Obsolescence – a cause for concern?

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 a...

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Bibliographic Details
Published in:Journal of property investment & finance 2015-04, Vol.33 (3), p.299-314
Main Authors: Grover, Richard, Grover, Christine
Format: Article
Language:English
Subjects:
Accounting
Buildings
Business models
Consumer behavior
Convenience stores
Costs
Economic life
Impaired assets
Property management & built environment
Property valuation & finance
Property values
Real estate & property
Supermarkets
Useful life
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Summary: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.
ISSN:1463-578X
1470-2002
DOI:10.1108/JPIF-02-2015-0016