Water is becoming a key factor for real estate locations

Following the extreme drought of recent weeks, water shortages have moved high up the agenda. While the Netherlands spent decades focusing on draining river and rainwater as quickly as possible, the opposite approach has been adopted since the start of the century: retaining water for longer periods to help secure supply during times of drought.

Yet awareness of water scarcity remains limited within the real estate sector, particularly when compared to issues such as grid congestion. Drought, and climate risk more broadly, is still not consistently factored into property valuations.

The availability of sufficient clean water is therefore becoming a new prerequisite for preserving and creating value, making it an increasingly important location criterion for real estate.

Drought turns water into a critical prerequisite

Much like grid congestion, water scarcity is not primarily a matter of a physical shortage of water, but rather of its availability. The bottleneck lies in extraction, storage, treatment and distribution. Rainfall is not being used optimally, and insufficient attention is paid to anticipating future shortages. Developing new water sources or expanding existing extraction capacity requires provincial permits, which are often lengthy processes.

In some regions, such as the Noordoostpolder, this has already resulted in new businesses no longer being connected to the drinking water network. For large-scale residential developments and commercial projects, water utilities may impose conditions or even implement waiting lists.

The impact is most visible in the logistics and industrial sectors. A distribution centre with sprinkler systems or a manufacturing facility has a fixed water demand that cannot easily be reduced through efficiency measures. Unlike electricity, drinking water is also difficult to generate independently.

What does this mean for real estate?

A combination of Savills data and information from the Dutch Climate Impact Atlas (Klimaateffectatlas) illustrates the scale of the challenge. In a scenario where the Netherlands experiences an extreme drought year in 2050, there would be significant shortages in surface water supply. As much as 96% of the built environment would be affected by these shortages.

The issue is particularly pronounced in the eastern and southern parts of the country, where higher sandy soils prevent the supply of fresh surface water. During dry periods, these areas therefore rely heavily on rainfall and groundwater resources.

Industry and logistics face the greatest risk

Almost half of the Netherlands' industrial stock is located in areas where surface water can no longer be supplied by 2050. In addition, a further 44% is situated in areas where surface water is available but where supply shortages are expected to occur.

Combined, this means that more than 90% of industrial real estate stock could face constraints in surface water availability by 2050. As a result, the sector will become increasingly dependent on rainfall and groundwater resources.

A different risk profile for residential real estate

The picture is somewhat different for the residential sector. The majority of the housing stock is located in areas where surface water can still be supplied. However, almost 80% of residential buildings are nevertheless expected to face temporary shortages in that supply during periods of drought.

For residential real estate, surface water availability therefore represents primarily a temporary challenge, whereas for industrial real estate it is evolving into a more structural issue.

Source: Klimaateffectatlas (2026), Savills Data, Intelligence & Strategy (2026). *Analysis based on 2050 | Hoog scenario. 

Not only shortages, but also flood risk

In addition to water shortages, there is also the question of what happens when there is too much water. Flood risk, land subsidence and extreme rainfall primarily affect the safety of residents and building users. They also influence insurability and the requirements imposed by lenders. For existing assets, the associated costs often only become apparent during refinancing or upon sale.

Our analysis shows a more reassuring picture in this respect: flood risk is expected to remain low in 2050, demonstrating that water safety is already deeply embedded in the Netherlands. Only 0.41% of the Dutch housing stock is projected to face a material flood risk (medium to high) by 2050.

For commercial real estate, the figure is somewhat higher: 1.3% of the retail, office and industrial stock is located in an area with a material flood risk.

As a result, flood risk is largely under control, while the greatest challenge lies in addressing water shortages. Nevertheless, the real estate sector must prepare for both extremes. Rainwater retention and effective drainage systems capable of handling peak rainfall events are among the available solutions.

However, the first step is greater awareness. To date, the implications of water scarcity and water-related climate risks have not yet received the attention they warrant within much of the real estate market.

Source: Klimaateffectatlas (2026), Savills Data, Intelligence & Strategy (2026).

Treat the water network like the electricity grid

Today’s water challenges are similar to issues facing the electricity grid. In both cases, infrastructure investments were made based on historic demand rather than future needs. Water utilities must be given the regulatory flexibility and financial resources required to expand capacity in the future. Without this, the Netherlands risks facing another major infrastructure bottleneck.

While acute shortages in drinking water supply are not yet a reality, new connections are coming under increasing scrutiny. We expect these challenges to grow rapidly as climate change leads to more frequent and prolonged periods of drought.

For the real estate sector, the message is clear: water availability is becoming a key location criterion. The availability and capacity of a water connection should be considered just as early in the acquisition and development process as an electricity connection. Existing assets should also be assessed for both flood risk and dependence on drinking water supply.

Those who act now can avoid a future in which water performance becomes an unexpected factor affecting both asset value and location attractiveness.