Definition
Plottage value is the term used to describe the increment in value that arises when adjacent parcels of land are united under a single ownership. This practice, known as assemblage, typically results in a plot that carries more potential utility and value than the sum of the values of the individual smaller plots before they were combined. This phenomenon is significant in urban development and real estate investment, as it often enables projects that require more extensive land space.
Examples
Example 1: Urban Development
In a downtown area, an investor purchases three adjacent lots, each worth $200,000. Individually, the plots don’t have the space needed to develop a high-rise office building. However, when combined, the larger plot’s value might increase to $750,000, not just $600,000 (the sum of the individual lots).
Example 2: Residential Neighborhood
A developer interested in building a new housing community might buy several adjoining lots in a suburban neighborhood. Initially, each small lot might be feasible only for a single house. When combined, the plottage could allow for a more extensive development project, potentially including parks and community facilities that increase overall property value.
Example 3: Industrial Expansion
An industrial company might seek to expand its facilities but needs more land than its current parcel allows. By purchasing adjacent land plots and consolidating them through assemblage, the company achieves sufficient space to expand its operations and increases both their productive capacity and the land’s value.
Frequently Asked Questions
Q: Why does combining land plots increase their value?
A: The larger, combined plot often supports more varied and potentially lucrative uses than each smaller plot alone. It provides greater flexibility for development projects, which enhances its utility and market value.
Q: Is plottage value realized immediately after combining the plots?
A: Not necessarily. The collective value increase often becomes evident once new development or usage projects that leverage the larger plot’s full potential are planned or initiated.
Q: Does plottage value always guarantee profit?
A: While plottage value generally suggests an increased potential utility putting upward pressure on land value, it’s not without risks. Market demand, zoning laws, and development costs must be favorable to realize the profit.
Related Terms with Definitions
Assemblage
Assemblage is the process of combining two or more contiguous parcels of land into one single parcel, which often precedes realizing plottage value.
Zoning
Zoning refers to municipal laws that define how parcels of land can be used within various areas (zoning districts) of a community, important for determining potential increases in a parcel’s value after assemblage.
Land Banking
Land banking involves purchasing land as an investment, holding it for future use or sale until its value increases due to potential development opportunities, which may include achieving plottage value.
Land-Use Planning
Land-use planning involves the designated use of land by public authorities and includes activities such as zoning, public consultations, and the provision of infrastructure and public services, all of which can influence the land’s plottage value.
Online Resources
- Investopedia - Plottage Value
- National Association of Realtors - Land Property
- Zillow - Assemblage and Plottage Value
- City Planning Resources - Urban Land Institute
References
- “Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer.
- “The Appraisal of Real Estate” by Appraisal Institute.
- “Land Use Planning and Development Regulation Law” by Julian Conrad Juergensmeyer and Thomas E. Roberts.
Suggested Books for Further Studies
- “Real Estate Investment: Strategies, Financing Techniques, and Market Analysis” by David M. Geltner and Norman G. Miller.
- “Land Development and Planning” by Thomas L. Daniels, John W. Keller, and Mark B. Lapping.
- “Zoning Rules! The Economics of Land Use Regulation” by William A. Fischel.
