Which depreciation type accounts for factors external to the property?

The type of depreciation that accounts for factors external to the property is external obsolescence. This form of depreciation arises from outside influences that negatively affect the property's value, such as changes in the surrounding neighborhood, economic downturns, or new zoning laws that might limit the property's use. External obsolescence is typically viewed as incurable because it is not related to the physical condition or inherent design of the property; rather, it reflects broader market or environmental factors that can diminish the desirability or value of the asset.

Physical deterioration, on the other hand, involves wear and tear on the property itself, resulting from age or neglect. Functional obsolescence refers to the property’s design flaws or outdated features that may make it less desirable to buyers or tenants. Market-related depreciation, while it sounds similar to external obsolescence, does not specifically address the external factors influencing value but may refer more broadly to changes in the overall market conditions.

Thus, external obsolescence specifically captures the impact of external factors, highlighting how the surrounding environment can influence property value.