Why is economic obsolescence often seen as a greater concern than functional obsolescence?

Economic obsolescence is often considered a more significant concern than functional obsolescence primarily because it is influenced by external factors that are beyond the control of the property owner. Economic obsolescence arises from changes in the market or economic environment, such as shifts in the local economy, neighborhood decline, changes in zoning laws, or external factors like a decrease in demand for the type of property. Since these factors are external, they may significantly decrease a property's value irrespective of its condition or functionality.

In contrast, functional obsolescence pertains to issues within the property itself, such as outdated design, layout inefficiencies, or inadequacies in the building’s functionality. These issues can often be addressed or mitigated through renovations or upgrades, making functional obsolescence more manageable for property owners.

Recognizing the broader economic factors that influence economic obsolescence helps appraisers and stakeholders understand the challenges of property valuation beyond physical attributes, making it a more pressing concern in many cases.