This paper presents results from the EU project “Transnational cooperation for the improvement of buildings energy performance and efficiency“(TRACE) which aims to provide a better understanding of reasoning behind scarce investments in energy efficiency in order to improve relevant policies.Due to the complexity and heterogeneity of the real estate market, it is crucial to understand the basic principles of interplay between its different components and stakeholders in the context of energy efficiency in order to create sound policies for enhancing investment in energy efficient buildings. This becomes more important when it comes to implementing policies on a local level and/or in less developed countries. The focus of the study rests therefore upon identifying economic aspects influencing private investments in energy efficient buildings and gaps where policy interventions should be considered in order to encourage such investments. The paper starts with a thorough analysis of the institutional framework of energy efficiency investments. In particular, it elaborates on the links between the real estate market and energy efficiency investments, with a particular focus given to the relationship between key market actors. By approaching the problem from an investor’s point of view, such issues as informational problems, split incentives and prisoner’s dilemma situations are argued inter alia to be critical when considering improvements in energy efficiency investments in buildings. This analysis allows us to identify key factors that may hamper investments into energy efficiency of buildings. At the same time, it makes possible to determine points where local and regional administrations can influence the energy efficiency related investment behaviour of private companies. The paper categorizes such routes for policy intervention and presents which of them are utilized to what extent by local and regional administrations in South-Eastern Europe.