This content is an excerpt from Savills Impacts, a global report on real estate trends that will shape the market in 2025. It is curated and supplemented with local insights from Savills Viet Nam. 

Climate change is no longer a distant threat; it is a tangible and escalating reality shaping every facet of urban life, particularly the real estate sector. As a result, climate adaptation is no longer optional. It is a critical priority and a catalyst for reshaping market fundamentals.  

According to Savills Impacts 2025, the previous year marked a series of alarming climate milestones: global average temperatures exceeded the 1.5°C threshold above pre-industrial levels; wildfires swept through Los Angeles in the winter; Spain experienced widespread flooding; Hurricane Helene struck the southeastern U.S.; and extreme heatwaves engulfed Europe.

Against this backdrop, cities and the real estate industry must be resilient and centre climate adaptation at the core of urban planning, asset development, investment strategies, and operations. Nowhere is this urgency more pronounced than in Asia, where coastal megacities are expanding rapidly and highly exposed to climate hazards.

Urban Centres are at the Forefront

Sea levels are rising at a rate of approximately 0.33 cm per year. Coupled with increased rainfall and glacial melt, cities are facing growing flood risks. In addition to physical damage, real estate in flood-prone areas are increasingly burdened by elevated insurance premiums.

Major cities such as Tokyo, Jakarta, Bangkok, and HCMC are witnessing a transition from theoretical to immediate climate risks. In Jakarta, land subsidence has become so severe that the government is relocating the capital.

Meanwhile, HCMC, Viet Nam’s primary economic engine, is grappling with worsening flooding, saline intrusion into water systems, and land subsidence conditions. Excessive groundwater extraction is intensifying land sinkage, while saltwater intrusion is driving drought conditions and threatening agricultural productivity.

Troy Griffiths, Deputy Managing Director of Savills Viet Nam, notes:

"Globally, HCMC is among the most climate-vulnerable urban centres. As an extension of the Mekong Delta, it is frequently exposed to tidal and seasonal flooding. Saltwater intrusion is also having a serious impact on water supply systems and agricultural output in the Delta, Viet Nam’s largest rice-producing region."

Rising Operational Costs and Asset Risk

Beyond physical damage, climate change is driving up insurance, maintenance, and operating costs while simultaneously eroding asset value. These pressures are pushing some buildings into a “stranded asset” status (no longer viable for transaction, investment, or lease).

Insurers, whose business depends on risk assessment, have been among the first to respond. According to insurer Aon, in 2024, natural disasters caused an estimated US$368 billion in global damages. In the U.S., insurance costs as a proportion of real estate income have doubled over the past five years.

This trend is not confined to North America. Markets across Asia are also facing rising insurance costs and diminished financial viability for high-risk assets. As liquidity and investment performance deteriorate, institutional investors, particularly large funds, are incorporating climate risk analysis into their due diligence.

The most exposed sector is residential real estate, especially with the long-term occupancy of tenants and the challenge of relocation in disaster scenarios. Industrial assets, in contrast, tend to have shorter lifespans and are less likely to be situated in high-risk zones. Still, location remains a decisive factor, especially for assets requiring strategic access to ports, airports, or logistics infrastructure.

Marylis Ramos, Head of Savills Earth Advisory, emphasises:

"The resilience of buildings to extreme weather and natural disasters will increasingly define their long-term viability. Proactively addressing climate risks now will mitigate future repair costs, reduce insurance burdens, safeguard tenant retention, and protect brand value."

Beyond the Building: City-Wide Adaptation is Essential

Certain cities are demonstrating global leadership in climate adaptation. The Tokyo Resilience Project, designed to protect the city over the next century, has introduced robust strategies to withstand earthquakes, floods, and extreme weather. A case in point is the Mori JP Tower, which features flood and quake-resistant engineering, on-site power and heat generation, and shelter space for up to 3,600 people.

In HCMC, adaptive measures are being explored, including the trial of salt-tolerant rice strains and a focus on integrated master planning to better allocate infrastructure resources.

As the experiences of Tokyo and HCMC illustrate, individual asset resilience is not enough. If the surrounding urban infrastructure is vulnerable, even the most climate-resilient building cannot function effectively. Flooded streets and disrupted transit systems impact tenants, occupiers, and entire communities. Urban adaptation must, therefore, be a city-wide, coordinated effort, not a collection of isolated responses.

Climate adaptation is not just a necessity; it is a strategic opportunity. Developers and investors who take the lead in resilient, future-ready assets will align with the growing emphasis on sustainable capital. This forward-looking approach not only protects asset value but also enhances brand equity and stakeholder confidence.

Cities that demonstrate the capacity to adapt will attract long-term capital, high-quality businesses, and a skilled workforce. For HCMC, a key regional hub, this is a critical moment. Reimagining the planning framework, upgrading infrastructure, and incentivising sustainable development will be essential to safeguarding its competitiveness in a climate-constrained future.