Obsolescence

Obsolescence occurs when something loses value due to being supplanted by a better product or changes in its environment. This factor in real estate differs from a building's economic life. A building may continue to exist for another 50 years, but its features make it obsolete. To elaborate further, here are four simple examples of condo features that have become obsolete.

1. Centralized A/C

Centralized A/C systems (water-cooled a/c systems) are often seen in high-end buildings built in the late 90s and early 2000s. Some of these buildings have converted to VRF (variable refrigerant flow, e.g., split type A/Cs), and only a few remain to use centralized systems. This A/C system is seen to be inefficient since users cannot compartmentalize areas they wish to cool. Consequently, this makes this system very costly to operate.

2. Bridges connecting towers

Some buildings have bridges that connect towers. They're currently unused or closed down, likely due to security issues.

3. Centralized gas line

This was a unique feature since only a few condos allowed gas-supplied cooking ranges. But after a sad incident in 2013, this feature was scrapped.

4. Mailbox

Another feature which I think will be obsolete soon would be the mail room. More often than not, packages and documents are too big to fit these tiny boxes. Developers are likely to revamp their design, so at the very least, documents may fit without folding them.

When valuing horizontal properties, obsolescence should be a more critical factor than their economic life.

Sellers often increase the selling price of their properties based on a 30 to 50-year-old improvement (e.g., with a "buhos" foundation). More often than not, the design of these properties has become obsolete, and tearing down the improvement and creating a new structure would be more cost-efficient.