What is assemblage? How it relates to commercial real estate?
Assemblage presents a unique development strategy that can greatly benefit both buyers and sellers if proper market analysis is conducted. The basic idea involves pursuing an area of land that has more value than current occupants realize. Interested parties identify two or more adjacent lots that have the potential to be combined. The larger combined lot resulting from this combination provides many more development opportunities and increased land value. Assemblage developments can either be for commercial or residential property development uses.
A simple assemblage scenario involves two adjacent lots. Both lots could be similar in size – 90 feet wide, for example. They could both be priced at $300,000 independently. They could both contain two small homes next to a multi-family building. The highest and best use for the two lots that the houses sit on is likely not being met. Their combined potential lot size of 180 feet wide is much more appealing for development. Because of this, the value could potentially be greater than $600,000 after they are combined since the assemblage dramatically increases the development possibilities for this space. A person interested in an assemblage deal would approach the two small house owners pitching an idea to purchase both pieces of land. If the area that the houses are in is predominantly a rental area, then it could make sense to develop a multi-family development on those lots.
The term plottage is used to describe the result of an assemblage development. Plottage is the new value created by the assemblage deal.