2.1: Part I- Commercial and Corporate Overview

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The real estate industry is enormous. In the United States alone, over 3.7 million jobs are tied to commercial real estate, 13 percent of GDP comes from the real estate industry, and the aggregate value of U.S. commercial real estate is approximately $16 trillion. - Spencer Burton

Commercial and Corporate Real Estate Careers Overview

Commercial real estate (CRE) refers to any type of real property that is used for business or commercial purposes rather than residential purposes. This includes properties such as office buildings, retail spaces, industrial facilities, warehouses, hotels, and shopping centers. Commercial real estate is typically bought, leased, or developed for the purpose of generating income through rental or an increase in value over time.

Commercial real estate encompasses a range of property types and is an integral part of the economy, providing spaces for businesses to operate and contributing to economic growth and development. Sports stadiums, amusement parks, shopping centers, colleges, public parks, and museums, are examples of “place-based” developments and are considered commercial property. Residential property, such as condominiums or single-family homes that are leased, bought, sold, or held for investment purposes are still considered residential property. They are not commercial property.

Examples of commercial properties typically held for investment purposes include:

Office building / skyscraper
Hospital / medical complex
Warehouse / industrial
Restaurant / grocery store
Shopping mall / retail strip
Vacant land, whether zoned residential or commercial
Multi-family / apartment complexes

A unique type of property is an apartment complex, often known as multi-family property, which may be classified as either residential or commercial property depending on the situation. For purposes of a mortgage loan, appraisal, or investment taxes, an apartment complex is classified as commercial property. For the purposes of landlord regulations, an apartment complex is considered residential because people occupy the premises.

A California “apartment complex” differs from a New York style “apartment building” in several ways. In New York, an apartment building is typically owned by the residents as a cooperative legal entity or corporation; each resident owns some of the shares or a percentage of stock in the cooperative or corporation. In upscale New York apartments, residents may occupy one (or more) entire floors of the building. In California, however, apartment complexes are owned by one or more investors, or by a legal entity consisting of investors. In California, each family rents a specific housing unit (for example, a 2-bedroom apartment) and pays rent to the owner/landlord (investor).

Property Zoning

Zoning, which is controlled by government agencies, is a factor that distinguishes commercial properties from residential ones. In incorporated areas, cities typically manage zoning regulations and enforcement through their building or planning departments. These departments are responsible for reviewing development proposals, issuing permits, and ensuring that construction projects comply with zoning ordinances (regulations) and building codes within the city limits.

In unincorporated areas, where there is no municipal government, zoning matters are typically handled by county authorities. County planning departments or building departments oversee zoning regulations and permits for development projects in these areas. They are responsible for implementing county zoning ordinances and ensuring that development activities adhere to land use regulations and building codes within the unincorporated territory.

Property zoning determines the types of properties allowed in a given geographic area. Similar types of properties are grouped together. For maximum efficiency, to maintain property values, and for residential safety and comfort, residential zones are typically located separately from commercial zones. For example, single-family residences are grouped together in the same areas, while industrial buildings and warehouses are located in different areas.

Commercial zoning allows uses such as hospitals, medical, office, restaurants, research laboratories, shopping malls, retail strips, industrial, warehouse, and parking lots. Some examples of commercial zoning are C-R (commercial retail), C-S (commercial service), and IM (industrial - manufacturing). Each city or county maintains its own set of codes and maps, which are usually located in its building department.

On the other hand, residential zoning is usually categorized based on the occupancy allowed, for example, R-1 or R-3. Land that is zoned R-1 is residential with lower occupancy: 1 house per lot, typically 8 lots per acre (depending on the local zoning regulations). Land that is zoned R-3 is residential with higher occupancy: 350 residential units per acre, for example. The denser zoning is usually valued higher than if it were zoned R-1 because more units can be built.

Zoning Examples

R-1 = Residential low-density. Single-family residence (one house per lot).
R-3 = Residential high density. Example: 150-unit apartment complex.
C-S = Commercial Service zoning. Example: restaurants.
C-I = Commercial Industrial zoning. Example: warehouses.

Explore this example of a zoning checker for the City of Victorville: https://www.victorvilleca.gov/government/city-departments/development/planning/check-your-zoning

Practice Zone

Find and view your city or county's building zoning online by using the search terms “zoning,” “building department,” and the name of your city. Enter your home address and locate it on the map. How is your house or apartment location zoned? Is it located in an area zoned R-1, R-2, R-3, RR, RS, or another zone? The zone codes will be displayed on the chart or perhaps on another page.

Now that you have practiced using a zoning map, locate your college. Is it in an area zoned C-1, C-S, or a special zoning because the land is owned by the community college district? You can use this map to also view a few other commercial locations, such as shopping centers, and compare them to the other locations you found.

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