Highly specialised buildings are often built and designed for a single purpose. For example, a fire station. This means that if that use becomes obsolete it is difficult to use the building for an alternative use. Such loss in value is functional obsolescence and is shown by difficulty in conversion to a higher and better use.


Drug companies sometimes build a highly specialised building designed to make one particular drug or chemical. A particular layout, specialised sterile rooms and quality control systems make it almost impossible to use the building for any other purpose.

While the making of that drug is economical to the company, the building has value particularly to the company. However, if a rival company produces a cheaper or better alternative drug it may no longer be viable to keep the factory running. In this case there is massive economic and functional obsolescence.

Such an extreme example puts the valuer in the awkward position of trying to ascertain the viability of the existing specialised use. Unless there is clear evidence to the contrary it is better to value the building as a viable use but with qualifications in the valuation that the market for the building is limited and dependent upon the viability of the product being produced in the building.


There are other examples of specialised buildings in the electronics industry. For example, in “Silicon Valley” in Los Angeles buildings are purpose built to make integrated circuits, CPUs and other computer parts. The value of such specialised buildings is largely dependent on the viability of the computer components being made.


Although some specialised uses may appear not to be suitable another use there are exceptions. For example, old mainstream religious churches in the inner suburbs of Sydney have been sold to newer religious groups and sects as a place of worship. In this situation there is little loss through functional obsolescence. Some old churches have also been successfully converted to restaurants and even as residential dwellings. However, there will still be significant loss in value because the costs of conversion are high.