Does Commercial Zoning Affect Property Value?

One of the most important things you need to consider when buying commercial properties is the local zoning laws, as these will ultimately affect what you can and can’t do with the property and, in turn, have the potential to affect property values.

However, understanding commercial zoning laws can be a difficult thing to navigate. So, to help make things as clear as possible, we’ve put together this ultimate guide, which includes information on what exactly commercial zoning is, how it affects real estate value, and whether rezoning can increase the value of your investment.

What is Commercial Zoning?

First things first, let’s take a look at what commercial zoning actually is. Commercial property zoning refers to the categorisation of land and properties for specific commercial or business uses, and these are defined by local governments with the intended use of guiding land use regulations and development within that region.

Confusing, right? Let’s put it a simpler way – commercial zoning laws outline the permitted uses, restrictions, and development standards for properties in designated commercial zones.

This includes density and building heights, parking requirements, landscaping and open space, heritage and conservation considerations, and more.

Local councils often provide zoning maps, development guidelines, and other resources that are very useful for investors to look into before purchasing, as the more complex the zoning laws are, the less flexibility you’ll have with building development and use.

What Are the Effects of Zoning on Commercial Real Estate Values in Australia?

Zoning regulations in Australia have significant effects on commercial real estate values as they shape the way in which the property can be used or developed. Here are some key effects you’ll need to know about:

Permitted Uses & Market Demand

Zoning laws determine the types of activities allowed on a commercial property, and those with flexible zoning will permit a wide range of uses, which means that the property will see higher demand and, in turn, increased value. However, properties in areas with restrictive zoning laws that limit certain uses are likely to see limited market demand.

Density & Building Height Restrictions

Some zoning regulations also dictate the maximum density and height restrictions for commercial properties, and these can impact the development potential, affecting its overall value in the process.

Location & Land Use Regulations

Zoning regulations also ensure compatibility with neighbouring properties and land, and commercial properties with zoning that aligns with the surrounding existing environment may have a higher value as the zoning is cohesive and well-planned.

Mixed Use Zoning Laws

Commercial properties located in areas with mixed use zoning may also have a higher value, as this zoning allows both commercial and residential properties to coexist in the same area. In turn, the property stands a good chance of attracting a diverse range of tenants and, as such, sees higher demand.

Infrastructure & Public Services

Zoning can also influence the provision of infrastructure and public services in commercial areas, and properties in zones with well-developed infrastructure (such as access to transportation and essential services) are likely to have a higher value.

Heritage & Conservation Zoning

Some commercial properties are based in areas with heritage or conservation zoning, and this is likely to restrict alterations and development. The purpose of this type of zoning is to preserve the historical character of the building, but, in turn, the value can be affected as potential is limited.

Economic & Employment Zone Impacts

Commercial properties that are located in areas that support thriving businesses and economic growth are also likely to have a higher value through increased demand, especially those that can be used as hubs or distribution centres for online business.

Environmental Considerations

In recent years, certain environmental zoning regulations have been introduced, and these can also impact property values. This is because commercial properties that comply with the regulations set out in this zoning category are more likely to attract environmentally-conscious businesses and tenants, increasing the value at the same time.

We understand that zoning laws can be confusing to a lot of people, so if you’re thinking of investing in a commercial property and want to know more, contact our team of experts. You’ll receive a no-obligation 15-minute call in which we’ll answer all of your questions and look at the next potential steps in your investment journey.

Can Property Rezoning Increase the Value of Your Investment?

Rezoning essentially means there has been a change in the designated land use regulations or the zoning regulations assigned to a certain area, and this can have the potential to increase the value of your investment.

One example of this is if your property is rezoned from residential to mixed use or commercial. This will likely attract a broader range of tenants or property developers, leading to an increase in value.

Rezoning in an area may also mean that new infrastructure or improvements to local amenities, and investment properties can experience higher demand and increased value as the surrounding area becomes upgraded.

Something that is incredibly important to note with rezoning, however, is that while it has the potential to increase property values, it also involves a regulatory process that is subject to approval by local government officials.

As a property owner, you are able to attend council zoning meetings and work with authorities to look at current local zoning laws, but the process is often lengthy, and it’s usually best to seek professional help to assist with this.

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