It’s probably not where you think it is. Most observers would assume it’s downtown where all the office skyscrapers live.

That may be where the highest price per square foot or square meter of land is traded but is it the most valuable? I would argue not.


Mono-cultured, mirror-glass office building zones are busy during the day but become strange, deserted no-places at night, inhabited by crime and dysfunction. BNE (break and enter) artists leave there at dawn to invade suburbs and rob useless mcmansions only to return at night to prey on occasional late-night workers who missed the last bus.

[Image of LA skyscrapers by Tuxyso / Wikimedia Commons, CC BY-SA 3.0,]

You couldn’t give me an office tower for FREE these days. Why? Because they are already dead-end investments. I mean who wants to travel for one to two hours a day (each way) to plunk your butt down in a tiny, noisy cubicle to perform meaningless middle-management work. Everyone is headed for a gig-style job, a PB4L, personal business for life, or a work-from-home placement.

If I gave you a free 65-story, downtown office tower with 20,000 square feet per floorplate for a total of 1.3 million square feet valued at $800 per square foot or $1.04 billion, you’d be pretty happy for a while. But even if it was full of good-paying tenants when I gifted it to you, I suspect: a) because you don’t know anything about running, managing and maintaining a project like this, b) you know zip about proper leasing and establishing tenant relations, c) demand for office space like this may very well be in a secular decline and d) tough, better capitalized competitors who do know something office space will come gunning for your clients as their leases expire–fairly shortly, they’ll be waving you goodbye.

New towers in Manhattan are currently testing the $80 per square foot mark in terms of triple net rent. In simple terms, that means if you rent a 1,000 square foot office, it’ll cost you $80,000 per year in base (sometimes called minimum) rent. For a place not even as big as some condos.

But wait, that’s not all. You will have to pay on top of your base rent, all of your landlord’s operating costs, repairs, maintenance, property taxes, property management expenses and utilities, which can add another $45 per square foot. So, your tiny office might end up costing you much more—$125,000 per year. And the actual space you occupy probably won’t be 1,000 square feet because most landlords “cheat;” they charge you for common areas (lobbies, elevator shafts, w/cs, corridors, anything that penetrates the floorplate like columns) so your rentable space and useable space are not the same. Rentable is grossed up, usually by 11 to 20%.

So why not turn your home or condo into a “hoffice,” that’s a horrible Scandinavian term for home office, duh.

Now back to your tower. Once you reach a vacancy rate of 30%, your losses will really start to mount. For a time, you will make up for empty space and operating costs you have to cover by piling those costs onto your remaining tenants (most commercial leases allow you to pull that trick) but with their costs rapidly going up, the rest of your tenants will quickly desert you too.

When you reach 100% vacancy, you will have to reach into your jeans to cover all operating costs, property taxes etc yourself—a total of $58,500,000 per year or $4,875,00 per month.

You won’t be thanking me for my gift of a free, useless Manhattan office tower any longer.

Here’re my calculations for you to review:



I believe the most valuable property in most cities is located downtown or close to downtown, but it has different characteristics—it is mixed use, a walkable place where you can live, work, play, make, create, learn, shop, socialize, entertain and be entertained. It generally has an amazing amount of density (more of the same use on one site) and intensity (more of a mixture of uses on a single site) packed into human scale neighborhoods with building heights of 12 stories or less. It has narrower roads, on-street parking, wider sidewalks, storefronts and other active uses at grade, plenty of openings onto the street, a zillion driveways and alleyways, 0-lot lines (built to the street and jammed together with tiny or non-existent sideyards).

It’ll have an irregular, modified street grid with lot sizes that vary from tiny to half a block but not more.

Roadways will be woonerf (a Dutch term meaning living) streets where cars are guests (but not banned) and pedestrians and cyclists are given priority.

The most valuable land is the property where you can make the highest ROI, return on investment, and where you can develop a livable, creative community where all social classes mix in together—no gated communities please.

If you want affordable housing, you are far better to create it in these communities so: a) you don’t ghettoize folks who need help, b) these people can find and walk to jobs, c) you can use the high rents you get from fair market rental of homes, apartments, condos, shops, co-working spaces, offices, makerspaces, workshops etc to subsidize your affordable uses without needing to beg governments at all levels on bended knee for on-going operating funds.

Hey, in Vienna something like 60% of all residents[1] (including apparently the mayor) live in subsidized housing, not because most of them can’t afford something else, but because it’s a statement of social cohesion.


The most valuable property will always follow what’s called the highest and best use rule, unimpeded by constrictive zoning regulations that today make it quite impossible to create the communities that we actually value the most.

For decades the principle of highest and best use guided town/city/township/county councils, architects, urban designers and economic development officers until zoning rules took over and ruined community development. To paraphrase Sir Winston Churchill, “It is  the  worst possible  system  except for  all  the others.”  It can be defined this way—

Highest  and best  use  for a  property  is achieved  when  the value  created  by its  development  for a  specific  set of  physically  possible, permitted  uses  (its functional  program)  and a  particular  form of  structure  combine to  produce  the highest  present  value of  rents  over the  economic  life of  a  project,” Bruce  M Firestone.

[1] Why rich people in Austria want to live in housing projects, Denise Hruby, GlobalPost, October 26, 2015.


A group of women in their 30s bought this property in the Byward Market[1] (near downtown Ottawa, Canada) about 7 or 8 years ago.


It’s a 4-story townhouse on a lot that is 30 feet by 100 feet. It has a restaurant that occupies the ground floor (with outdoor patio) and basement, a bar on the second floor, a residential use on its third level and an ESL (English as a second language) school on its top floor.

They paid about $2.4 million for it. Everyone told them they were crazy, but five and a half years later they got an offer for $6.5 million.

This represents a 19.9% per annum appreciation in property value.

I asked the women (now in their 40s), “Are you going to sell it?”

“What? No! We have wonderful tenants. It makes great monthly cashflow. Every month we own it, our tenants are (in effect) paying down our mortgage, which will soon reach zero. We are buying and HOLDING, Prof Bruce! What do you think it’ll be worth when we’re your age?”

Well, since they are 20 years younger than moi, that works out to an astounding $245,073,875.52 if it keeps appreciating at the same rate.

So where is the most valuable territory? Not maybe where you thought it was, right?

It all makes sense to me (and presumably to Warren Buffett too who’s been known to say, “Our favorite hold period is forever.”)

Again, here’re my calcs for your review:


[1] Which has some of the characteristics of European towns that I talk about in this essay.


Currently, I am in the Algarve (in southern Portugal) doing some research on how they create livable towns. Here’s a photo essay I put together that will give you a visual dimension for what I have been talking about above—


You don’t have to be a genius to become an accomplished urban designer; you only have to have a tape measure and a camera and come to Europe to learn how.

Visit the small town of Olhão, west of Faro and you will see thriving, wealthy, walkable, animated, livable, mixed-use communities that are built for pedestrians and cyclists where cars, buses and trucks are guests.



Prof Bruce