The Corner Lot and the Drive-Through
You are asked to appraise a 0.6-acre parcel at a signalized corner in a California city. The parcel is zoned C-2 (general commercial) and currently holds a small 1,800-square-foot retail building built in 1972, leased month-to-month. The neighboring parcels include a bank, a gas station, and a strip center. A national coffee chain has approached the owner about a drive-through, and the owner wants to know whether that use would be the highest and best use. The general plan designates the area as commercial. The city's zoning code allows drive-throughs in C-2 only with a conditional use permit, and the code requires a 12-foot stacking lane and a minimum 1,000-foot separation from schools. A school is 850 feet away. The site is 0.6 acres, and a drive-through prototype needs about 0.45 acres.
1. Walk through the four highest and best use tests for the drive-through use.
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Legally permissible: C-2 zoning allows commercial use, but a drive-through requires a conditional use permit, and the code requires 1,000 feet of separation from schools. The school is 850 feet away, so the use as proposed appears to fail the separation standard unless the city grants a variance. That is a serious legal-permissibility problem, not a certainty of denial, but it must be disclosed.
Physically possible: the site is 0.6 acres and the prototype needs 0.45 acres, so the building fits, but the 12-foot stacking lane and required parking must also fit. A stacking lane plus parking on a corner lot with limited access points may be tight, so a site plan check is needed.
Financially feasible: a drive-through may generate enough rent to justify demolition of the existing building and new construction, but that depends on the permit being granted and on construction costs.
Maximally productive: compare the drive-through to the existing retail use and to other permitted C-2 uses (bank, small strip center). Conclude that the drive-through is a candidate only if the permit and separation issues are resolved; otherwise the highest and best use is likely continued retail or redevelopment to a permitted commercial use.
2. How does the existing 1972 building affect your conclusion?
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The existing building is old and small relative to the site, so its value as an improved property may be close to land value. If the building's contribution to value is less than the cost to demolish and clear the site, the improvements are not adding value, and the highest and best use is as though vacant land.
You should estimate the land value, the value of the existing improvements, and the demolition and site-preparation cost. If land value plus improvement value is less than or equal to land value alone, the existing use is interim. The month-to-month lease also matters: it gives the owner flexibility to terminate, which supports redevelopment but also means the current income is not a stable long-term indicator. You should state that the highest and best use conclusion is conditional on the permit outcome and on the owner's willingness to redevelop.