The change to a circular economy paradigm should be established by the implementation of different actions of knowledge, decision-making strategies, stakeholders' engagement, which are usually supported by the overlapping of the sustainable dynamics created through the encounter of the natural, economic, human, and cultural approaches. This new approach to the management of cultural heritage requires scientific knowledge and expertise from multiple disciplines in order to decide on a specific action. This study considers 26 variables relating to heritage, physical vulnerability of buildings, and external hazards, and develops a functional degradation index for the buildings studied. This information helps to broaden existing knowledge on the preservation of buildings and to streamline the decision making process in the management of set of heritage buildings in South America. A set of 20 timber buildings located in the city of Valdivia (southern Chile) through in-situ visual inspection were examined. The buildings are ranked in terms of priority based its intrinsic functionality. This kind of approaches are new contributions to the area of the sustainability in the management of cultural heritage, which includes a balanced integration of technological, environmental, economic, social, governmental and behavioural performance.