How Does Zoning Work in CRE?

Written by: Lucro Staff 3 weeks, 2 days ago

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Location, location, location. That sentence is perhaps the most common platitude uttered when discussing the most important factors in real estate investment. To a large extent location is the most important thing in real estate but commercial real estate has another crucially important wrinkle; let’s talk about zoning.

Zoning laws are laws created and put into place by local governments. They work to control the growth of the area, along with the health and safety of the local residents. Whether it’s city or county ordinances, zoning laws affect every business and commercial real estate property. They put restrictions on every aspect of commercial real estate, from the type of business that is allowed in a certain geography to the aesthetic of the building itself. Becoming familiar with the local zoning laws is a critical first step before pursuing any kind of development or adaptive reuse of a property.

What are zoning laws and what are they used for?

Zoning laws can be defined as laws that are created to stop property owners from interfering with one another. They restrict what businesses are allowed to be in what area of a town for safety and health reasons. For example, too many of the same industrial properties next to each could lead to too much noise and pollution in a neighborhood. Zoning laws are what prohibit nightclubs and bars from opening next to schools, and chemical plants next to zoos.

Zoning laws are used to help reduce certain factors such as traffic, parking, billboards, advertisements, air quality, noise levels, and waste management. Zoning laws also work to preserve historic districts and business neighborhoods. Zoning laws can cover the type of business allowed, the aesthetic of the building, its proximity to other properties, or the quantity of certain types of business. For example, there are some areas that allow only two bars per block or one grocery store per block.

Different types of zoning

Those not in the commercial real estate industry generally believe that there are two types of zoning—residential and commercial. While these are two major types of zoning, there are actually five main zoning types that are seen across the country. It’s not uncommon to see areas that have been zoned for multiple uses, such as both residential and commercial. Below are the five major types of zoning and what they entail.

Always check the zoning laws before buying

If you’re considering investing in commercial real estate, it’s important to always check the zoning laws before you buy. Even though you may be buying a property in a commercial zone, there might be restrictions on what kind of businesses can be built or operated. Similarly, when looking for space for your commercial enterprise, never sign a lease before carefully checking the laws and restrictions. Understanding local zoning regulations, the restrictions they impose, and the process for rezoning can help you avoid costly legal troubles down the road.