Commercial Real Estate Zoning Laws – What Are They and Why Do They Matter?

Understanding zoning laws in your area is essential to choosing the right commercial property in the right location. Commercial property zoning is regulated by local governments and plays a pivotal role in determining the use of land and buildings in a specific area. Whether you’re a property owner or developer, having a proper cognizance of the local regulations and rules in your commercial zone will shield you from time consuming and costly misuses.

Why Commercial Zoning Matters

While residential zoning determines the structure and design regulations of single-family homes in residential areas, commercial zoning encompasses all types and categories of commercial real estate – from industrial facilities to office buildings to shopping centers. Commercial zoning laws regulate both building size and design as well as outdoor features and usage requirements. While zoning requirements vary by state and area, some general concepts that are directed by zoning laws for commercial spaces can include:

Permitted Uses

The type of zoning that a building or property is under will determine what activities and uses can take place on that property. Zoning requirements help local governments to make sure that acceptable uses are taking place in specific areas. For example – that there isn’t heavy industrial pollution happening in a shopping and dining district. Usually, properties zoned as “mixed use” will be in higher demand and have a higher property value than those zoned for one specific use only.

Lot Coverage

Lot coverage determines the percentage of the parcel that can be taken up by building or structure. It can also determine how much square footage can be used for parking space, driveways, walkways, and additional structures. Lot coverage is typically used in industrial zoning.

Floor Area Ratio

Floor area ratio (FAR) is similar to lot coverage in that it takes into account the square footage of the building compared to the entire property. In addition, though, it takes into account the density or height of the building. The floor area ratio is found by dividing the total building floor area by the gross lot area. It’s expressed as a decimal number.

Signage Requirements

Zoning ordinances regulate signage requirements for businesses. This often includes rules such as sign placement in relation to streets and sidewalks, sign size and height, design, content, illumination, and more. Signage requirements help to ensure safety, create consistency and aesthetics in an area, and protect the right to free speech while also considering the public’s welfare.

Parking Requirements

Zoning influences the parking setup that a business can have. Parking requirements in zoning might determine factors such as how few or how many parking spaces are allowed, the size of the spaces, and the size of the aisles.

Fire Exit Regulations

Properly following commercial zoning laws ensures the building occupants’ safety in case of a fire. Regulations in this category commonly include the number and type of fire exit doors, emergency escape windows, fire escape stairs, and limiting obstructions near fire escapes. There are also regulations for fire alarms.

Pollution

Heavy industrial use properties can cause a significant amount of pollution to their neighbors and surrounding communities. Zoning laws take into account pollution levels in categories such as noise, emissions, light pollution, chemicals, and more. Local governments use methods such as targeted mitigation efforts and implementing buffer zones in order to decrease potential pollution. Heavy industrial zones are also typically located farther away from residential and commercial areas in order to avoid introducing pollution into more highly trafficked areas.

Other common topics addressed in commercial zoning requirements include:

• Building height
• Building density
• Building design
• Distance from roadside
• Safety
• Access requirements
• Waste management
• And more

Not only do zoning regulations for commercial properties influence permitted uses of the property as well as practical building and infrastructure requirements, but they can also influence the value, market demand, and future profitability of the property. Properties with more flexible zoning regulations tend to be in higher demand as they can host a wider variety of uses. On the other hand, properties in commercial areas with restrictive zoning laws are generally lower in demand.

It’s important to understand both the zoning requirements you’ll need for your commercial development as well as the local zoning regulations in your area. The process of petitioning for rezoning is slow, expensive, and difficult, and is often completed without achieving the desired result. Therefore, it’s much more effective to thoroughly understand your zoning needs before jumping into a commercial real estate investment.

Types of Commercial Zoning

The main types of zoning in commercial real estate include:

Light Industrial

Industrial zones are split into light industrial and heavy industrial. Light industrial zoning is typically used by businesses in manufacturing, distribution, and packaging. These types of businesses don’t tend to cause a significant amount of pollution or noise, and they can be located closer to residential areas. Commercial businesses in light industrial areas are usually working on products that are closer to the consumer level.

Electronics manufacturers, print shops, wholesale businesses, storage facilities, auto repair shops, and cabinet shops are just a few examples of light industrial commercial use businesses. These types of businesses are generally not using heavy machinery.

Depending on its intended use, industrial outdoor storage (IOS) properties can be developed in a light industrial zone.

Having a property rezoned from light industrial to heavy industrial can be quite difficult.

Heavy Industrial

Heavy industrial zones are used by companies that cause a significant amount of pollution – such as noise, smoke, waste, and smell. They often utilize heavy machinery and make complex products. Because their more significant environmental concerns have a consequential effect on their neighbors, these types of properties are located farther away from other commercial areas and residential communities.

Heavy industrial use properties house power plants, chemical manufacturing facilities, mining facilities, heavy construction companies, and industrial outdoor storage facilities, among others.

Commercial

Commercial zoning is often divided into separate categories for different commercial activities and uses. Retail stores, grocery stores, malls, restaurants, entertainment venues, and office buildings are all types of businesses that fall into the commercial zoning category. Most of these businesses serve residents of the community and are often located in a commercial zone such as a downtown area or in other popular shopping and dining areas.

Each category has its own set of rules and restrictions on development and operation on the property. These can vary by state and area.

Agricultural

Agricultural zoning is applied to areas intended for agricultural use and production. Often, this type of zoning is not on the radar for commercial developers, but some agricultural commercial businesses work in these zones.

Agricultural zones are most often used by farmers and ranchers. They can also be used for more commercialized agricultural businesses such as orchards, agri-tourism, and farm retail.

Mixed Use

Mixed-use zones are areas that allow residential, commercial, and/or industrial uses to live together in one area. Often, these areas are walkable and create a sense of community in the area. The close proximity of residential and commercial use properties also boosts economic growth by making it easy for residents to patronize local businesses.

Usually, there are at least three types of commercial uses taking place in one mixed use zone, creating a live-work-play area and a gathering spot for locals and visitors. These uses may include restaurants/retail/entertainment, office use, residential, hotel, or parks and recreation.

Vertical mixed-use developments are mixed-use properties that incorporate multiple uses (such as office, retail, dining, or apartments) into one vertical building with multiple floors.

Properties in mixed-use zones are often the most expensive due to their versatility.

Is Rezoning Possible?

Rezoning is a complicated process and is not always successful. It’s often attempted by developers desiring to change a residential zone to a commercial or mixed-use zone. The rezoning process involves petitioning the local government and can be long, expensive, and time consuming. It generally includes activities such as submitting an application (and paying application fees), attending council zoning meetings and public hearings, environmental reviews, and plenty of waiting. The process often takes 6-12 months or more.

While rezoning has the potential to increase property values and allow for more ideal usage of the land, it’s a difficult process and many times does not yield the desired result. Often, lawyer fees are also involved.

For investors and property owners, the best bet is usually to look for a property that’s already properly zoned for your desired usage.

Commercial Zoning in Charlotte

Zoning laws and terms vary by local community. It’s important to understand the distinct terms and zoning regulations of your local zoning ordinance. In the metro Charlotte area, here are some zoning categories you’ll commonly hear.

• ML-1. This is part of the Manufacturing and Logistics Zoning District and is used for light industrial, such as warehouse and distribution properties.
• ML-2. Another part of the Manufacturing and Logistics Zoning District, ML-2 accommodates more hazardous or noxious industrial uses, such as “truck terminals, quarries, and waste management facilities“. Both ML-1 and ML-2 zoning districts have distinct land use regulations and local rules including minimum lot length, maximum building height, minimum setback distances, minimum parking requirements, and more.
• CG. CG references General Commercial Zoning District. These are general developments, “typically located at key intersections or organized along arterial streets.” These districts accommodate pedestrians and automobile access.
• CR. The Regional Commercial Zoning District is intended for commercial use that’s regionally significant and/or large scale. Regulations for this district ensure that there’s proper compatibility and safety for neighboring usage.
• RC-1. The Research Campus Zoning District accommodates taller structures in campus areas and mixed-use developments.
• I-1. This term can also refer to light industrial zoning.
• I-2. I-2 can refer to heavy industrial zoning.

Other types of commercial zoning designations around the greater Charlotte area include NC (Neighborhood Center), IMU (Innovation Mixed-Use), and OFC (Office Flex Campus), among others.