Commercial Real Estate Red Flag: When Zoning Lies to You!

 Buying commercial real estate? Knowing the difference between zoning and usage is gonna save you a lot of money.

Hey everybody. Joseph Gozlan with Eureka Business Group. Your Retail Navigator for the Dallas Fort Worth market, and I wanna talk about a very important distinction between zoning and usage when it comes to commercial real estate.

And the difference is zoning is what the city says should happen in that building. Usage is what the city is gonna allow to happen in the city or what is already happening in the city. For example, I can have a building that is marked or zoned as office, but the usage can be something that is more like retail for us.

For example, a signage shop. That normally is sitting in either industrial or retail location, but in certain cities it is allowed in an office building because it’s called business services. So just because it’s zone certainty doesn’t mean I cannot put something in there.

But the other way around is also important. Sometimes we see a retail use in a building that has been zoned something else, and the reason it’s there, it’s because it’s grandfathered. Grandfather means that as long as that business is operating. This because it’s been there before. The zoning has changed.

The city cannot kick the business owner out. But if that business, the owner moves out and then it’s vacant for a period of time, depending on the city, then the city can revoke that usage and revert back to the original zoning.

The easiest example is to think about an old downtown where the city has rezoned areas that used to be residential into commercial, and you have a, let’s say, a small apartment building on there. If that apartment building. Gets hit by a tornado or destroyed from a fire or something like that, then the city is not gonna allow you to rebuild a multifamily on it because it’s zoned commercial.

So then you’re gonna have to build a commercial on it. Another things that we’ve seen in the past is we’ve seen retail use in buildings that don’t support the new retail parking lot code or stuff like that. And now the city have rezoned it to industrial or the city rezoned it and added new parking code that prevents you from using it as retail moving forward. And now buying this thing is gonna put you in a bind. So understanding the usage versus the zoning, talking to the city before you buy the property is super critical. And at Eureka Business Group, we have a very long checklist that we’ve prepared for due diligence.

So when you buy a property, things to assess, things to look at, things to consider, and if you’re interested in a copy of that PDF, leave us a note in the comments below or shoot us a message on our website, EBGTX.COM and we’ll be happy to send you a copy.

I’m Joseph Gozlan with the Eureka Business Group, Your Retail Navigator for the Dallas-Fort Worth Market.