External Obsolescence [3138]

A new road directs traffic away from a commercial warehouse.  As a result of the new road, the warehouse rents for $.50 less per square foot than it was before the new road was opened.

The warehouse is 30,000 square feet and the gross income multiplier for similar properties is 9.  What is the effect of the new road?

$0.50 x 30,000 = $15,000 loss per year in gross income

$15,000 x 9 = $135,000 value loss due to economic obsolescence

The loss must be multiplied by the GIM to estimate the loss in value.