Commercial land differs from residential land and other types of real estate properties for a number of reasons. Generally, it refers to land being used for commercial purposes or income-generating pursuits.
Other aspects include how the land is classified by municipalities, zoning commission, utility companies, tax considerations and planned development.
Any plot of land or area divided into plots that are going to be used for to build office buildings, retail stores, warehouse and storage facilities, manufacturing plants, parking lots or even apartment complexes are considered commercial land.
Unused land can also be considered commercial land if there is an ongoing or future development in the area.
Impact of Zoning in real estate Land
Zoning plays a vital role in determining the classification of a particular plot of land. Zoning regulations for each municipality classify land depending on how it is going to be used.
Generally, land surrounded by residential properties are considered residential land but if an apartment complex or a block of retails stores is built, it can be reclassified to commercial land depending on the situation and special circumstances.
When you think about buying land for commercial purposes, you need to understand the zoning regulations in the area and if zoning change can be applied based on the type of structure that you plan to build.
Commercial Land Use
Land can be used for commercial, agricultural, residential or industrial purposes. Residential land can be converted to commercial land if the structure built is not for personal use only and income is expected to be generated from the building.
Land built with Apartments that have more than 2 doors is generally considered commercial land because it already generates income to the owner.
Land in rural areas that are classified as agricultural land can also be rezoned to commercial use when a new road is built and large scale development is expected.
For example, land in the provinces is classified as agricultural land because they are being used to plant and harvest crops. If a new road is built and the land is across the new road, it can be rezoned as commercial land because the opportunity to build a commercial structure directly across the road is high.
Types of commercial land
Mixed use land is a type of commercial land classification wherein the area is used for both commercial and residential purposes.
Shophouses wherein the street level space is used as retail stores and the upper floor is used as residential space is considered mixed-use.
Farm lots and villas with a large outdoor space used for planting crops and leased to businesses are also examples of mixed-use commercial land.
Commercial or residential land is classified as multi-family use depending on local zoning regulations. Usually, land surrounded by houses with residents is classified as residential land.
Commercial land, on the other hand, is classified as such if they are in the business areas or a future/ongoing development is underway.
Primary uses of Commercial Land
Any land used for the sole purpose of profit is considered commercial land.
Land that was built with apartment buildings, guesthouses, and hotels that are being rented or leased can be classified as commercial land.
Land used as warehouses or storage facility, office buildings, condominiums, land leased to be used as parking lots or docking facilities, is also typical uses of commercial land.
Tax Rates on Commercial Land
Commercial land is classified as commercial with the intention of distinguishing the property from other residential real estates because the rates of taxes and utility rates are different. A premium is paid for properties that generate income or profit.
In all aspects, rates are higher for commercial land than residential or agricultural land. Because the owner is earning a profit from the land, it is also expected that he pay higher for its use.
Properties that can be built in commercial lands
Apartment Buildings - are buildings subdivided into smaller portions and rented as residential space. Usually, an apartment building is multi-storied with 2 or more residences or “apartments” per floor.
Commercial buildings - are structures that are built for commercial purposes such as offices, warehouse or storage space, shopping malls, schools or retail stores.
Commercial buildings can either be “mixed-use” residential and commercial. Primary examples are buildings that have retail stores at the street level and residential spaces or in the upper levels.
Commercial Land without structures - A plot of land can also be designated as commercial land if used as a right of way, a road leading to urban areas, leased as docks, airport terminals or parking space.
Land in an area where large development is expected is also classified as commercial land.