What every cRE investor needs to know about zoning before buying
Zoning is one of the most overlooked—but absolutely critical—factors in commercial real estate investing. Before you ever run your cap rate calculations or start negotiating terms, zoning determines what you can and cannot do with a property. It shapes everything from who you can lease to, to what kind of tenants you can attract, to whether your business plan even works at all.
A flex space that’s zoned industrial may allow you to lease to a logistics operator or a manufacturing tenant—but that same building in a commercial zone could restrict your options to retail or office users. And if you buy a building that’s out of compliance with current zoning regulations? You could be facing expensive legal battles, permit issues, or a complete stall in your investment timeline.
In this blog, we’ll break down the zoning essentials every CRE investor should understand before buying a property. From use categories and zoning overlays to variances and value-add plays, this guide will help you ask the right questions and avoid costly mistakes. Whether you're buying your first small warehouse or adding to a portfolio of mixed-use developments, zoning can either be your greatest advantage—or your biggest risk.
What zoning really means in commercial real Estate
At its core, zoning is a city or county’s way of organizing land use. It tells you what type of activity can take place on a given parcel—whether that’s residential living, industrial manufacturing, retail sales, or office use. But it goes beyond just “what you can build.” Zoning regulations also dictate how you can build it, how much of the land you can cover, how high you can go, and even how many parking spaces you need to provide.
Common zoning elements include:
Use category: (e.g., residential, commercial, industrial, mixed-use)
Density and FAR (Floor Area Ratio): how much square footage you can develop
Height restrictions: maximum building height allowed
Setbacks and buffers: how far the building must sit from the lot line or neighboring uses
Parking requirements: based on tenant type or building square footage
Lot coverage: percentage of a lot that can be covered by structures
Green space or open space ratios: especially in urban or planned development zones
Zoning also interacts with other regulations—like building codes, environmental restrictions, and ADA compliance—so it’s critical to view zoning as just one layer of a broader due diligence process.
Understanding zoning at this level is key because it defines the range of possibilities for your investment. A building that looks perfect on the surface may not meet code—or may require a lengthy approval process to be used the way you intend.
Example:
A 10,000 SF warehouse with 18-foot ceilings in a CS (Commercial Service) zone might allow light automotive service and office use—but prohibit manufacturing or storage of flammable materials. Meanwhile, the same property in an IR (Industrial Restrictive) zone could serve more intense industrial tenants. And if located within a mixed-use zone like MUL, it could even support a combination of office, showroom, and small-scale retail uses.
Another example: a property located in a floodplain or historic overlay might appear ideal on paper—but its zoning restrictions could significantly limit redevelopment potential or increase permitting timelines.
Zoning isn’t just a limitation—it’s a roadmap.
When you know how to read zoning codes, you can:
Spot underutilized properties with development potential
Identify legal non-conforming uses (grandfathered in, but valuable)
Avoid costly delays and surprises during lease-up or redevelopment
Explore repositioning opportunities by understanding what’s allowed by right vs. what requires discretionary approval
Before you even walk a property, you should know the zoning designation and understand what it allows—and what it doesn’t.
common zoning designations and what they allow
Zoning codes can vary by city, but most municipalities use a standardized set of categories with local naming conventions and overlays. Understanding the major zoning classifications—and the differences between them—is essential when evaluating a commercial property for acquisition, leasing, or redevelopment.
General Zoning Categories:
Commercial (C or CS, CL, CA) – Allows uses like retail, office, restaurants, and personal services. Often has restrictions on intensity and type of business activity.
Industrial (IR, IG) – Allows manufacturing, distribution, logistics, and some flex space uses. Can range from light industrial to heavy industrial.
Mixed-Use (MX, MUL, MUN) – Allows a combination of commercial and residential uses. Typically used in urban infill or transitional zones.
Residential (RS, RM, R) – Intended for housing; often has very limited commercial allowances.
Agricultural/Open Space (AG, OS) – Preserved for low-intensity uses like farming, parks, or conservation areas.
Nashville-Specific Examples (or insert your local codes):
CS (Commercial Service): Light retail and office uses, including auto repair, showrooms, and small-scale distribution.
IR (Industrial Restrictive): Industrial and warehouse users that don’t involve heavy emissions or external nuisances.
MUL (Mixed-Use Limited): Residential, office, and light commercial—often ideal for adaptive reuse and live/work spaces.
DTC (Downtown Code): A form-based zoning overlay designed for urban development in Nashville’s core. Encourages height, density, and walkability.
Why Zoning Designation Matters:
Determines the types of tenants you can legally lease to
Affects your ability to renovate, expand, or subdivide
Influences your building’s long-term value and repositioning options
Impacts lending and appraisal outcomes, especially if the use is non-conforming
Bonus Tip: Look for Underutilized Zoning Potential
Some properties are operating well below what zoning allows. A flex space with a 1.0 FAR in a 3.0 FAR zone, for example, could support a vertical expansion or new mixed-use development. Always compare existing conditions with the full entitlements granted by the zoning code.
zoning pitfalls to watch for before you buy
Zoning issues are one of the most common reasons real estate deals fall apart—especially when they’re not identified early. Investors who overlook or misunderstand zoning risk buying properties that can’t be used as planned, leading to costly delays, legal disputes, or forced repositioning. Here’s what to look out for.
Nonconforming Uses
A nonconforming use means the property was legally established under previous zoning laws but doesn’t align with current zoning regulations. These uses are typically "grandfathered in" but come with limitations:
They may not be expanded without approval.
If the use is abandoned for a certain period, it may lose its status.
Financing or insuring a nonconforming asset can be more complicated.
Always verify whether the current use is allowed by right, or if it’s continuing as a nonconforming use.
Zoning Doesn’t Match Your Intended Use
Just because a building has historically functioned a certain way doesn’t mean it’s zoned for that today. Before you close, verify:
The current zoning code and description.
Permitted uses and any conditional uses.
Whether a special use permit or variance is needed.
A classic example: buying a former retail building with plans to turn it into a small-bay warehouse—only to find out that the zoning prohibits warehousing or has strict delivery truck restrictions.
Overlay Zones and Restrictions
Many cities apply overlay districts that add a second layer of rules on top of base zoning. These may include:
Historic overlays that limit exterior changes
Urban design overlays (UDOs) with stricter architectural standards
Floodplain restrictions that affect redevelopment and insurance
Environmental overlays for conservation or tree protection
These can significantly impact what you can do—even if the base zoning technically permits it.
Inadequate Parking or Access Requirements
Zoning codes often require a specific number of parking spaces per square foot or per unit. In urban areas, these requirements might be reduced—but they still matter:
Not enough parking = limited tenant options
Shared access issues = headaches during permitting
Lack of ADA-compliant access = compliance risks
Missing Entitlements or Permits
Just because a tenant is operating doesn’t mean all the necessary permits and entitlements are in place. Always verify:
Use and occupancy permits
Any special exceptions or zoning variances on file
Compliance with current fire code and accessibility standards
Bottom Line: Before you close on any commercial property, make zoning research a priority in your due diligence. Review zoning maps, speak with the planning department, and consult a zoning attorney or land use consultant if the property’s use isn’t clearly permitted. Zoning problems don’t usually show up on a pro forma—but they can derail your entire investment plan.
Unlocking value through rezoning or variances
Zoning doesn’t just create boundaries—it also presents opportunities. If a property’s existing zoning limits its use, density, or tenant mix, there may be pathways to increase its value through rezoning, a variance, or a special use permit. The key is knowing what’s possible, what’s likely, and what it takes to get there.
Rezoning: Changing the Underlying Classification
Rezoning means applying to change the official land use designation for a property. This can unlock:
Additional building height or square footage (via increased FAR)
New uses (e.g., adding residential to a commercial lot)
A broader tenant pool (e.g., allowing industrial use in a previously commercial zone)
Rezoning is typically a legislative process, involving public hearings, planning staff recommendations, and city council approval. It can take 3–12 months or more, depending on your market, and public opposition can delay or derail your plan entirely.
Variance: Adjusting a Specific Limitation
A variance doesn’t change the zoning category—it grants an exception to a specific rule. Common variances include:
Reducing setback requirements
Modifying parking minimums
Allowing additional signage or unique site layouts
Variances are usually granted by a zoning board of appeals and require a clear demonstration of hardship or unique site constraints. They’re faster to obtain than a rezoning but harder to justify if the hardship is self-created or economically driven.
Special Use Permits (or Conditional Use Permits)
Many zoning codes allow certain uses by right and others by permission. If your intended use falls under the latter, you may be able to secure a special use permit—often subject to conditions such as operational hours, noise limits, or buffer zones.
When These Tools Make Sense:
You’re buying a property with strong fundamentals but a zoning mismatch.
You’re targeting a high-visibility location with an outdated land use designation.
Your investment strategy depends on a change in use (e.g., converting retail to flex or industrial to mixed-use).
Best Practices:
Always consult with a local zoning attorney or land use consultant before applying.
Engage neighborhood stakeholders early if public input is required.
Be realistic about timelines, fees, and entitlement risk.
Pro Tip: Study the future land use map or city’s long-term comprehensive plan. If your intended use aligns with the city’s vision, your rezoning or variance is far more likely to succeed.
Tools and resources to research zoning
Every savvy CRE investor should have a zoning research toolkit. While zoning codes can be complex, there are now more resources than ever to help you verify a property’s current use permissions, explore development potential, and identify red flags before entering a deal.
1. Municipal Zoning Maps and GIS Portals
Most cities and counties offer online GIS (Geographic Information System) portals where you can:
Look up zoning by parcel address or tax ID
View overlays like flood zones, historic districts, or transit-oriented districts
Identify nearby zoning patterns and neighboring uses
Examples:
Metro Nashville Planning Department Viewer
San Diego Parcel Lookup Tool
NYC ZoLa (Zoning and Land Use Application)
These tools are indispensable for initial screening and due diligence.
2. Zoning Code Documents (Unified Development Ordinances)
Each municipality publishes its own zoning code, often called a UDO or LDC (Land Development Code). These documents break down:
Permitted uses by zone
Development standards (height, FAR, setbacks)
Parking and signage regulations
Special use and variance procedures
Always cross-check a property's zoning code section to confirm what is allowed by right versus what requires discretionary approval.
3. City Planning and Zoning Departments
Don’t underestimate the value of picking up the phone. Planners can:
Explain current zoning restrictions
Clarify how overlays or pending zoning changes affect your parcel
Tell you what documents are needed for a rezoning or special use request
Provide context on how zoning is enforced in practice
Some even offer pre-development meetings or zoning verification letters—useful tools for serious investors.
4. Title Reports and ALTA Surveys
When reviewing title work, look for:
Recorded zoning restrictions or deed covenants
Access and easement limitations
Legal descriptions that match zoning documentation
A clean ALTA survey can also reveal boundary issues that affect buildable area or access—crucial when evaluating redevelopment or expansion plans.
5. Work with Zoning Consultants or Land Use Attorneys
When you’re dealing with:
Rezoning applications
Legal nonconforming uses
Complicated entitlements or permitting timelines
…it’s worth investing in expert guidance. A local zoning consultant or land use attorney can help you avoid missteps and improve your odds of getting approvals.
Final Tip: Always save a PDF or screenshot of your zoning lookup and document the date. Codes change, and you want proof of what was in place when you conducted your due diligence.
conclusion and investor takeaways
Zoning is often seen as just another box to check during due diligence—but for savvy commercial real estate investors, it’s a strategic tool. Whether you're acquiring your first flex building or repositioning a multi-tenant portfolio, understanding how zoning shapes what’s possible on a parcel can mean the difference between unlocking hidden value and walking into a costly setback.
From understanding permitted uses to identifying zoning overlays, nonconformities, and rezoning opportunities, the investors who win long-term are the ones who study the rules before they play the game. They don’t just accept what a broker or seller tells them—they verify it with public records, zoning maps, and professional advisors.
As cities grow and regulations evolve, zoning will only become more important. It influences how we build, lease, redevelop, and exit. But for those who know how to navigate it, zoning isn’t a barrier—it’s a blueprint for smart investing.
For those interested in delving deeper into commercial real estate investing, check out our course offerings. The courses provide in-depth insights, real-world case studies, and practical strategies to help you navigate the complexities of commercial real estate and achieve success in your ventures. Whether you're a seasoned investor or just starting in the world of commercial real estate, there's always more to learn. Equip yourself with the knowledge and tools you need to thrive in commercial real estate.
Zoning is one of the most overlooked—but absolutely critical—factors in commercial real estate investing. Before you ever run your cap rate calculations or start negotiating terms, zoning determines what you can and cannot do with a property. It shapes everything from who you can lease to, to what kind of tenants you can attract, to whether your business plan even works at all.
A flex space that’s zoned industrial may allow you to lease to a logistics operator or a manufacturing tenant—but that same building in a commercial zone could restrict your options to retail or office users. And if you buy a building that’s out of compliance with current zoning regulations? You could be facing expensive legal battles, permit issues, or a complete stall in your investment timeline.
In this blog, we’ll break down the zoning essentials every CRE investor should understand before buying a property. From use categories and zoning overlays to variances and value-add plays, this guide will help you ask the right questions and avoid costly mistakes. Whether you're buying your first small warehouse or adding to a portfolio of mixed-use developments, zoning can either be your greatest advantage—or your biggest risk.