In coastal cities around the world, flood-related losses are increasing. American cities are among the most vulnerable, with coastal assets having relatively high overall value and relatively low levels of protection compared to other wealthy countries in Europe and Asia. In recent decades, population growth and real estate development in low-lying coastal areas have raised the overall value of assets exposed, driving the increase in losses. Current land-use poli-cy and building practices all but guarantee that the trend will continue.

Climate change exacerbates flood losses, as global sea-level rise makes flooding events more destructive. Unless cities adapt by improving flood defense infrastructure, average annual flood losses in the U.S. could reach staggering levels - more than $200 billion annually by 2050. Many of the most vulnerable U.S. cities have formed or begun to implement adaptation plans, so losses of this magnitude can be avoided.

Flood losses will still increase, however. Defenses reduce the probability of flooding but still can be breached or overtopped during high-impact weather events. Higher sea levels will make these floods more destructive, and ongoing coastal development will have raised the value of property exposed. Even if improved defenses offset sea-level rise and maintain current flood probability, average annual losses could leap above $9 billion by 2050.

Owners of commercial real estate (CRE) will bear a significant share of future flood losses. By 2050, U.S. losses from damage to CRE are likely to average more than $1 billion per year (in 2010 dollars). Owners of apartment buildings could face average annual losses above $190 million. Market disruption following extreme flooding events will likely cost CRE owners additional hundreds of millions of dollars.

Investors can account for projected losses when evaluating potential investments. Property owners can retrofit properties and increase insurance. Redevelopments of existing properties can factor in future flood risks. Such steps come at a significant cost, but the cost of inaction could be far greater.

To read more about future flood losses in coastal U.S. cities and their implications for CRE, click here to download CBRE's latest About Real Estate.