Highest and Best Use: The Evolving Paradigm

Mark G. Dotzour (), Terry V. Grissom, Crocker H. Liu and Thomas Pearson
Additional contact information
Mark G. Dotzour: Department of Finance, Real Estate and Decision Sciences The Wichita State University Wichita, Kansas 67208-1595, http://www.twsu.edu/~finance/
Terry V. Grissom: Real Estate Center Texas A&M University College Station, Texas 77843-2115, http://RECenter.tamu.edu/
Crocker H. Liu: Department of Finance 900 Tisch Hall The Stern School of Business New York University New York, New York 10003, http://www.stern.nyu.edu/
Thomas Pearson: Melson & Associates 3300 Oaklawn Avenue Dallas, Texas, http://www.robinson.gsu.edu/realestate/

Journal of Real Estate Research, 1990, vol. 5, issue 1, 17-32

Abstract: Highest and Best Use is often identified as the key concept supporting real estate use and value decisions. However, at best the concept has received ambiguous if not conflicting consideration as to its relevance in the literature of economics, finance, real estate, appraisal, and other areas of study concerned with land use decisions and valuation. This paper addresses this ambiguity and identifies the theoretical premises of Highest and Best Use as employed in the various land use disciplines. The theoretical foundations as they are synthesized form the basis of a formal constrained optimization model for land use decisions. The model's logic identifies the need to include the cost of capital and location along with the physical, legal, infrastructure, and market parameters discussed in the bulk of the economic and appraisal literature (including courses and professional practice). The financial and locational variables are needed in order to advance the use paradigm to fit current context of problems facing real estate decisionmakers.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1990
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Citations: View citations in EconPapers (6)

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