Highest and Best Use Analysis (HBU)

Objective

Determine the highest and best use of a site for a client based on the following concepts:

• Legally permissible – what uses are possible give the zoning restrictions of the site
• Physically possible – what uses could be potentially constructed on the site given its physical limitations and characteristics
• Maximally productive – Identify the potential use or mix of uses that return the maximum profit

Opportunity

Develop an in-depth analysis of the property and its potential uses compared to current and projected market conditions to determine how much demand could it capture:

• Identify the physical, zoning and location limitations of the lot to rule out potential uses
• Delineate the market areas for each probable use and identify and estimate current and future supply and demand for each one
• Determine market comparables with similar characteristics to those of the subject in order to determine the potential capture rate (penetration) for each probable use
• Determine the highest and best land use considering the estimated capture rate for each of the probable uses, market time, and the most profitable mix of uses

Solution

Conduct a Highest and Best Use Analysis that covers the following steps

• Inspect the subject property and adjacent properties
• Collect and analyze legal and technical documentation
• Interview client
• Interview local market participants or entities
• Collect market data from public and private sources
• Conduct surveys and collect additional data
• Organize information and analyze data collected to draw the highest and best use conclusions

Deliverable

1. Property Analysis
1.1 Site Analysis
1.2 Description
1.3 Slopes / Topography
1.4 View
1.5 Access
1.6 Floodplain
1.7 Adjacent Land Uses
1.8 Legal / Regulatory
1.9 Noise
1.10 Utilities
1.11 Tree Cover
1.12 Soil / Rock
1.13 Public Planning and Zoning
1.14 Location Analysis
1.15 Description
1.16 Land Uses and Linkages – Projected Roads and Throughfares
1.17 Direction of Growth and Land-Use Intensity
1.18 Growth Rate
1.19 Zoning and Planning
1.20 Neighborhood Land-Use Forecast

 

2. Market Delimitation and Supply and Demand Analysis for Each Possible Use
2.1 Demand
2.2 Supply
2.3 Residual Demand
2.4 Demand Projection
2.5 Supply Projection

 

3. Estimation of Capture Rate
3.1 Segmentation of Competing Properties
3.2 Comparison and Classification
3.3 Pro-rata Capture Rate
3.4 Catch Rate Conclusions

 

4. Financial Analysis and Plan for the Optimal Use of the Land