Working on a similar but not same situation. Small metro / city area with population in the 20-30K range. Eight parcels (out of many dozens of properties in the estate with most in different locations with this particular estate) with same zoning and either adjacent or across the street from each other all commercially zoned and planned. I believe the important question to ask here is whether it is reasonable to assume that you could likely sell all parcels in the market at one time (i.e. the "date of death") to separate buyers. There's maybe 4 or 5 commercial zoned parcels sold in the entire small city area in a year. I think you have to consider a discount for the sale of the group of parcels as a single economic unit to a developer that may take over the development and/or sale of these parcels over the course of years. Of course to get there, I will be reporting the value of each parcel sold to an individual purchaser, but I don't think it is reasonable to think that they could all be sold to separate buyers on the date of death for the estate. It is more likely that they would have to offer the parcels as a single economic unit package and take a discount that would attract a developer willing to develop and sell out the parcels upon completion. The market does not appear deep enough to elicit individual purchases of these parcels on a single date of valuation.
I also certainly think that the parcels would fit the larger parcel definition test of unity of use, contiguity, and unity of ownership. The names of the parcels may be in different LLC's but the same parties maintain beneficial ownership. They just vested different LLC's on some of the parcel ownerships for various reasons over the years.
I would say that you have to use your judgment as to how the market would respond. Also, is it fair to say that the market may not be able to absorb the properties with individual sales in situations like these where you are valuing a group of properties and there is not a deep enough market on that date to reasonably suggest that there would be eight individual purchasers that would all be willing and ready and able to purchase those lots at or at least around the same time. Of course, I presume historical sales data on commercial lots available from the public records or tax search MLS records tells you that is not reasonable or likely and any reasonable projection forward suggests the same.
However, if you are contemplating just throwing every property from the estate (the estate I'm working on has dozens of properties all over the place) into one big discounted economic unit, I would suggest the answer is a firm "No". See the following excerpt from the definition of fair market value that you should be referencing as your market value definition in your appraisal report:
Fair Market Value (IRS Estate Tax Purposes) - Definition
(b) Valuation of property in general. The value of every item of property includible in a decedent's gross estate under sections 2031 through 2044 is its fair market value at the time of the decedent's death, except that if the executor elects the alternate valuation method under section 2032, it is the fair market value thereof at the date, and with the adjustments, prescribed in that section. The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property includible in the decedent's gross estate, which is generally obtained by the public in the retail market, the fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail. For example, the fair market value of an automobile (an article generally obtained by the public in the retail market) includible in the decedent's gross estate is the price for which an automobile of the same or approximately the same description, make, model, age, condition, etc., could be purchased by a member of the general public and not the price for which the particular automobile of the decedent would be purchased by a dealer in used automobiles. Examples of items of property which are generally sold to the public at retail may be found in §§20.2031-6 and 20.2031-8. The value is generally to be determined by ascertaining as a basis the fair market value as of the applicable valuation date of each unit of property. For example, in the case of shares of stock or bonds, such unit of property is generally a share of stock or a bond. Livestock, farm machinery, harvested and growing crops must generally be itemized and the value of each item separately returned. Property shall not be returned at the value at which it is assessed for local tax purposes unless that value represents the fair market value as of the applicable valuation date. All relevant facts and elements of value as of the applicable valuation date shall be considered in every case. The value of items of property which were held by the decedent for sale in the course of a business generally should be reflected in the value of the business. For valuation of interests in businesses, see §20.2031-3. See §20.2031-2 and §§20.2031-4 through 20.2031-8 for further information concerning the valuation of other particular kinds of property. For certain circumstances under which the sale of an item of property at a price below its fair market value may result in a deduction for the estate, see paragraph (d)(2) of §20.2053-3.
https://www.ecfr.gov/current/title-26/part-20/section-20.2031-1#p-20.2031-1(b) - (Title 26 CFR, §20.2031-1(b) Definition of gross estate; valuation of property.)
Anyhow, see the language above such as "every item of property", "particular item of property", "item of property", "unit of property", "each item separately returned", etc., etc. Nowhere does it describe a portfolio sale or discount for all properties in the estate. I also have noted in some market circumstances, there is no portfolio discount when it is a strong market or the type of property is in demand with little supply, etc., etc. In any event, I think you have to be reasonable to presume whether such a transaction for properties that comprise what we know as a "larger parcel" in eminent domain is probable and likely given market circumstances. If the property in individual units likely couldn't be sold at the same time because the market for that property type is not that deep, a combined single economic unit appraisal discounted to the level that would attract another developer to take it over and sell it out is reasonable and probably most appropriate in my opinion.
Do a thought experiment here and take it to the more extreme level where you have a group of 100 lots in a residential subdivision in your estate assuming the decedent was a subdivision developer. I don't think it would be fair or consistent with the above definition to consider each retail price of the lot at the time of death, but rather the price of the unsold subdivision lots as a combined whole of the 100 lots in whatever condition it is in and report that particular property as a single economic unit. The subdivision could never sell all 100 lots on the same day to separate buyers as the market probably dictated a 2 to 4 year sell-out period or some other long time frame when it was developed. The part in the definition about "taking into account the location of the item wherever appropriate" and "most commonly sold to the public" are important factors here. So I think you have to be reasonable for particular groupings of properties and determine if there's even a likelihood that such parcels could be sold to individual buyers on the date of death or if they would most likely have to be bundled to be sold on a particular date if the goal is to sell them on the date or death. I would argue that a large group of parcels of the same use potential in the same location may only be capable of being sold in a bulk combination as individual sales would not be possible given market demand and depth for the purchase of that many parcels or lots in that particular area all adjoining each other at any given point in time. The market is not that deep in some instances to sell all of these parcels on the date of death in one location. This will usually require some subdivision style sell-out analysis to arrive at a supportable pricing in the market for the grouping of lots.
