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HIGHEST & BEST USE <br /> Highest and best use as defined in The Appraisal of Real Estate, 13th Edition, by the <br /> Appraisal Institute is: "The reasonably probable and legal use of vacant land or an improved <br /> property, that is physically possible, legally permissible, appropriately supported, financially <br /> feasible, and that results in the highest value." Highest and best use is analyzed in two ways, <br /> site as vacant and site as improved. Since the subject is vacant land, only the site as vacant <br /> is analyzed. <br /> Typically there are four criteria in highest and best use analysis: <br /> - Legally permissible use: What uses are allowed by zoning? <br /> - Physically possible use: What uses are physically possible on the site? <br /> - Financially feasible use: Which possible & permissible uses produce a positive return? <br /> - Maximally productive use: Of the financially feasible uses, which use produces the <br /> highest return warranted by the market (the ideal improvements)? <br /> Site as Vacant: "Among all reasonable, alternative uses, the use that yields the highest <br /> present land value, after payments are made for labor, capital and coordination. The use of a <br /> property based on the assumption that the parcel of land is vacant or can be made vacant by <br /> demolishing any improvements."The Dictionary of Real Estate Appraisal 5"'Edition <br /> Legally Permissible Uses: The current BP, Business Park, zoning allows for light industrial <br /> and office uses. The subject is guided for commercial, which is more logical given the <br /> subject's proximity/visibility to US Highway 10 and small size of the site. Minimum site size is <br /> 43,560 SF. <br /> Physically Possible Uses: The physical characteristics of the site appear suitable for <br /> development. City sewer and water are assumed available. The site has average access <br /> and above average visibility/exposure. The site will allow for a number of potential uses. <br /> Financially Feasible Uses: Surrounding uses, market demand and the availability of <br /> financing typically drive financial feasibility. <br /> • Surrounding Uses: The subject is located in a small commercial district that is situated at <br /> the intersection of US Highway 10 and Joplin Street. Surrounding uses include <br /> commercial to the north and west, the Sherburne County fairgrounds to the south and <br /> recreational to the east. Given the site's location, proximity to commercial and the <br /> Highway 10/Joplin Street intersection, a commercial use is considered logical. <br /> • Financing: Availability of financing is currently average. Value assumes the subject has no <br /> site issues that would restrict typical financing for well qualified buyers. As market demand <br /> recovers, positive economic returns on new development should return. <br /> • Market Demand: Demand for commercial in the subject area is improving. Although <br /> development in outlying locations has been more gradual, demand is rated average for <br /> locations with good appeal (convenient access, highway exposure, stable site conditions, <br /> etc.). <br /> Maximally Productive Use: Given the above discussion and keeping in mind market <br /> demand, financing, site amenity, zoning and the subject's surrounding uses, commercial <br /> development is considered most feasible. <br /> 34 Nagell Appraisal&Consulting 1 952-544-8966 1 www.callnagell.com <br />