Why Zoning Matters in Commercial Real Estate: What Every Investor Should Know

Zoning is one of the most powerful—and often overlooked—factors in commercial real estate. Whether you're sizing up an industrial lot near a port or dreaming of opening a trendy café in an urban core, zoning laws can either unlock your plan or shut it down cold.

Zoning refers to local government rules that dictate how land can be used. From the height of your building to the number of parking spaces required, zoning laws outline exactly what you can and can’t do with a property. According to the American Planning Association (APA), zoning codes exist to separate incompatible land uses and promote orderly growth—key in commercial real estate, where retail, office, industrial, and mixed-use spaces often compete for the same urban footprint.

Buy the wrong parcel in the wrong zone, and you could find yourself with a costly asset that can’t operate the way you intended. The Urban Land Institute (ULI) emphasizes that zoning policy is a critical determinant of a property’s value, its development potential, and even its ability to access incentives or financing. They also note that inflexible zoning contributes to high land costs, underutilized sites, and missed investment opportunities.

Zoning classifications vary by area, but most codes include the following common zones: “C” for retail and office uses, industrial zones commonly known as “M” or “I”, housing often labelled “R” with numbers (R1-R4) that indicate the level of density allowed, and mixed-use districts sometimes called MU or MX. Some cities even have transit-oriented zones that encourage denser development around public transportation and lessen traditional parking requirements. Nationwide we have seen Opportunity Zones that encourage development in distressed areas by giving tax incentives to Buyers who make significant capital investments. All cities publish their zoning code and many offer real-time searchable sites like ZIMAS, where users in Los Angeles can search by property address and view zoning, overlays, and parcel history.

To verify zoning before investing, you should always start with the city’s zoning map or GIS portal. Many municipalities, such as Los Angeles, make this available online. Once you’ve identified a property’s zone, review the corresponding zoning code or ordinance. These documents specify permitted uses, height and density limits, and what kinds of permits—like conditional use permits (CUPs)—may be required for a particular use. While some investors stop here, the smart ones go further. Calling or meeting with a city planner can provide clarification on ambiguous zoning terms, especially in neighborhoods with overlays or discretionary review processes. In more complex cases, such as large-scale development or urban infill projects, hiring a land use attorney or zoning consultant is a smart investment.

Changing the zoning of a property, also known as rezoning, is possible—but it can be an arduous process and the results aren’t guaranteed. Rezoning typically requires a lengthy and expensive process involving public hearings, environmental review, and political approvals. It can take several months or even years. However, cities across the country are beginning to update and modernize outdated codes. As noted in ULI’s Zoning Reform Agenda, many local governments are exploring flexible land-use policies to stimulate development, especially in high-growth areas and urban cores. This shift opens the door for rezoning to become a viable strategy—if you're willing to navigate the bureaucracy.

Modern zoning trends are also reshaping the commercial real estate landscape. Cities are increasingly adopting form-based codes, which focus on the design and scale of buildings rather than just their use. This approach, as described by ULI, supports walkable, mixed-use environments and helps streamline the entitlement process. Adaptive reuse is another key trend, with investors seeking to convert underused office space into housing or hospitality. But this isn’t always easy—APA’s adaptive reuse report outlines the various zoning and building code challenges that can stand in the way. Environmental zoning overlays are also gaining traction, especially for industrial projects. APA recently released a guide on battery energy storage zoning, which is crucial as more CRE investors enter the energy, logistics, and sustainability space.

Bottom line—zoning isn’t just a box to check. It defines what’s possible, limits your risk, and shapes your project’s future. Investors who skip zoning due diligence aren’t being bold—they’re being reckless. Before you make an offer, pull the zoning map, read the code, consult with experts, and verify your plans with the local planning department.

At Eve Capital, we don’t just help you find the right property—we work with you and your team to make sure all your questions are answered so you are clear about your purchase and positioned for long-term ROI.