What causes economic obsolescence?

Economic obsolescence, also known as external obsolescence, refers to a loss of property value due to external factors that are beyond the control of the property owner. This can include changes in the surrounding area that negatively impact the attractiveness or desirability of the property, such as increased crime rates, proximity to undesirable land uses (like industrial sites or landfills), changes in zoning laws, or broader economic downturns.

These factors reduce the demand for property and can lead to a decrease in its market value, despite any upgrades or maintenance performed on the property itself. Understanding economic obsolescence is crucial for appraisers and real estate professionals, as it helps them assess the true market value of a property in relation to the external economic environment. This distinguishes it from other issues like maintenance problems, design flaws, or layout challenges, which are related to the property's physical characteristics rather than external circumstances.