Commercial zoning laws regulate how people develop and use land for business. These frameworks, which vary by jurisdiction, dictate the location, activities, parking requirements, building size, and aesthetics of commercial properties. They apply to everything from small stores to industrial and office complexes, from single-family homes to mega malls.
If you are a commercial real estate professional, understanding the nuances of commercial zoning laws can help you maintain compliance. It can also help you deliver more strategic investments and leverage your projects for higher returns. Here is what you should know about commercial zoning laws in the US.
Zoning Classifications and Definitions
Most states categorize zoning districts based on their intended use. Accordingly, there are five zoning classifications: residential, commercial, mixed-use, industrial, and special districts.
Commercial zones are typically large-scale businesses like factories and malls, with further categorizations based on the type of business activity taking place on the land. These subcategories cover different businesses, such as:
- Retail spaces – Stores, shopping centers, and other businesses that sell goods directly to consumers.
- Restaurants – Food-related establishments that make, sell, or deliver food
- Offices – Spaces that host professional, business service, and administrative companies. Examples include law firm offices, advertising agencies, and large corporate buildings.
Commercial zones are usually assigned a code denoting their use. The more common commercial zoning codes in the US include:
- C-1 (Local Commercial) – Typically small-scale retail and service businesses catering to a neighborhood, such as cafes, dry cleaners, and grocery stores
- C-2 (Community Commercial) – Community businesses not covered under C-1, including hotels, movie theaters, restaurants, and department stores
- C-3 (General Commercial) – Large-scale commercial businesses like car dealerships, shopping malls, and wholesale retailers
- C-4 (Central Business District) – Mixed-use developments in the city center and downtown area, including retail, service, and office spaces
- C-5 (Highway Commercial) – Automotive-related businesses located near major highways and roads, like motels and gas stations
- C-6 (Heavy Commercial) – Large footprint commercial businesses like mini storage, vehicle sales, warehouses, and building materials stores
- O-1 (Professional Office) – Smaller offices for professionals such as doctors, accountants, lawyers, and real estate agents
- O-2 (General Office) – Offices not covered under O-1
Permitting Processes for New Construction
Federal and local governments regulate new constructions to ensure safety and compliance with local zoning laws, building integrity, and more. Although permitting processes vary across jurisdictions, they typically involve the following steps:
- Pre-application planning, which involves reviewing your project plan with regulation experts, engineers, architects, and other experts.
- Document submission, including engineering plans, architectural drawings, and environmental impact assessments
- Review process
- Feedback address, including submitting additional documents
- Permit approval
If you cannot find information on permits and property titles on government websites, consult the local planning department or zoning office. You can also consult a real estate zoning expert.
Success at this stage of the project can be greatly improved by building strong relationships with local governments and experts who are key to the process.
Land Use Restrictions and Variances
In addition to defining how land real estate is used, commercial zoning laws also impose restrictions on the types of business allowed in a zone. Industrial zones, for instance, may allow factories but prohibit restaurants. Understanding land use restrictions can help you decide where to locate your project.
Under some circumstances, you may get approval to use commercial land or property for an activity other than those provided in the applicable ordinance. This is called a variance. With a variance, you can also surpass the minimum lot size requirements and property line setbacks.
You must demonstrate "hardship" to obtain a variance. This involves proving that you can only make a reasonable profit on a property if it deviates from the applicable ordinances.
Impact of Zoning on Property Values
Zoning laws do more than dictate where you locate your business project; they also impact property value. Brokers and investors use zoning codes to assess the profit and development potential of a given parcel of land. For instance, properties in a high-demand retail zone are likely to attract higher market prices than those in a local community zone.
Similarly, zoning changes can increase a property's value. If a property previously zoned in a residential area gets approved for commercial use, its increased usability could elevate its value.
Compliance With Local Regulations
Zoning classifications and their corresponding codes vary from state to state. In New York, for instance, commercial zoning codes range in complexity from C-1 to C-8. Each code dictates the type of property that can exist in a given zone, the activities that can be conducted there, and other details like construction and parking requirements. They also often vary from one municipality to the next.
When considering an investment in a new location, it is crucial to understand its zoning laws. Noncompliance can expose your project to site audits, legal liability, and other penalties. Most states have an online repository of the applicable laws in different commercial zones. These sites also offer other zoning information, including zoning codes, maps, and application documents for variances and permits.
Complying With Local Zoning Laws for Successful Investments
Understanding commercial zoning laws can help you avoid the legal pitfalls of noncompliance. Moreover, they can help you maximize investment profitability and feasibility for your clients.
Because zoning codes vary significantly across jurisdictions and often change, you need a keen eye to understand how they impact land real estate investments.
To understand more about commercial real estate zoning compliance, find an RLI member and land consultant in your area who specializes in commercial real estate development.