How is economic life typically compared to physical life?

Economic life refers to the period during which a property is expected to generate income or provide value to its owner, while physical life relates to the time span a property can last before it deteriorates or requires significant rehabilitation. Typically, economic life is considered shorter than physical life because a property may have a longer structural existence than its ability to produce income effectively.

For example, a building may physically stand for many years, yet due to changes in market demand, obsolescence, or shifts in the surrounding environment, it may no longer be economically viable after a certain point. This phenomenon helps property owners understand when it is advisable to invest in renovations or whether to consider divesting their assets. The focus on economic life is particularly relevant for appraisals and investment evaluations, as it directly impacts return on investment.

Some alternatives might suggest that economic life could be equal to or exceed physical life, but such scenarios are less common in practical application, as market forces generally exert substantial influence on a property's economic viability. Additionally, while economic life can vary depending on market conditions and property type, the prevailing standard is that it tends to be shorter than the physical life. Therefore, the correct understanding aligns with the notion that economic lifespan is often constrained by market dynamics that can