Depreciation

The life of a property is affected by the legal, economic and physical environment within which it subsists. Economic factors are likely to be the most significant determinants of its life, in particular:

• the extent to which the property can continue to meet the occupier's or tenant's changing needs through time;
• the continuance of the (original) location advantages of the property through time; and
• whether a demand continues in that location for the permitted uses to which the property may be put or allowed. ³⁶

These factors, when considered within the context of a diversified portfolio should not influence the decision to invest, but will be built into price.

___________________________

₃₆For a complete discussion of the effect of depreciation on real estate, see Baum[1991].