Highest and best use in commercial real estate can lead two buyers to look at the same property and see two completely different opportunities.
One sees what is already there.
The other sees what the property could become.
That distinction sits at the center of how Victory Ground evaluates real estate.
A building’s current use can provide important information about its performance, but it does not necessarily define its future. Location, demand, surrounding development, zoning, physical configuration, and operating strategy can all influence whether a property has a more productive use waiting to be uncovered.
For an investor, the opportunity is not always to improve what already exists.
Sometimes the larger opportunity is to rethink it entirely.
Current Use Is Only the Starting Point
Commercial real estate acquisitions are often evaluated through the lens of existing performance.
What is the building today?
How much income does it produce?
Could improvements increase rents?
What would a renovated version of the same property look like?
Those are reasonable questions.
But they can also create a narrow view of the opportunity.
Highest and best use asks a broader question:
What use makes the most sense for this property, in this location, based on the demand surrounding it?
That can produce a very different answer.
A residential property may sit in an area where commercial demand is stronger.
An underutilized retail building may be better suited for another operating concept.
A traditional office property may have more value as a flexible workspace.
A single-use property may support multiple revenue-producing businesses.
The physical building matters.
But the position matters more.
The Appraisal Institute similarly treats highest and best use as an analysis that considers factors such as land-use regulations, supply and demand, the physical adaptability of the real estate, and market-area trends. Appraisal Institute guidance on highest and best use
The Naperville Acquisition
Victory Ground’s recent Naperville acquisition is a clear example of highest and best use in commercial real estate.
The property was a 12-unit multifamily building that attracted multiple offers during the acquisition process.
Most buyers evaluated the building based on what it already was: a multifamily asset with the potential to be improved as multifamily.
Victory Ground evaluated it differently.
The opportunity was not simply to renovate the residential units and operate a better version of the same building.
The opportunity was to look at the location, surrounding demand, and Victory Ground’s operating platform and ask whether the property could support a fundamentally different use.
The vision is to transition the property from residential to commercial use, creating the future home of Brick & Mortar Naperville alongside &Provisions Naperville, an adjacent food and beverage concept.
Same property.
Different thesis.
That is what highest and best use in commercial real estate can reveal.
Location Should Inform the Use
Real estate is fixed.
Operating concepts are not.
What the current market wants may have changed.
That distinction matters because the best use of a building should respond to the market around it rather than being dictated solely by what happened to occupy the property before an acquisition.
A strong location can support different uses over time.
Consumer behavior changes.
Work patterns change.
Neighborhoods mature.
Population shifts.
Commercial corridors evolve.
The most effective real estate strategy recognizes those changes and evaluates what the market is asking the property to become.
At Victory Ground, the objective is not simply to find buildings that fit an existing operating model.
It is to identify strong real estate first and determine which use can perform best within that location.
That approach is part of Victory Ground’s broader integrated model, where real estate, operating companies, and professional services work together around the asset. Explore the Victory Ground platform
That is different from buying a predetermined property type and hoping the surrounding market supports it.
Highest and Best Use in Commercial Real Estate Requires More Than Vision
Seeing another possibility is only the first step.
Executing it is what creates value.
A change in use can involve construction, entitlement, financing, operating expertise, marketing, property management, and ongoing execution.
That complexity is one reason opportunities can be overlooked.
It is easier to underwrite a multifamily property as multifamily.
It is more difficult to ask whether that same property could perform better as something else and then build the infrastructure required to make that transition possible.
A strong commercial real estate investment strategy therefore has to consider more than acquisition price.
It also has to consider execution capability.
Can the property be repositioned in a way that improves its long-term potential?
The next question is whether the new use can be operated effectively once that repositioning is complete.
Construction also has to be considered. Can the work be managed within the investment plan?
From there, the operating concept has to prove there is enough demand to support it.
Finally, the asset needs to be managed successfully after the repositioning is complete.
Without those capabilities, a different use is simply an idea.
With them, it can become a strategy.
Without those capabilities, a different use is simply an idea.
With them, it can become a strategy.
Where Vertical Integration Changes the Equation
This is where Victory Ground’s vertically integrated platform becomes especially important.
The platform brings together real estate ownership, operating businesses, and professional services across multiple stages of the asset lifecycle.
That allows the investment thesis to extend beyond acquisition.
Victory Ground can identify the asset.
Develop the business plan.
Oversee construction and repositioning.
Introduce an operating company designed for the location.
Manage the property.
Market the concept.
And continue operating the asset after development is complete.
That integration expands the range of opportunities the platform can pursue.
Instead of asking only:
“Is this a good multifamily building?”
The question can become:
“What is the highest-performing use for this quality piece of real estate?”
That is a much larger opportunity set.
Victory Ground’s approach also connects directly to its PropCo OpCo model, where ownership of the physical real estate and operation of the businesses inside it work as coordinated parts of the investment strategy. Read more about Victory Ground’s PropCo OpCo model
The Building Is Not the Business Plan
One of the easiest assumptions to make in real estate is that the current use of a property should determine the future use.
But buildings are containers.
Their value depends in part on what happens inside them.
The underlying real estate may support a business model very different from the one that came before it.
A property that has been residential for decades does not automatically have to remain residential.
A building that has historically been office space does not automatically need another traditional office tenant.
A vacant storefront does not necessarily need another conventional retailer.
The better question is whether the current use is still the most productive use available.
That is the difference between improving an existing model and rethinking the asset itself.
That gap is where increased profit may be hidden.
From Acquisition to Operations
Identifying highest and best use in commercial real estate also changes how an acquisition is evaluated.
The analysis cannot stop at closing.
The full lifecycle matters.
Acquisition: Is the underlying location strong enough to justify investment?
Repositioning: Is there an opportunity to improve or change the use?
Construction: What physical changes are necessary to execute the strategy?
Activation: Which operating concept best matches local demand?
Operations: Can the business and property be managed effectively over time?
This is why Victory Ground views real estate as a platform rather than a series of disconnected transactions.
Acquisition, construction, and operations are not separate strategies.
They are different stages of the same strategy.
Seeing What Others Miss
Competitive acquisitions often come down to price.
But sometimes the advantage is not simply paying more.
It is seeing more.
If every bidder underwrites a property according to the same existing use, they are largely solving the same equation.
A different operating model can create a different equation entirely.
That does not mean every property should be converted or every existing use should be changed.
It means the current use should be tested rather than assumed.
What does the location support?
Where is demand?
What use can create the strongest operating performance?
What capabilities are required to execute it?
And ultimately:
What can this property become that it is not today?
That is where highest-and-best-use thinking begins.
The Opportunity Beyond the Building
The most interesting real estate opportunities are not always obvious from the current rent roll or the condition of the building.
Sometimes the opportunity exists between the asset that is there today and the one that could exist tomorrow.
Victory Ground’s Naperville acquisition demonstrates that difference.
Where one buyer may see a 12-unit multifamily property, another may see the foundation for a new commercial destination.
The parcel and building are the same, but the vision changes.
A different operating strategy can then unlock a different level of potential.
But a different vision can lead to a different operating strategy and, ultimately, a different level of potential.
That is why highest and best use in commercial real estate should not stop at asking what an asset is worth today.
The more important question may be:
What is the highest and best use of the real estate, and who has the platform to execute it?
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