After World War II, industrial space was in high demand and industrial zoning was born. As the American Planning Association explains, the country was ready to produce more consumer goods, but “industrialists soon found themselves faced with a great shortage of industrial land.. When zoning laws and zoning permits were established to regulate land uses, many government officials wanted to limit the amount of land used for industrial zones. They did so to protect residential and commercial neighborhoods from factories and their accompanying smoke, noise, traffic, and other types of pollution. In the 1950s, a group of business and planning organizations came together to attempt to balance the need for more industrial land with the desire to not wreak havoc on residential neighborhoods. To bridge the gap, they created more options for industrial zoning. They regulated where factories and manufacturing plants were located and came up with requirements for how and where to separate them from residential areas. This led to thriving industrial districts across the country.
Today, manufacturing may be on the decline in some states, but if you’re planning to build in an area zoned for industrial use, whether it’s for a self-storage facility, transforming a decaying factory into residential lofts, or even building a whole new manufacturing facility, it’s important to understand what’s allowed, what’s not, and how to navigate your city’s rules.
Zoning is a series of laws that determine how land is used and what is allowed to be built on a particular piece of property. Industrial zoning refers to land that permits the manufacturing of industrial products, factories, power plants, warehouses, and other uses that are important to that area’s economy. This includes spaces that create, store or distribute products, or produce or refine energy or fuel. In some cities, this can also include film production, construction and distribution centers, transportation hubs like airports, or municipal services like sewage treatment plants. The exact permitted uses vary by city. When the American Planning Association first developed the principles of zoning, and specifically industrial zoning, they grouped different types of industrial businesses and zoning permissions by the impact that these industries had on their surrounding areas. “Zoning districts would be described by listing the measurable limits of noise, smoke, odor, vibration, glare, etc. that would be permitted for any industrial use in that particular district but the uses would not be listed by name.” In this case, it was more important not to limit the specific kinds of industry but instead focus on specific effects that had to be contained within these districts so as not to impact residential areas. Later on, different cities added regulations for use as well as regulations for impact.
Commercial and industrial zoning both involve non-residential or at least non-single family home land, but there are key differences between the two types of zoning. Businesses in areas zoned for commercial use, as Wicklaw noted, generally have some sort of interaction with the public. Commercial zoning can include retail stores, offices, restaurants, entertainment venues, and multifamily buildings. Areas zoned for commercial use are likely to have more regulations on noise, pollution, traffic requirements. They also have different requirements for lot size and how far the building is setback from the curb. Industrial zoning is tied to manufacturing and fabrication, explained Adam Friedman, Director of the Pratt Center for Community Development. He added, “And that fabrication process is going to have sort of ripple impacts. It’s going to generate more noise, it’s going to generate more vibrations. It might generate more car traffic.” Facilities located in industrial zones make the products that are then sold in commercial areas. They produce the energy that powers our residential and commercial spaces, or like airports or bus depots, they serve as a transportation hub between differently zoned neighborhoods.
When applying for zoning permits, you’ll likely need to differentiate between light industrial zoning and heavy industrial zoning. Here’s what each one means.
Light industrial zoning includes manufacturing practices and spaces that don’t use capital-intensive machinery or production equipment. Activities in light industrial zones are generally more consumer-focused than heavy industry, producing products for end-users rather than as intermediaries for uses in other industries. For example, a light manufacturing plant might make toys; a heavy manufacturing plant might make a specific part or material that the toy company needs to put inside the toys, or they may generate the power that fuels the toy factor.
Examples of light industrial uses include but are not limited to:
In contrast, heavy industrial zoning involves industries that use capital and energy-intensive machinery to produce large and complex products. Unlike light industry, the products made in heavy industrial zones are less likely to be used by consumers and more likely to be targeted to other businesses that may or may not eventually use them in consumer-facing products. For example, solar power is light industry (think solar panels on your home), and oil or natural gas production is heavy industrial (used to power buildings, cars, and entire cities).
Examples of heavy industrial zones include but are not limited to:
Every city has specific requirements for their types of industrial zoning and how they organize permitted uses in specific areas. For this article, we’ll look at the basic industrial zoning categories for New York City as an example of how a city or town regulates its land use for industrial purposes. In New York City, there are three types of industrial zoning that are differentiated from each other by the level of industrial uses permitted, the performance standards they must adhere to in terms of the amount of noise, traffic, and pollution, and the number and type of non-industrial uses permitted. Each of these overall groups has sub-districts that might allow slightly different uses, but we’re focusing on broad categories here.
These districts allow a combination of light industrial uses, commercial uses (C-1, C-2 and C-3), and a limited number of community uses. An M-1 district might include a commercial bakery, a small-scale auto repair shop, and perhaps a community center. These districts, according to the New York City Department of City Planning, act as a kind of border or transition between commercial zones and industrial zones. In some cases, a heavier manufacturing use, like a fuel depot, may be allowed in an M-1 zone, but that facility would face more stringent regulations and performance standards for noise and environmental pollution than they would if they were located in an M-3 district. These districts also have the lowest Floor Area Ratio (FAR), which is the correlation between the size of the lot the building is constructed on and the amount of floor space that can be built on that area.
M-2 districts are intended to be a transition point between light manufacturing in M-1 and heavier manufacturing in M-3. They tend to be located in waterfront areas. They have many of the same uses as M-1 districts but without the community facilities, and with fewer options for commercial and retail stores. Hotels are not permitted in these districts either. Except in special circumstances, no residences are permitted in either M-2 or M-3 districts. Also, as long as the M-2 district doesn’t border a residential one, it can have more smoke and noise than M-1. The Floor Area Ratio is a little higher too, with more room to build, but again, not as high as M-3.
M-3 industrial districts generate the most noise, pollution, and other noxious uses out of all three types of manufacturing districts. They were originally designed for power plants, chemical plants, and foundries, but now tend to house recycling facilities and cement production. Most M-3 districts have the highest allowed amounts of noise and pollution as compared to M-1 and M-2 districts, unless they border residence districts. These districts have the highest FAR, given the amount of space needed for kinds of facilities built in M-3 zones.
First you’ll want to research the area you’re planning to build in and see what’s permitted, what’s not, and what you’ll have to do to earn a building permit.
You can always talk to local banks and credit unions to find financing for your industrial development or redevelopment project. Private lenders and debt funds are also an excellent option, especially if you’d like access to industry expertise and flexible financing. Either way, you’ll need a commercial mortgage broker that is plugged into a vast network of lenders to find the best terms and present yourself professionally.
At the beginning of the pandemic, recalled Friedman, “there was this tremendous gap in personal protective equipment. There weren’t enough masks, there weren’t enough gowns. And New York City went through this process of trying to secure stuff to be made locally and was able to do quite a bit of that.” That was a huge help towards enabling New York’s healthcare system to function, but it was also a warning sign. As the City continues to convert industrial zones to commercial and residential districts, “we don’t have as much capacity to respond,” Friedman said. He added that the same is true for climate change. Not allowing for zoning that would incentivize renewable energy or other resiliency measures “puts the functionality of the city at risk.” That leaves an opportunity for developers all over the country to consider how they can take advantage of industrial zoning. They could build facilities that would allow them to take advantage of healthy markets for things like solar panels and electric cars. While some manufacturing has been moved overseas, COVID proved there is in fact still a need for it in America. If you can navigate the zoning codes, your industrial real estate project may have a promising market.
