How does functional obsolescence affect property value?

Functional obsolescence refers to a reduction in property value due to outdated features or design inefficiencies that make it less desirable or less effective for its intended use. The correct choice highlights that this phenomenon typically arises from structural deficiencies or design flaws that fail to meet current market expectations or standards. For example, a property might have a layout that is inconvenient or unable to accommodate modern technological needs, thereby diminishing its functionality and decreasing its market value.

The other options do not accurately reflect how functional obsolescence interacts with property value. Improving building layout, enhancing aesthetic appeal, or increasing tenant demand would generally have a positive effect on property value. In contrast, functional obsolescence leads to a negative impact, primarily due to elements that hinder a property’s usability or attractiveness to potential buyers or tenants.