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Zoned Out Over CRE Definitions? Commercial Zoning Explained

One of the ways that Biscred accommodates searches for commercial real estate owners, operators, developers, and investors is by "Company Asset Experience." You'll see options for entertainment facilities, affordable housing, industrial, life sciences, and more. These asset experiences parallel the ways that commercial real estate is zoned for use.

What does it mean when a building or property is zoned commercial? How are the various commercial zoning designations determined? What are all the commercial zoning definitions?

The definitions of commercial zones will differ from state to state, county to county, and city to city. In this post, we'll provide a summary of the general definitions of commercial zones and offer guidance on how to find information on commercial properties.

Commercial Zone Definition

Commercial zoning is a designation that municipalities use to determine how land and buildings can be used. Generally speaking, zoning laws are intended to limit or control what businesses can do in certain areas, and also to determine tax bases for property owners. Use limits of CRE may include things such as:

  • Noise levels

  • Building height

  • Setback from the roadways

  • Parking spaces

  • Signage

  • Heavy vehicle access

  • Waste management

  • Air quality

  • Number and types of businesses within a given area

What Are Commercial Zoning Classifications?

Commercial zoning is a critical component of urban planning and land management that involves categorizing different areas of land for specific types of use. Think of it as a carefully curated puzzle where each piece has a designated spot to ensure the overall picture is coherent and functional.

When you come across a sign indicating "zoned commercial," it signifies that the property is authorized for commercial activities – a realm where businesses, services, and structures can operate within specific parameters defined by local regulations.

At its core, commercial zoning serves several key purposes:

  1. Orderly development: By segregating land uses, commercial zoning helps prevent chaotic and incompatible combinations of activities. This ensures that noisy factories don't end up next to peaceful residential neighborhoods. It also makes sure that commercial infrastructure supports businesses without disrupting local residents. Does this always work perfectly? Unfortunately not; however, zoning laws establish a basis for businesses and residents to live together.

  2. Economic growth: Commercial zones are designed to foster and support economic activity and tax support. Commercial zoning contributes to job creation, community investment, diversified tax bases, and overall local prosperity by providing dedicated spaces for businesses to flourish.

  3. Community harmony: Zoning prevents conflicts between different land uses. For instance, a school and a nightclub would be better situated in separate zones to avoid disturbing students and nighttime revelers.

Types of Commercial Zones

Commercial real estate zones vary based on how city and state governments decide to organize themselves.

Basically, there are four common types of real estate zones:

  1. Residential zones: Apartment houses and rental communities are residential, yes, but they are also commercial because they are owned and operated as businesses. These areas are designated for housing and are often divided further into subcategories like single-family residential, multifamily residential, and mixed-use residential. Think of a peaceful suburban neighborhood where houses and apartment buildings coexist.

  2. Commercial zones: As the name suggests, these areas are dedicated to businesses and commerce. Shopping centers, office buildings, restaurants, and entertainment venues are found here. The bustling streets of a downtown area are a classic example of a commercial zone.

  3. Agricultural zones: These zones are reserved for agricultural and farming activities. Fields, orchards, and pastures fall under this category, ensuring that food production remains possible but contained in specific areas.

  4. Industrial zones: Industrial zones house factories, warehouses, and manufacturing facilities. These areas tend to be strategically placed to minimize noise and traffic disruptions to residential and commercial areas.

Exploring Types of Commercial Real Estate Zones

The following are common types of commercial real estate zones and the buildings or structures that fall within them:

  1. Retail zone: A bustling hub for shopping enthusiasts, retail zones are home to stores, boutiques, and shopping malls. Rodeo Drive in Beverly Hills, where luxury boutiques attract shoppers, is an example of a retail zone.

  2. Office zone: Skyscrapers and business parks dominate office zones, hosting professional services, corporate headquarters, and co-working spaces. The Empire State Building is a prime example of an office zone, but so are the office buildings where you might visit your accountant, dentist, lawyer, etc.

  3. Industrial zone: These zones accommodate heavy machinery and manufacturing processes. Factories, warehouses, and distribution centers thrive in industrial areas while keeping such activities out of incompatible areas like residential or commercial zones.

  4. Mixed-use zone: A versatile blend of residential and commercial spaces, mixed-use zones foster vibrant communities. San Francisco's Fisherman's Wharf is an example of a mixed-use zone with a mix of restaurants, shops, and attractions alongside residential units.

  5. Entertainment zone: These areas focus on leisure and entertainment, hosting theaters, concert halls, and amusement parks. The famous Las Vegas Strip is an example of an entertainment zone.

  6. Hospitality zone: Designed for travelers, hospitality zones encompass hotels, motels, and resorts. The famous Miami Beach offers a range of hospitality establishments along its stunning coastline.

It’s important to note that commercial real estate zones vary based on how city and state governments decide to organize themselves.

Can You Rezone an Area?

Areas can be rezoned to better accommodate the evolving needs of a community. Rezoning involves the process of modifying the designated use of a specific area and requires approval from local authorities or zoning boards. This can be pursued to adapt to shifting community priorities, encourage economic growth, or address changing demographics.

Typically, a public hearing is required, which is why you will see signs like this, occasionally, notifying the public that someone has applied to rezone an area for commercial use.

Photo 157865808 | Zoning Law | Modfos from Dreamstime

Answers to FAQs About Commercial Zoning Codes

How do you check zoning?

Zoning information is public record. Large and midsize communities provide access to zoning information online, but smaller communities may not. You can usually check zoning information through the local government's planning or zoning department. Many municipalities provide online resources, zoning maps, or interactive tools on their official websites, enabling residents to search for specific addresses or areas to ascertain their zoning designation. You can also contact your local municipal planning or building department. They can provide guidance and point you in the right direction.

Can you build a house on commercial land?

Generally, no. CRE that is designated for commercial use will need to be rezoned as residential or mixed use. A builder or property owner can apply to their local zoning board to change the zoning. The most reliable answer to this question would come from your local government. Look for your city or town's zoning board, division, or office (also sometimes called planning commissions).

Can you live in a property that is zoned commercial?

People can live in or on property that is zoned as mixed-use or multi-family commercial, such as in an apartment complex or retail-residential neighborhood. Living in other types of commercial properties depends on your local code enforcement laws and offices. Best to check with them.

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