If you’ve ever dealt with real estate of any kind, then you’ve probably heard of zoning laws, land use ordinances or zoning legislations. Local governments pass zoning laws that dictate what can be built on what land, how those buildings can be used and what rules property owners need to follow with regard to that land, such as when you need a zoning permit.
Typically, zoning laws are specific to one city, district, municipality or county, and zoning legislation exists for all types of real estate, including residential, commercial, industrial, agricultural and recreational.
The type of zoning that applies to you will depend on whether you’re investing in commercial vs residential real estate. Commercial zoning laws regulate what kinds of activities a business or commercial property is allowed to conduct in a specific area, as well as the category of business that can occupy that area. While residential zoning focuses on single-family homes, including single-family rentals, commercial zoning regulates apartment buildings, shopping centers, hotels, offices, industrial facilities, restaurants, etc. “One would look at a zoning map and see what the laws are in the area you’re interested in and therefore be able to understand what you can build or what kind of business you can run in that area,” said Paula Crespo, a Senior Planner at the Pratt Center for Community Development.
The zoning laws for commercial properties control things like building size, height, parking, safety, accessibility, distance from the street and more. For the New York City, for instance, “Zoning regulations for Commercial Districts lay out the rules governing the wide variety of commercial places in the city, including retail centers in Manhattan, shopping centers along arterial highways and the local retail streets found throughout the city’s neighborhoods,” according to the Department of City Planning.
Commercial zoning encompasses all sorts of regulations, said Crespo, depending on the type of property, and where that property is located. Some regulations include:
Lot coverage looks at the square footage of a piece of land as compared to the size of the building, not factoring in height or density. Many districts have laws that regulate the lot coverage of a building in relation to the land, expressed as a percentage. Usually, lot coverage applies more to industrial properties.
Floor area ratio (FAR), like lot coverage, looks at the square footage of the land as compared to the square footage of the building. However, unlike lot coverage, FAR accounts for both vertical and horizontal size. The floor area ratio of a 1-story, 2,000 square-foot building would have the same floor area ratio as a 2-story, 1,000 square-foot building, for instance. “Sometimes it’s about height, but it’s usually more about bulk,” said Crespo. “How much of a building can you build? A part of that will be height, but not exclusively.”
Commercial zoning laws always regulate for a certain number of exits and fire escapes in a building. The requirements vary by district, but larger buildings require more exits and fire escapes than smaller ones, for instance.
Parking ratio refers to the number of parking spaces for a commercial property in relation to the property’s gross leasable area (GLA). Different districts have different minimum ratios for different types of buildings, and the ratio is usually represented as the number of parking spaces per 1,000 square feet. For instance, office buildings might have a parking ratio of five or six, while industrial buildings might only have a ratio of two. Parking ratios also need to comply with Americans with Disabilities Act (ADA) regulations, requiring a certain number of handicapped parking spots.
Commercial zoning also regulates what kind of business you can build where. For instance, a commercial zone might regulate “how wide the street might have to be for a certain type of large business to be there. So you can’t plunk down a huge grocery store on a residential side street, for example,” said Crespo. Certain commercial buildings are therefore limited to specific areas of a district because of how they “impact their surroundings,” added Crespo.
Different types of commercial properties also have different zoning regulations, depending on the property type. For example, multifamily properties will be zoned differently from industrial properties, which will be zoned differently from retail properties.
Usually, multifamily zones also permit single-family homes, whereas most single-family zones only permit single-family. With multifamily properties, you’ll usually come across zoning laws that regulate building density and height. Some zones allow very large buildings, while others might not allow more than three stories, for instance. If you’re building an apartment building, take a look into density bonuses.
Retail and restaurant zoning usually has restrictions on what type of retail property is allowed to be in a certain area. For example, some municipalities have restrictions on where you can build bars and liquor stores. Private businesses also have to abide by ADA rules, requiring accessibility for customers with disabilities.
Areas that are zoned for industrial use are typically required to be farther away from other properties, such as residential or retail properties. To build another property on an industrial zone, business owners will usually need special permission from the district. There are different types of industrial properties, each with varying ordinances. For a light industrial property, which includes some manufacturing, packaging and distribution facilities, they are allowed to be closer to other commercial and residential zones. A heavy industrial property, though, such as mining and power production, causes more noise pollution, waste, smoke and smell, so they need to be a certain distance away from other types of properties.
Sometimes, landowners might want to build a commercial property in a residential area, where commercial properties are not allowed. In certain situations, there are ways to get around the existing zoning ordinances. The New York City Department of City Planning (DCP) calls these changes “discretionary actions,” as “they require the exercise of judgment,” said the DCP. The DCP added, “Discretionary actions can apply to a single, small building or can be as large as a citywide zoning amendment that affects buildings throughout the city,” and all discretionary actions “are subject to some form of public review to ensure that the public can voice their opinions on the proposed action.”
In addition to public review, zoning changes “are all also subject to environmental review, which requires that adverse environmental effects which are considered likely to stem from the action are described and considered by decision makers,” said the DCP. Some ways to go about changing zoning laws include:
One option to change zoning laws is to petition the government to rezone the area, allowing for commercial properties. However, it’s important to note that rezoning is a particularly slow process, and local governments likely won’t accept your petition without a valid reason that makes sense for the community. “I would not call it easy,” said Crespo regarding rezoning. “It’s expensive and will probably require a lawyer. And you won’t necessarily get it approved just because you go through the motions.”
The process of rezoning involves something called the Uniform Land Use Review Procedure (ULURP), said Crespo. ULURP is a step-by-step process to rezone a given area, and it involves preliminary outreach, environmental review, a public hearing and much, much more. For New York, the steps that go into ULURP are outlined in more detail in Chapter 8 of the Zoning Handbook.
Another option developers have is taking advantage of ancillary use codes, if they apply to your specific situation. An ancillary use code permits specific uses of a property that may not exactly align with zoning regulations but are deemed necessary for the local community. For example, a gas station is considered a retail property, but in industrial areas, gas stations are needed for workers that are coming and going. Therefore, in some cases, developers can build gas stations in areas zoned for industrial use only.
Commercial property investors can also get around zoning laws through a zoning variance or a conditional use permit. A variance is an exception to a zoning ordinance given in situations where the zoning law would create unnecessary hardship or difficulty for the property owner. However, a conditional use permit is usually easier to get than a variance. A conditional use permit (CUP) is a permit that requires approval from the city’s planning commission to circumvent certain zoning laws. CUPs are approved under a set of conditions, or “conditional uses.” When applying for a CUP, developers need to go before the local zoning board to argue that their plans will benefit the community overall. One common example of a conditional use permit is when districts allow for home-based business operations in a residential district. Running a business in a residential district violates zoning laws because of the need for signage, parking, etc., but CUPs allow for exceptions to these laws.
Commercial zoning is divided into eight different types: C1, C2, C3, C4, C5, C6, C7 and C8. Each type refers to the range of commercial uses allowed in that district. Different cities have different rules for each zoning type, and in one city, C1 can represent something entirely different than C1 in another city, so for the purposes of this article, we’ll be focusing primarily on New York City zoning.
“C1 zoning districts are intended to serve local shopping needs and maintain the highest level of retail continuity,” said the DCP. These districts allow for a variety of retail stores and “personal service establishments” like restaurants, grocery stores, hair salons, small clothing stores and drug stores. These businesses serve the surrounding neighborhood. “C1 is for businesses that are very locally serving,” said Crespo. “Generally speaking, you’re not going to have people coming from afar,” so these businesses include “things like dry cleaners and bodegas.”
C2 zoning, like C1, is intended for retail, but is “designed for a wider range of locations where retail continuity may be less important,” said the DCP. These include things like movie theaters, funeral homes, bicycle repair shops and other businesses that are not regularly visited day-to-day.
C3 districts allow for commercial uses relating to boating and waterfront recreational activities. These include “docks and mooring facilities,” or “bicycle shops and candy stores,” said the DCP.
All three of these districts allow a wide range of commercial properties, including retail and department stores, offices and hotels, said the DCP. However, there are a few differences between the three. C4 districts allow some amusement and entertainment businesses, like bowling alleys and skating rinks, while C5 does not allow for entertainment use. Instead, C5 allows for specialized custom manufacturing like jewelry-making. C6 is the most lenient of the three and permits everything that C4 and C5 allow, in addition to home maintenance and repair services.
C7 districts only allow for entertainment and amusement facilities, which can include “ice cream parlors, restaurants, delis, gift shops and toy stores,” said the DCP.
C8 districts allow all commercial and general services, according to the DCP.
Commercial zoning encompasses a wide range of rules and regulations. When building a commercial property, be sure to read up on your city’s specific zoning laws so that you have an understanding of what you can build and where. And if you need a change the zoning rules for your specific property, each district usually has a handbook or a set of guidelines explaining how to apply for zoning changes in that area.
