This concept refers to the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. For example, a vacant lot in a densely populated urban area might be more valuable as an apartment building than as a single-family home, even if both uses are legally permissible. This determination considers factors such as zoning regulations, market demand, and the physical characteristics of the property.
Accurately determining optimal property utilization is critical for a variety of stakeholders. It informs investment decisions, guides development plans, and provides a basis for property valuation. Historically, this principle evolved alongside the growth of modern real estate markets and appraisal practices, reflecting the need for a standardized framework to assess property potential. Understanding this concept provides crucial insights for maximizing returns and contributing to responsible land development.
