What does physical deterioration refer to in real estate?

Physical deterioration in real estate specifically refers to the loss of value of a property that results from its physical condition over time, primarily due to wear and tear. As buildings and structures age, they may experience various forms of damage, such as roof leaks, foundation issues, or deteriorating infrastructure, which ultimately affects their market value. This concept emphasizes the tangible aspects of a property and acknowledges that as physical elements decay, repair and maintenance costs may increase, contributing to an overall reduction in value.

Understanding physical deterioration is vital for real estate professionals as it influences investment decisions, property management strategies, and the assessment of market value. Property owners must address maintenance needs proactively to mitigate any potential loss in value stemming from this type of deterioration.