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Business Definition for: economic obsolescence
Dictionary of Business Terms
economic obsolescence
See also economic depreciation
Dictionary of Real Estate Terms
economic obsolescence

loss of value from all causes outside the property itself. Also known as environmental obsolescence and external obsolescence.

Example: An expensive private home may drop in value when an industrial plant is built nearby. This is a form of economic obsolescence that must be considered in the appraisal of the property. Causes of economic obsolescence are numerous. Noisy or unattractive highways and industrial plants cause a loss in value to nearby residences; the rate-making authority of a public utility or railroad can cause economic obsolescence to almost every railroad or public utility; polluted waterways, swamps, and obstructions of views have an adverse effect on the value of nearby property.

See also depreciation (appraisal)
Related Terms:
economic depreciation

in real estate, loss of value from all causes outside the property itself. For example, an expensive private home may drop in value when an industrial plant is built nearby. This is a form of economic depreciation that must be considered in the appraisal of the property.

depreciation (appraisal)

a charge against the reproduction cost (new) of an asset for the estimated wear and obsolescence. Depreciation may be physical, functional, or economic.

Example: The estimated reproduction cost (new) of a theater being appraised is $500,000. wear and tear sustained during its life is estimated at $100,000. Functional obsolescence caused by lack of air-conditioning and high ceilings causes an estimated loss of $100,000. It is in a decaying area of the city estimated at causing $100,000 of economic obsolescence. Total depreciation is estimated at $300,000.

Referring Terms:
external obsolescence
obsolescence
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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