If a corporation closes a convenience store in a beach town, placing the 190 ft x 100 ft parcel on the market, what is the highest and best use of the land going forward? The conventional argument, taught in real estate schools, is that the highest and best use is the one that produces the highest property value. Value is only measured by what a buyer will pay for the property; it is an economic measurement. There are four criteria that must be met in order to qualify as "highest and best use." They are legal permissibility, physical possibility, financial feasibility, and maximum productivity. The residents of the area liked the use as a convenience store, but that use is precluded because the sellers insist on a non-compete arrangement that eliminates any sort of food sales, whether fresh, processed or prepared on site.
The property is zoned commercial, and a proposal was made to rezone the property residential in order to allow the construction of up to six duplex buildings that would be sold as condominiums. Local residents were almost uniformly opposed because a number of unsold duplexes already exist in the neighborhood. Another argument was that the primary beneficiary of a change in zoning would be the seller of the property, who was creating its own hardship by restricting future use. There is no commercial entity stepping up to buy the parcel at the current asking price, but the seller would certainly get his price if the property were rezoned residential.
Variations on this same scenario have occurred over and over in resort towns as escalating residential property values have tempted commercial property owners to either sell out to developers, if the zoning allowed residential use, or to petition for zoning changes in order to do so.
Several questions arise from this scenario: If a commercial property owner is deed-restricting his land to keep competition out of town, how does this affect "highest and best use?" If the zoning is changed to permit residential housing, benefitting the seller, this changes the "highest and best use" of the parcel, but what about the ripple effect in the community? Should there be any consideration given to the longer-term values when commercial enterprises flee, turning thriving resort town into second-home bedroom communities? I don't know the answers. I am just asking the questions. I'd like to hear what others think on this topic.
Stay tuned for more on "highest and best use" and point of view...as in "if buyers value views and open space but developers value bedroom counts, what is the highest and best use?"