4.3.2.2. Market Demand.Any highest and best use requires a showing of market demand. As the Supreme Court observed, “most things…have a general demand which gives them a value transferable from one owner to another…[T]his transferable value has an external validity which makes it a fair measure” of just compensation.295 Accordingly, “it is generally accepted that there must be demonstrated an actual profitable use or a market demand for the prospective use.”296 To meet this standard, “objective evidence substantiating [the appraiser’s] market demand analysis” is required.297 “Value implies demand and a buyer”—and each must be proven, never assumed.298 

Highest and best use cannot be predicated on demand created solely by the government project for which the property is acquired; as the Supreme Court held, “[i]t is not fair that the government be required to pay the enhanced price which its demand alone has created.”299 To illustrate, a property’s highest and best use cannot be commercial rock quarrying if there is no likely market demand for gravel except in connection with the public highway project for which the property is acquired.300 

Similarly, the government’s intended use of the property—such as a military bombing range, national monument, or habitat conservation—cannot be considered unless there is competitive demand for that use in the private market.301 As the Ninth Circuit reasoned: 

[V]alues resulting from the urgency or uniqueness of the government’s need for the property or from the uniqueness of the use to which the property will be put do not reflect what a willing buyer would pay to a willing seller . . . . [G]overnment projects may render property valuable for a unique purpose. Value for such a purpose, if considered, would cause “the market to be an unfair indication of value,” because there is no market apart from the government’s demand.302 

The Sixth Circuit recently explored what must be shown “to prove the existence of a market demand for something.”303 To show market demand for a proposed use of hotel development, examples of “objective evidence substantiating [a] market demand analysis” would include proof of preliminary discussions with a prospective hotel chain, market studies showing sufficient demand for a hotel, or market sales of land for hotel development purposes.304 With no such evidence presented, hotel development was correctly excluded from consideration as the property’s highest and best use.305