Encyclopedia
Highest and best use
The legally permitted, physically possible, financially feasible use that produces the highest value for a property.
For example: An owner of a single-storey shop near transit learns the land may be worth more for redevelopment than for its current use. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you own an old single-storey retail building on a lot zoned for much more density. An appraiser looks at what the land could support and finds its value is in redevelopment, not the current building. That shapes how you price and market it.
What I’d tell a friend
Look at what your property could become, not just what it is. That may change its value and who wants to buy it.
Why it matters to you
It's how appraisers and buyers think about what the property is really worth. If a site's best use is different from its current use, its value and future may be too.
How to use it in your deal
Buyers should think about highest and best use when pricing: if you're paying for redevelopment potential, check zoning, Official Community Plan (OCP) policies, transit-oriented area rules, servicing and the cost and time to get approvals. If you're buying to hold the existing building, don't overpay for potential you won't use.
Owners should know their property's highest and best use when deciding whether to renovate, redevelop or sell. Tenants in buildings whose best use is redevelopment should expect demolition clauses and short renewals. Appraisers and lenders consider it in valuations. Assessments may also reflect it, which is why some owners pay taxes on unused density. Ask an appraiser to test it if a big decision rests on it.
Mistakes I see
Paying for potential that's not legally permitted. Ignoring costs and timelines. Tenants not expecting redevelopment.
In BC and Vancouver
Zoning and OCPs come from the Local Government Act and municipal bylaws; appraisal standards guide the analysis.
Official sources: Local Government Act (BC Laws) · Transit-oriented areas (Government of BC) · BC Assessment appeal guide
What it means
Highest and best use is the use of a property that is legally allowed, physically possible, financially workable and gives the highest value.
Appraisers use it to judge whether a property is worth more as is or for another use.
Using it
Check zoning, the official community plan and any area plans that may allow more density or other uses.
A planner or appraiser can test options. I can help you understand who the likely buyers are for each one.
Questions to ask before you sign
- What does zoning allow?
- Is redevelopment feasible?
- What would it cost?
- How long would approvals take?
- What's the value as is?
Keep reading
Related terms: Density: floor space ratio (FSR) / floor area ratio (FAR), Land lift, Land assembly
- Buying a commercial property in BC, step by step
- Sale-leaseback for BC business owners
- How commercial property is valued in BC
Working through this right now? Questions are free. Book a 15-minute call or call or text 604 256 2002, and I’ll give you a straight answer.
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.