An industrial building is worth less than other buildings in its market because it has low ceilings and outdated design and fixtures. This is an example of ___________.

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

Answer: (A)

Functional obsolescence occurs when the property's design or features become outdated or less useful, reducing value. Here, the industrial building's low ceilings and outdated design/fixtures make it less desirable and less efficient to use compared to newer buildings. This loss in value is due to the building’s own design, not from wear and tear or external factors. If the design could be updated cost-effectively, the obsolescence could be curable; if not, it remains incurable. So the situation best illustrates functional obsolescence.