What are the key components of depreciation based on physical factors?

Depreciation based on physical factors primarily focuses on wear and tear, which refers to the decline in value of a property due to physical deterioration. This can result from factors such as age, use, exposure to elements, and lack of maintenance. As a building or its components age, they may face structural issues, aesthetic deterioration, or reduced utility, all of which contribute to a decrease in market value.

Physical depreciation is tangible and can often be quantified through appraisals, allowing appraisers to account for these losses when determining the value of a property. While functional obsolescence and market decline are relevant to the overall depreciation concept, they fall under different categories. Functional obsolescence relates to a property's design or utility deficiencies, and market decline concerns the effects of economic conditions and neighborhood factors on property value. These factors are not part of physical depreciation but rather relate to other forms of depreciation.

Focusing on wear and tear provides a clear foundational understanding of how physical factors specifically contribute to property depreciation, making it the correct answer in this context.