particularly given ongoing difficulties in accessing EU funds and structural issues in the automotive industry.

Romania – Political Uncertainty Shapes Monetary Policy

Romania’s central bank maintains high rates despite declining inflation, mainly due to political uncertainty ahead of the presidential elections in May. Inflationary pressure  persist, particularly in the services sector, driven by rising public sector wages. Colliers forecasts moderate rate cuts by the end of the year, provided the political and fiscal landscape stabilises.

Bulgaria – Gradual Cuts Amid Rising Public Spending

Bulgaria is pursuing a cautious monetary policy, gradually lowering interest rates as part of its efforts to meet eurozone accession criteria. Inflation remains elevated, and rising public spending is weakening the effectiveness of central bank actions. Despite these challenges, euro adoption remains a strategic goal, though it sparks political debate. If inflation drops to 2% by year-end, Bulgaria could become a regional outlier, reaching eurozone readiness.

Slovakia – Between Investment Opportunity and Trade Risk

As a eurozone member, Slovakia will directly benefit from ECB rate cuts, potentially boosting investment. However, the economy’s heavy reliance on exports makes the country vulnerable to international trade tensions, particularly U.S. tariffs. The machinery and electrical equipment manufacturing sector – key to Slovakia’s exports – could be especially impacted. Additionally, inflation rose to 4% in March 2025, the highest level since early last year.

“In countries where interest rates are cut, lower financing costs will stimulate investment and improve conditions for the commercial real estate sector. This presents a real opportunity for a rebound – especially in the logistics and industrial segments, where lower financing costs and increased demand for warehousing, driven by nearshoring, can significantly accelerate new developments,” adds Grzegorz.

Colliers experts also highlight the growing potential of the office market, especially in capital cities such as Warsaw and Prague, where demand for modern, energy-efficient buildings is on the rise. The modernisation of older buildings is gaining momentum, and tenant pressure for sustainable solutions is becoming increasingly strong.

The student housing and build-to-rent (institutional rental) segments are also gaining importance, particularly given the housing shortage and demographic shifts. Meanwhile, rising wages are supporting recovery in both the retail and hospitality sectors.

Colliers