What does the loss of value caused by physical wear and tear over time indicate?

The loss of value caused by physical wear and tear over time is best indicated by physical deterioration. This term refers specifically to the reduction in an asset's value due to its physical condition deteriorating as it ages or experiences usage. For instance, a building may lose value as its materials age, leading to issues such as rust, decay, or structural weakness.

Physical deterioration is directly concerned with tangible aspects of a property or asset, distinguishing it from other concepts like economic obsolescence, which relates to factors outside the property that can affect its value, or functional obsolescence, which deals with deficiencies in the design or utility of the property itself that affect its marketability. Market depreciation, while a general term referring to any reduction in value in the marketplace, does not specifically address the physical aspects tied to wear and tear. Therefore, physical deterioration accurately encapsulates the idea of loss of value due to physical conditions over time.