What factors can contribute to a property's functional obsolescence?

Functional obsolescence refers to a reduction in a property’s usefulness or desirability due to design flaws or outdated features, which can arise from various factors including poor design and the age of the structure. When a building does not meet the current standards of functionality required by modern tenants or buyers, it can lead to challenges in attracting interest or achieving favorable pricing in the market.

For instance, a home with outdated layouts, insufficient amenities, or impractical configurations may be seen as less desirable compared to newer properties that cater to contemporary preferences. Similarly, age can introduce issues such as outdated electrical systems, plumbing, or lack of energy-efficient systems, which are increasingly important for today's buyers. These characteristics can significantly impact the property’s overall marketability and value, hence contributing to functional obsolescence.

In contrast, new zoning laws could impose changes that impact how a property is used but do not inherently alter the property's functionality. Economic downturns primarily influence market demand and property values rather than the intrinsic functions of the property design itself. Being located in a highly desirable area tends to enhance a property's value and desirability, rather than contribute to obsolescence.