[adrianratnapala]

It is not always economically rational though. The US has a history of using eminent domain to grab neighbourhoods full of small businesses so that they can be turned over to a big development projects of nominally higher value. Then the big developer pulls out or goes bankrupt, and the result is a ruined, rat-infested empty lot.

Those cases involving eminent domain and rats are the most dramatic, but it works at a more pedestrian level too. Say a government wants to dispose of some disused rail-yard or something. A developer who says "I'm going build some big shiny shops and attractions here" has better optics than a developer who says "I'm going to lay down some infrastructure and parcel the land up to whoever wants to buy it, nature will decide what the land is used for".

The latter is actually quite likely to produce the higher economic value land use, but there is no good political narrative. And in a world of strict zoning rules, there might not even be a legal framework for it.