The following key findings are identified in this post:
- Developing and employing an entitlement level within a site selection process is critical for overall project success
- The order of actions matter in an entitlement process, including first having a comprehensive understanding of the intended use
- Hire local experts to guide you to areas where the intended use will most likely be allowable or avoid areas where the intended use will most likely not be allowed
- If an economic development exists, leverage its resources to help with the entitlement process
- If there is an administrative or political nature to obtaining use approval, be open to hiring land use attorneys or consultants with relevant experience working with the oversight agency in question
This post is written within the scope of an industrial firm searching for an existing industrial building within most North American markets. Although many of the points made will apply to industrial build-to-suit or land searches, those transaction types also have nuances not considered here.
Very Brief History of Zoning in North America
Zoning has been part of policing powers constitutionally granted to state and local governments in the United States since the early 20th Century. The term zoning originated from what were called zones in early planning efforts, or the areas where certain uses were permitted or prohibited.
Most zoning in North America is single-use or Euclidean zoning, named for a court case in Euclid, OH which established its constitutionality in 1926. Euclidean zoning generally only allows one kind of use in specified geographic districts.
Other types of zoning include form-based, conditional, performance, and incentive zoning. Euclidean zoning is often supplemented by these other types of zoning in North America. This is especially true in larger markets with greater complexity to their zoning codes.
Industrial Uses and Zoning
As part of its police powers, governments are typically given the right to prevent and eliminate uses that do not comply with their zoning codes. For the industrial occupier, the approval of its intended use is a hurdle that must be overcome in order to successfully operate in a newly acquired property.
Historically, industrial uses have been a controversial part of planning, especially following the Industrial Revolution. The idea of separating uses with pollutive natures from uses without pollutive natures is fundamental to Euclidean zoning. Pollution here can include noise, emissions, hours of operations, and strain on infrastructure.
As North American industrial uses transitioned from manufacturing to warehousing and distribution in the late 20th Century, local governments became increasingly concerned about weighing the cost and benefit of uses considered less pollutive only half a century ago. Warehousing and distribution of products came with a reputation of having lower levels of employment than its manufacturing predecessors while generating a relatively high cost to infrastructure.
In areas where certain industrial uses are losing the cost/benefit calculations in local government, it is common to see prohibitions and heavy restrictions on those uses, conditional zoning, and a general trend towards NIMBYism.
Therefore, it is difficult predict whether or not a use is permitted within different locals, even if they are contiguous. Typical site search areas can contain several planning areas with vastly different zoning codes, some friendly to certain uses and others prohibitive.
In order to deal with the uncertainty of such a significant issue, it is therefore imperative that the modern industrial firm develop and use an entitlement sub-process within its site selection process. The following are suggestions for such a process based on my experience of pursuing entitlement approvals for a wide variety of industrial clients:
- Hire local experts to help guide you to the areas where the intended use will most likely be allowed or help you avoid areas where it will not be allowed. In most instances, a real estate broker will fill this role but for larger projects a site selection firm may also become involved.
- Have a comprehensive understanding of the intended use. Euclidean zoning codes will typically outline a list of permitted or conditional uses for a certain zone. However, they can often limit permitted uses in additional ways, such as restricting hours of operations, noise emissions, or outdoor storage of product. Making sure the intended use is not only permitted, but unencumbered by additional restrictions is recommended.
- Building on #2, read all of the provisions pertinent to the zone in question. Many zoning codes will cite various sections outside of the description of permitted activities in a certain zone. It is important that all such sections are reviewed in relation to the intended use.
- Do not call the planning department as a substitute for reviewing a published code. Unless the municipality does not have a published code, the published code is more reliable and less likely to be misinterpreted than a conversation with a planner. In addition, planners typically appreciate and are more cooperative when you have explored available online resources before calling to ask questions.
- Leverage economic development at the local, county, and state level to help with entitlements. Believe it or not, some areas want more business and are willing to work with companies to navigate zoning issues within their respective governments.
- If there are any conditional or special use approvals, zoning variances, or political matters relevant to the intended use being approved, consider hiring experienced land use attorneys or other politically connected consultants to pursue approval when appropriate.
- Finally, it is a good practice to always understand how the intended use is formally approved. Pursue written approval for the intended use as soon as it is reasonable but always before signing non-contingent real estate agreements. Many governments provide written approval for uses as part of their business license process or with a separate occupancy permit. Some will provide a zoning letter verifying the intended use is permitted.