Highest and best use is a test of what is legally permissible, physically possible and financially feasible — not of what is aspirational.
Highest and best use analysis asks which of the reasonably available uses of a site produces the greatest value, subject to being legally permissible, physically possible and financially feasible. Each limb of that test does real work.
Legally permissible
Planning parameters, land use category, density entitlement and conversion requirements define the realistic development envelope. Assuming approvals that have not been obtained requires a special assumption, stated as such.
Financially feasible
A residual appraisal is only as good as its inputs. Achievable pricing, absorption rate, construction cost, professional fees, finance cost and the developer's required return should each be evidenced or reasoned, and the outcome tested for sensitivity.
Reconciliation with comparison evidence
Where land transaction evidence exists, a residual conclusion should be reconciled against it. A significant divergence is a prompt to re-examine assumptions rather than to prefer the more attractive answer.
Information on this website is general in nature and does not constitute a formal valuation, appraisal or professional advice. A valuation conclusion arises only from a professional engagement with an agreed scope of work.