From the course: Introduction to Commercial Real Estate Analysis

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Highest and best use

Highest and best use

From the course: Introduction to Commercial Real Estate Analysis

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Highest and best use

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- [Instructor] Another fundamental concept in commercial real estate is that of highest and best use, that is, is the property, whether it's vacant land or improved with buildings on it already, is it being used in a way that generates the highest possible value? With a property, we really only have three options to determining the highest and best use. And these three possibilities are one, to leave it the same, the current status, the building the way it is right now and how it's used is achieving its highest and best use and generating the highest value. The second option is to keep the existing overall structure of the property but change its use to something that generates more value. Third option is to tear it down and build a completely different property on the same site to achieve the highest and best use. Now, both options two and three have their own, sort of, range of possibilities within that. To change the use, there are many possible alternative uses that can be changed…

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