Highest and best use
A short, practical note on highest and best use, with the public definition from IVS / Red Book (effective 31 January 2025).
In my practice, highest and best use is the use a market participant would have in mind when bidding — the one that is possible, legally permissible and financially feasible, and that produces the highest value. Market value reflects it, so I test it before I value. It may simply be the current use; it may be another one, such as an old warehouse with a licence for housing. When the highest and best use differs from the current use, I state it in the report and show the evidence behind it.
“Highest and best use is the use, from a participant perspective, that would produce the highest value for an asset.”
Source: IVS 102 Bases of Value, Appendix A90.01
“The highest and best use is the use of an asset that maximises its potential and that is possible, legally permissible and financially feasible.”
Source: IVS 102 Bases of Value, Appendix A10.04
Common confusion
Highest and best use ≠ the owner’s plan: it is the use the market would price, not the one the owner prefers.