Highest and Best Use
Understand highest and best use in Canadian real estate — what it means, how it's determined, and why it’s key to property value and development.
June 27, 2025
What is Highest and Best Use?
Highest and best use refers to the reasonably probable use of a property that results in the highest value, provided it is legally permissible, physically possible, financially feasible, and maximally productive.
Why Highest and Best Use Matters in Real Estate
In Canadian real estate appraisal and development, highest and best use analysis guides property valuation, investment decisions, and development planning.
It involves assessing:
- Zoning and land use permissions
- Market demand and trends
- Physical characteristics of the site
- Financial feasibility of alternatives
Understanding highest and best use ensures properties are utilized or developed in ways that optimize their value.
Example of Highest and Best Use in Action
An appraiser determined that redevelopment for a mid-rise residential building represented the property's highest and best use given market demand and zoning.
Key Takeaways
- Identifies use that maximizes property value
- Must be legally, physically, and financially viable
- Guides appraisals and development plans
- Affects investment and planning approvals
- Essential in land and property valuation
Related Terms
- Market Value
- Zoning
- Urban Planning
- Land Value
- Development Potential
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
Highlights from the Delta Golf & Country Club listing brochure. (Colliers)
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)
