An industrial building is worth less than other buildings because it has low ceilings and outdated design and fixtures. This is an example of which concept?

• A. Economic obsolescence
• B. External obsolescence
• C. Physical deterioration
• D. Functional obsolescence

Answer: (D)

Functional obsolescence shows up when features inside a building make it less useful or desirable in today’s market, even though it’s physically sound. Here, the industrial building has low ceilings and outdated design and fixtures, which limit its ability to accommodate modern equipment, workflows, or space needs. That reduced usefulness lowers its value relative to newer buildings. It isn’t about wear and tear (that would be physical deterioration) and it isn’t caused by factors outside the property (that would be external or economic obsolescence). The issue is internal design and configuration that no longer meet current market preferences.