Highest-and-best-use study: Why you need this before developing your property


Developing your own land into a high-value property takes a lot of work. There is a lot of thought that goes into the planning of a property development before the construction and development occurs. This is where the highest and best use concept comes in.

Highest and best use — what it is

In the world of real estate appraisal and advisory, there is a concept called “highest and best use” that originated with early economists such as Irving Fisher. This means “reasonable, probable, and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.”

The four criteria

Real estate consultants, advisors, and appraisers have four criteria that help determine what is the highest and best use of a property. These require the right expertise and research to properly evaluate each criterion and would need different stakeholders at each step. 

  • Physically possible

First, the development must fit the surrounding demographics and commercial activity of the location or else it would not be productive. When your land is a 3,000 sqm real estate, you can remove a subdivision development from your options. Subdivisions require a much larger space to work on. Further: Are utilities and drainage good in the area? How is the accessibility? Engineers can be consulted with regards to this criterion in determining the property’s suitability. 

  • Legally permissible 

What can developers do to the property that is allowed by the law, such as zoning and other property regulations? Are there any restrictions in the land’s deed? If the plan does not meet this requirement then that is not making the most out of property. Lawyers and land experts can be tapped to determine if certain construction types are suitable for the given property.

  • Financially feasible

The market of the location and demographics must also fit the intended use for the property as this can affect the land’s value. How would the building of the property compare to other properties in the location? Is the cost to upgrade much more expensive than the cost of properties in the area?  Real estate experts can offer consultation on key use of property for every location if it is feasible. 

  • Maximally productive 

Under this criterion, the highest and best use must be profitable. But this question also asks which option will provide the maximum benefit to the owner. 

An owner would often have an objective in mind. In cases where the owner wants to sell the land, a residential condominium might be ideal, whereas a hotel, office building, or retail center would suit the owner if they do not wish to dispose of the land. 

It is important that real estate consultants who produce these highest and best use studies consider such goals albeit there will be times that the goal might not be feasible at all.

Getting appraisal for your land

Appraisal is a key part in undertaking the next step to developing your land. Get in touch with professionals with experience in handling appraisals of all sorts of properties all around the Philippines. Santos Knight Frank is a real estate services firm offering appraisal services. With a great track record in successful projects, you can trust Santos Knight Frank for appraisal, brokerage, property management, and more. Visit the website to learn more http://www.santosknightfrank.com/.

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About Santos Knight Frank

The world of real estate can be a difficult place to navigate. Whether property is your investment or a tool that drives your business success, you need a partner who can guide you in every step of the way.

Since 1994, Santos Knight Frank has been guiding Fortune 1000 companies, BPOs, private clients, and institutions in all facets of real estate. We advise companies on their best office, retail, and industrial location, oversee commercial fit-out projects, and manage facilities. We have facilitated over 4 million sqm of office transactions on behalf of clients and managed over 40 million sqm of real estate under our property & facilities management arm.

Our residential brokerage platform and wide collection of bespoke homes allow our private clients to buy, lease, and sell properties within their budget, timeline, and lifestyle.

For landlords and investors, we provide valuations and appraisal, consultancy and research, sales and leasing, and property management services across the Philippines.

Santos Knight Frank is part of the global Knight Frank network of over 384 offices in 51 markets, including the strategically important U.S. partnerships with Cresa (commercial real estate) and Douglas Elliman (residential real estate).

We are locally expert and globally connected, end-to-end and best-in-class – as any great partner in property should be.