Investing in Commercial Real Estate – Property Types
Commercial properties are principally defined as; if it isn’t residential it’s commercial. This meaning is rather simple, but defines it categorically. Within this grouping, commercial properties are primarily classified by its specialized usage. Property types are typically described as:
- Office
- Retail
- Industrial
- Warehouse/Flex
- Multi-Family
- Hospitality
- Medical
- Commercial Land
Prince William County classifies these property types into six major categories:
1. Commercial Districts
2. Office Districts
3. Industrial Districts
4. Planned Business District
5. Planned Mixed Use District
6. Suburban Residential High and Urban Residential Districts
Commercial Districts. The Commercial District is broken down into three specific areas:
1. General Business District (B-1) – Planned to provide areas for community-scale retail, office and institutional uses. There are currently 61 uses by right within this District, three secondary uses and an additional 36 uses which require a Special Use Permit. Maximum building is height 45 feet.
2. Neighborhood Business District (B-2) – Intended to provide for areas of neighborhood-scale retail and to a lesser extent office and institutional uses but particularly consumer product and service centers. There are currently 44 uses by right within this District, one secondary use and an additional 11 which require a Special Use Permit. Maximum building height is 45 feet.
3. Convenience Retail District (B-3) – Designed to serve nearby residents, rather than pass-by or regional traffic. There are currently 19 uses by right within this District, one secondary use and an additional three which require a Special Use Permit. Maximum building height is 35 feet.
Office Districts. The Office District has four subcategories.
1. Office Low-Rise District O(L) – Designed to provide areas for low- to mid-rise office buildings, and research and development facilities. There are currently 17 uses by right within this District, 18 secondary uses and an additional eight which require a Special Use Permit. Maximum building height is 45 feet.
2. Office High-Rise O(H) – Planned to provide areas for high-rise and institutional uses with limited supporting retail and service uses. There are currently 20 uses by right, 20 secondary uses and an additional seven which require a Special Use Permit. Maximum building height is 100 feet.
3. Office Mid-Rise District O(M) – Designed to provide areas near appropriate transportation facilities for mid-rise office and institutional uses with limited support for retail and service uses. There are currently 18 uses by right, 20 secondary uses and an additional eight which require a Special Use Permit. Maximum building height is 70 feet.
4. Office/Flex District O(F) – Intended to provide areas for research and development centers, office, institutional and minimal impact industrial uses with limited supporting retail and service uses. There are currently 24 uses by right, 28 secondary uses and an additional 21 which require a Special Use Permit. Maximum building height is 45 feet.
Industrial Districts. The Industrial District is divided in three areas:
1. Heavy Industrial District (M-1) – Planned to provide areas for and to encourage development of heavy and intensive industrial processing, manufacturing and storage with limited retail and service uses. There are currently 67 uses by right, four secondary uses and an additional 23 which require a Special Use Permit. Maximum building height is 75 feet/
2. Light Industrial District (M-2) – Designed to provide areas for research and development centers, light industrial manufacturing, warehousing, wholesaling and related office and institutional uses. There are currently 38 uses by right, 14 secondary uses and an additional 17 which require a Special Use Permit. Maximum building height is 60 feet.
3. Industrial/Transportation (M/T) – Intended to provide areas for and encourage development of heavy industrial uses including those which generate considerable truck and/or heavy equipment traffic, or which require access to more than one mode of transportation. There are currently 69 uses by right, four secondary uses and an additional 22 which require a Special Use Permit. Maximum building height is 75 feet.
Planned Development. There are two Districts in this category:
1. Planned Business District (PBD) – Designed to implement the regional employment center, office and flexible use employment center land use classifications designated in the Comprehensive Plan. Non-residential areas shall be established in accordance with the following zoning Districts:
a. General Business - B-1
b. Neighborhood Business - B-2
c. Office Low-Rise - O(L)
d. Office Mid-Rise - O(M)
e. Office High-Rise - O(H)
f. Office/Flex - O/F
g. Light Industrial – M-2
There are currently 24 uses permitted in the above Districts which are not permitted in the Planned Business District.
2. Planned Mixed Use District (PMD) – Designed to provide a single zoning district which promotes an integrated business community within which business and residences are conveniently linked. Non-residential areas shall be established in accordance with the following zoning Districts:
a. General Business - B-1
b. Neighborhood Business - B-2
c. Office Low-Rise - O(L)
d. Office Mid-Rise - O(M)
e. Office High-Rise - O(H)
f. Office/Flex - O/F
g. Light Industrial – M-2
There are currently 21 uses permitted in the above Districts which are not permitted in the Planned Mixed Use District.
Suburban Residential High and Urban Residential Districts. These three Districts include Multi-Family dwellings:
1. Suburban Residential District (R-16) – Designed to provide for and encourage quality development at urban densities in locations well-served by public utilities and roadways not to exceed 16 dwelling units per acre. There are currently four uses by right, two secondary uses and nine uses which require a Special Use Permit.
2. Urban Residential District (R-30) – Intended to provide and encourage quality Multi-Family development at urban densities not to exceed thirty dwelling units per acre. There are currently four uses by right, three secondary uses and an additional eight which require a Special Use Permit.
3. Urban Residential District (R-U) – Planned to provide and encourage quality Multi-Family development at urban densities not less than 31 units per acre. There are currently five uses by right, three secondary uses and an additional eight which require a Special Use Permit.
These categories and subcategories are specific to Prince William County. Other City and County zoning ordinances may and more likely classify these property types differently. It is always important during the due diligence process to check with your City/County Planning Office prior to purchasing a property.
Note: Laws vary in different States, always seek legal counsel and work with an experienced Commercial Real Estate Broker.
Image Courtesy of David Niblack
Michael Setunsky is the Broker and owner of Michael's Commercial LLC serving the Northern Virginia commercial real estate market. He has been licensed since 1985 and a Broker since 1990. As a commercial real estate and business broker, he has earned the distinction for being one of the top commercial real estate producers in the Mid-Atlantic Region. He also serves on the Mid Atlantic Real Estate Marketing Association's (MAREMA) Board of Directors, and is a Commonwealth of Virginia licensed Instructor. He teaches Pre-licensing, Post Licensing Education, Broker's and Continuing Education courses. Visit his company web site at http://michaelscommercial.com/.
©2009 Michael’s Commercial LLC, All Rights Reserved – Investing in Commercial Real Estate – Property Types - July 23, 2009
Investing in commercial real estate may seem like a challenge, but it is really no different than investing in residential real estate. The typical office, retail, industrial, etc. properties are obviously commercial type properties. However, there is a major distinction when it comes to multi-family properties. Multi-family properties with four or fewer units are considered residential and properties with five or more units are considered commercial properties. Why is there a distinction?