A piece of land and related property may be considered to be its highest and best use when it provides the maximum return to its owner or user. The return may be measured in monetary terms, or intangible and social ways, or a combination of such values. However, the value of a piece of land is not static and can change over time. The highest and best use of a property at any point in time is derived from four qualities as follows:

Legally allowable under local laws and regulations
Physically possible use of the subject land and building
Financially feasible for the use of the subject land and building
Maximum utility/profitability for use of the land and building

In today's struggling CRE market, the highest and best-use concept has been put to the test, with hundreds of office properties around the country ripe for changing from their former use. During the last ten years, there have been two large changes in use for many CRE properties. The first is the conversion of former commercial sites such as gas stations, older urban office buildings and suburban strip retail centers into high-rise and garden apartment projects. The other and more dramatic, highest, and best-use change is older suburban mall properties that are being converted into industrial, office, hotel, medical office, food courts, fitness centers and bowling alleys. Today, there is a new highest and best-use conversion, office buildings in urban cities to apartments or in some cases hotels.

Instant Insights /

The Highest and Best Use of an Office Conversion

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