Functional obsolescence is best described as:

Functional obsolescence refers to a reduction in a property's value stemming from outdated or less desirable features and design choices. This can occur when a building's layout is inefficient or when it lacks modern amenities that are expected by buyers. For example, homes with fewer bathrooms than is typical in the market, or properties with an awkward or impractical floor plan, may experience a loss of appeal. This loss in value is inherently tied to the property's functionality and how well it meets the needs of current market preferences and standards.

In contrast, options that describe increases in value due to modern renovations, depreciation methods based on land use, or increases in demand within a specific area do not capture the characteristics of functional obsolescence, as they do not relate to the shortcomings or inefficiencies of the property's features or design.