What happens to a property's value if it suffers from economic obsolescence?

When a property suffers from economic obsolescence, its value typically decreases due to external factors that negatively impact the property. Economic obsolescence refers to a reduction in property value caused by external influences that are beyond the control of the property owner, such as changes in the local economy, shifts in market demand, the decline of surrounding areas, or changes in government policies that affect the property's desirability.

For example, if a new highway is built that bypasses a neighborhood or if a major employer in the area closes down, these external factors can lead to reduced demand for properties in that area. As a result, the market perceives that the property is worth less than it would be under favorable economic conditions. This decrease in value reflects the extent to which the property is affected by its surroundings rather than its inherent characteristics. Understanding economic obsolescence is important for real estate professionals as it influences property valuation and investment decisions.