A commercial property lost value due to a highway rerouting traffic away from it. This is an example of?

The scenario presented reflects economic or external obsolescence because the decrease in the property's value is a result of external factors beyond the control of the property owner. Economic obsolescence occurs when the value of a property is negatively affected by external conditions, such as changes in the local economy, infrastructure decisions, or shifts in market demand. In this case, the highway's rerouting has reduced traffic flow to the commercial property, leading to a decline in its attractiveness to potential customers and, consequently, its market value.

Functional obsolescence, on the other hand, relates to issues within the property itself that reduce its desirability or utility, often due to outdated design or layout; this is not applicable here. Physical deterioration refers to the wear and tear of the property over time, which is also unrelated to external factors like traffic patterns. Market trends are broader economic indicators that affect multiple properties and do not specifically address the unique loss of value due to the highway change. Thus, the correct identification of the situation as economic or external obsolescence effectively captures the nature of the valuation decrease experienced by the property.