Understanding what is plottage in real estate

If you’re wondering, what is plottage in real estate, this blog is for you. Here, we’ll explore how the concept can significantly impact property valuation and development potential.

In urban areas, where space is limited, developers often use plottage to their advantage. They assemble smaller parcels and construct high-rise buildings with commercial and residential spaces. The resulting larger parcel typically has greater value due to its enhanced potential uses. In suburban or rural areas, developers might combine smaller parcels, each with a single-family home, into a larger contiguous parcel. The idea is to create residential subdivisions with multiple homes, parks, and other amenities, thereby increasing the overall property value.

What is plottage in real estate?

Plottage refers to the method property owners use to combine smaller parcels of land into a single, larger parcel – thereby increasing the value of the real estate. This increase happens because the value of the combined, contiguous parcel is often greater than the sum of the individual parcels. The new parcel of land can offer more significant development opportunities or a more appealing living configuration than the smaller parcels could on their own.

For example, individual parcels of land might have limited use or value. But, when these smaller parcels of land are combined, the new larger parcel might be suitable for more extensive development projects. This could include a mixed-use complex, a commercial center, or a large residential building.

People often mix up the terms plottage and assemblage, but they mean different things. Plottage refers to the increase in value that happens when you combine smaller parcels into a single larger one. On the other hand, assemblage is the actual process of purchasing and combining those smaller parcels. For commercial real estate investors, both concepts go hand in hand, as assemblage leads to plottage value.

How does plottage impact property value?

The increase in value from plottage can be because of several factors:

• Combining small land parcels might make it possible to change the zoning laws or land use designation. For example, a new zoning classification could allow for a higher density of development. Or, a different type of use such as commercial rather than residential.
• A single larger parcel of land often offers a more favorable size or shape. It’s more suitable for certain developments. For example, a larger rectangular lot may be more practical for building a large commercial building compared to smaller, irregularly shaped lots.
• A larger, contiguous parcel might provide better access to roads, utilities, and other infrastructure. This can make the land more attractive for development, increasing its value.
• The local real estate market’s demand can also affect the plottage value. In areas where there is a high demand for certain types of properties, combining smaller parcels into a larger parcel can significantly increase the property’s value.

Key takeaway

This powerful concept of plottage shows how combining smaller adjacent parcels into a larger, contiguous parcel can create more property value. No wonder it’s a valuable strategy for real estate developers and investors. 

Knowing what is plotting in real estate, and how to utilize it, can help you maximize the potential of your real estate investments and achieve significant financial gains.

Read more: NAICS code for real estate investment

Written by Ramona Sinha. December 14, 2024

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.