What is the Meaning of Highest and Best Use

Highest and best use (HBU) is a concept in real estate that refers to the best value-added use for a property, regardless of its actual and current use, provided it is physically possible and financially feasible.

JULIZAR is well-trained and experienced in conducting highest and best use studies focusing on four main factors: legal permissibility, physical possibility, financial feasibility, and maximum productivity.

We understand that property value and its use are closely linked, so the highest and best use is that which results in the highest value for the present and generates the greatest net return over a certain period or for the foreseeable future. We also consider the impact of the surrounding environment, competitive forces and local politics, as well as the timing of potential property development.

A large number of our clients, especially real estate developers and state-owned enterprises (BUMN), possess underutilized buildings and thus do not benefit from the land.

We can assist you in creating highest and best use studies. The results of our research can help address your concerns before commencing construction.

We offer highest and best use studies for various office, retail, industrial, and land properties throughout Indonesia. Highest and best use analysis can be completed as a standalone project.

Highest and Best Use Study

The highest and best use of a property refers to the probable use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible, resulting in the highest value.

A highest and best use study seeks to identify which use will provide maximum value to a vacant plot or an improved plot of land.

The highest and best use analysis for a specific property must meet certain criteria that flow sequentially. The general order is:

• Legally permissible
• Physically possible
• Financially feasible
• Maximally productive

The sequence of legally permissible and physically possible can be applied in any order. However, a potential use must meet both of these requirements before moving on to the financially feasible or maximally productive analysis.

This means that uses not legally permitted by zoning or other restrictions, or those that are physically impossible due to site or building limitations, will not be considered for financial feasibility.