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.

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