Commercial buildings can be used as a residence if the local zoning laws of the property allows it. To permit this, the building still retains a commercial component, but the residential portions will comprise more than half the building. This is often seen around our city business centers as “mixed-use buildings”, wherein the commercial aspect takes the lower floors (like your ground floor shops) while the residential portion takes the middle to upper floors. One must read carefully into the building laws and percentage of commercial to residential as well as factor in locational analyses if it is desirable for people to come live there.
What are Mixed-Use Buildings?
A commercial building is defined as buildings that have businesses or activities that generate income, such as retail, offices, restaurants, service salons and a grocery. (1)
The key into converting a commercial building as a residence is thoroughly checking the local zoning laws of your site. This will dictate the rules of how you can build and how much percentage of commercial to residential dedicated floor area you must have.
This combining of building functions leads to the formal term, “mixed-use buildings.”
There are in fact several mixed-use buildings among us now. Usually the residential portions of these buildings are much larger than their commercial component.
A few of examples of existing mixed-use buildings that have a commercial aspect and are in a commercial location but with a residential use: (1)
Main Street/Vertical Mixed-Use Buildings
You’ll find these in your central business districts (CBDs) where the first few floors are businesses, often catering to the residents like a mini-supermarket, laundromat, coffee shop and a few offices. The term, ‘main street’ refers to those shops that are on the ground floor facing the main streets like the arcaded shops that entice people to enter.
Shophouse Mixed-Use Buildings
You’ll see this concept more in asian countries or older small cities, where the business of the owner is on the ground floor and his/her residence is right above, beside or behind. This housing concept grew for people to have the most convenience in time flexibility, eliminating the travel from work to home.
Why Mixed the Use?
The biggest benefit these types of buildings have to offer are their convenient location. Being in commercial districts, your home becomes accessible to transportation, schools, groceries, parks, hospitals, all while having an active social life. The money and time saved commuting to work and errands are also significantly less. This encourages people to walk and not need to carry the burdening expenses of owning and maintaining a car or endure long hours from public transport modes. (1)
Things to Consider before Converting
So now we know you can rezone your property from entirely commercial to having some residential component. However, you’ll have to assess if financially, this is a strategic move. (2)
What establishments are nearby? What is the building condition and upkeep requirement? How much will it cost to meet the requirements of converting into a residential property?
Marketing & Demand
How far is your property to the nearest grocery or hospital? Will the establishments nearby benefit your tenants? Is it in a location desirable for residents to live in? Safe and quiet but accessible and convenient?
Try picking a place that has potential to bring in several tenants, to save your troubles in fillling up those rentals down the road. (3)
Rezoning Laws and Market
Do know that applying to rezone a building is no easy task. First your application and plan will have to be approved by the local government as well as the general public!
A commission meeting will be held for the locals in the area to be notified of this change. This meeting is a chance for them to raise any concerns but can also act as a platform for you to showcase how this can benefit them in return.
After a thumbs up from the people, the planning’ commission’s recommendation proceeds to the legislative body for the final approval. Should they reject your proposal, you’ll need to wait a while before reapplying. (2)
Renovations and Construction
Switching to a residential use may entail some money spent on paperwork for permits as well as construction. You’ll need to invest in redo-ing your electrical and water lines to accommodate separate tenant bills, as well as check the building code requirements for entry and egress of both pedestrian and vehicular flow. There’ll be fees involved for the professional builders you hire such as architects, engineers and laborers as well as the materials. (2)
If you’re in a situation of purchasing a commercial building for conversion, check the requirements for residential buildings. Afterwards, see which existing commercial buildings will involve the least amount of physical work to meet them, therefore costing you less.
If you do need to get your hands dirty and renovate, here are a few tips on making the most of your renovation: (2)
- Do not skimp on structural safety and utilities: This goes without saying but it is truly imperative to update and check every detail through the building professionals before having people occupying the building as a home.
- Highlight the existing design features: Maybe your building has an old brick wall you could turn into a key lounge area. Perhaps it has a high coffered ceiling or original moldings that can give your building a unique character and experience
- Bring in the light: Most likely your commercial building was made with darker spaces for offices than homeowners would prefer. Find ways to let in the sunlight and maybe replan and redesign these with your common areas or amenities for residents.
Do note expansions and renovations are also subject to local building code regulations. (3)
Things to Watch Out For
With any building construction involved, a lot of unexpected costs can come about. Therefore have a financial plan, contingency and possibly insurance!
Although several commercial buildings can accommodate the conversion, there are some exceptions to commercial properties that cannot be converted to residential use: (3)
- Commercial buildings in national parks or conservation zones
- Commercial buildings in designated natural beauty/scientific interest regions
- Commercial buildings that are designated as historic landmarks
- Commercial buildings in military explosive zones/safety danger zones
Although adding a residential component to your building gives a longer term lease and natural security provided by the tenants, the financing can be difficult. Equally hard is having to personally handle the tenants and the individual maintenance problems of the units. This is much more complex than dealing with companies leasing larger spaces as an office. (4)
What About Having it the Other Way Around?
Be wary of the other way around! Most often it is not allowed to have a business in a residential area, or to convert a residential building into a commercial building. Of course, this is contextual and depends on your local zoning laws. It also depends on the scale of how big you intend your business to be, because small home businesses may be permitted.
Despite you being the homeowner of the building and lot, there may still be some rules in your mortgage agreement that can terminate your loan or flat out stated in your zoning laws as “not allowed.” (4)
There are definitely ways to go about rezoning a building’s use if justified and deemed safe by the local government. It’s worth opening up our eyes to see how our existing buildings can be lived in differently. It’s worth the new perspectives and trying!
- Valle, G. (2022, January 17). Can commercial buildings be used as a residence? BuilderSpace. Retrieved July 2022, from https://www.builderspace.com/can-commercial-buildings-be-used-as-a-residence
- Esajian, P. (2022, June 29). Tips for converting commercial property to residential. FortuneBuilders. Retrieved July 2022, from https://www.fortunebuilders.com/tips-for-converting-commercial-property-to-residential/
- Smart Remodeling LLC. (2022, July 5). Can you change a commercial property to residential? Smart Remodeling LLC. Retrieved July 2022, from https://www.smartremodelingllc.com/blog/can-you-change-a-commercial-property-to-residential
- UpCounsel. (n.d.). Can residential property be used as commercial. UpCounsel. Retrieved July 2022, from https://www.upcounsel.com/can-residential-property-be-used-as-commercial