Depreciation in real estate is divided into three categories: economic, functional, and what other category?

Depreciation in real estate is categorized into three main types: economic, functional, and physical. Physical depreciation refers to the loss of value due to the physical deterioration of a property over time. This can occur due to factors such as wear and tear, aging, and neglect, which can affect the property's overall condition and market value.

Understanding physical depreciation is crucial for property managers and real estate investors, as it helps assess the true value of a property and informs decisions regarding maintenance, renovations, and investments. The recognition of physical depreciation can also impact tax assessments and property valuations, making it a vital concept in real estate management.

The other categories of depreciation, such as economic or functional, deal with issues related to changes in market conditions or internal property features rather than the physical state of the property itself.