Commercial zoning can be complex or straightforward. In many markets, finding the correct zoning for your use is becoming more and more challenging. It all depends on the local authorities who segmented the land in accordance with federal, state, and local ordinances, regulations, and laws. Zoning defines what structures can be built, how they are used, and how they relate to other properties. Most often they include the following:
Commercial property types
Allowed commercial uses
Types of buildings (e.g., size, building requirements, etc.)
Outdoor storage: if materials, equipment, etc. are allowed outside
Health and safety and accessibility regulations
All commercial properties within a city are assigned in a primary zoning district. In CRE, these districts may include office, commercial, downtown, historical, agricultural, mixed-use, or industrial areas. In addition, some districts are known as overlay zoning districts where one might combine two zones, such as industrial or mixed use. The regulations for these zoning districts vary in restrictiveness compared to primary zoning. A property located in such district is subject to both primary and overlay provision, but when there is a conflict, the overlay district governs.
Here are five things you MUST consider about zoning when buying, leasing, or investing in CRE:
Check the zoning right away. No matter how interested you are in the property, if the zoning does not match your needs, you might not be able to make the deal work. A broker can help you figure out if the property is a fit for you.
It’s a good idea to ask the city for a zoning letter to identify the current zoning district, permitted uses, and current requirements. This may bring to your attention current or previous issues with the property, including open violations, variances, special permits, conditions, or exceptions. It’s important that you fully understand what is allowable for that building/property and what restrictions are in place.
If you are an investor, consider if the restrictions allow for adaptation as market trends shift. You might want to shift away quickly from office to industrial without having to go through a city zoning board. You may need to apply for a rezoning or conditional use permit. A variance may also be the way to get your deal approved.
Do your homework. Think about the future and what the property and surrounding area will be like in five or ten years. Are there other projects in the works that will impact the area? Often, current zoning can be an extreme benefit or an extreme nightmare. Connect with government planning offices and reach out to CRE brokers to collect valuable clues for changes in the area.
Finally, if the building/property might work, get it under contract and work through these considerations quickly during your due diligence period. This is the time after signing a contract when you inspect the property and finalize your decision. You need to avoid "analysis paralysis.” Working with an experienced broker can help you navigate zoning in our current market.
If you find yourself frustrated with commercial zoning, be sure to reach out to a professional. I’m here to help if you have any questions (612-788-1552 or jeff@CEGspaces.com).
Jeff Salzbrun is the owner and broker of Commercial Equities Group (CEG). As a veteran-owned real estate brokerage, CEG has been involved in many sale and lease transactions, ranging from single offices to 250,000+ square foot buildings. At CEG, we get your deal done. We know space, and we know the CRE business.
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