Obsolescence – a cause for concern?

Abstract

Purpose

The purpose of this paper is to review what is known about obsolescence and its causes, and provide a critique of how it is reflected in valuations.

Design/methodology/approach

The method has been to review the literature on obsolescence to examine the main causes and whether there are approaches that can identify the vulnerability of buildings to the business models they are designed to satisfy becoming outmoded.

Findings

Obsolescence is an inherent part of the way in which market economies function as new competitors disrupt established business models. Investors need better methods to evaluate the risk that obsolescence poses to their portfolios.

Practical implications

Obsolescence can result in significant unpredicted losses of value.

Originality/value

Much of the literature on obsolescence treats it in the same way as depreciation without recognising its unpredictable nature. The paper explores alternative approaches to how obsolescence might be measured.

Citation

Grover, R. and Grover, C. (2015), "Obsolescence – a cause for concern?", Journal of Property Investment & Finance, Vol. 33 No. 3, pp. 299-314. https://doi.org/10.1108/JPIF-02-2015-0016