September 21, 2023

The Daily Industry

Business Blog

The relationship between property zoning and property values in Melbourne

Article at a Glance:

  • Property zoning in Melbourne regulates the use of properties in the city for commercial, industrial, residential, or agricultural use.
  • Property zoning has a significant impact on property values, so it is worthwhile to be acquainted with zoning regulations in Melbourne while investing in commercial real estate in the city.

As one of Australia’s most dynamic and growing cities, Melbourne’s commercial real estate continues to lure investors from in and around the country. While investing in commercial real estate in Melbourne, every investor has a primary goal of making the most of their investment. The idea of making the most of real estate investments relies on several factors, such as property zoning. Property zoning has a direct impact on property valuation, and it is in every investor’s best interest to understand this relationship to make informed investments in the market.

Property zoning refers to the process of dividing land into different zones based on their intended use. The zones can range from commercial and industrial to residential. Commercial property zoning refers to areas designated for office, business, and retail spaces. In this article, we discuss the impact of property zoning on property values in Melbourne.

Impact of property zoning on commercial property values in Melbourne

While investing in commercial real estate in Melbourne, it is important to understand the city’s zoning laws as they significantly contribute to determining the property’s future value. In Australia, zoning laws are established by the state government and thus can differ from one state to another. If you are interested in investing in Melbourne’s real estate, you need to understand this legal requirement on what kind of development is allowed on a property in Melbourne.

The impact of property zoning on commercial property values is significant as it determines future development opportunities on and from the property. For instance, commercial properties zoned for high-density commercial use, such as office spaces or shopping centres, are typically more valuable than properties zoned for low-density commercial use, like small retail stores or service businesses.

Properties zoned for high-commercial use can generate higher rental incomes and attract larger businesses and corporates that require large spaces to conduct business operations. Conversely, low-density commercial properties generate lower rental income and thus have lower profit margins.

Zoning laws also help investors to identify the best-suited location to buy or lease properties. These laws specify the type of business or dwellings in a particular area, which gives an idea of whether the property you seek to buy or lease in an area will be close to your type of customer. It can be a determining factor for investors to decide whether to invest in a specific area.

Commercial property zoning is based on a range of factors, such as the type of businesses operating in that area, the proximity to residential areas, and the population. As zoning regulations are based on dynamic factors, it is also important to realise that these regulations can change over time. For instance, a commercial property zoned for low-density commercial use may be zoned for high-density commercial use in the future, which will significantly increase its value and improve the commercial property’s value as well.

When you consider investing in commercial real estate in suburbs of Melbourne like Caulfield, St. Kilda, Richmond, Elwood and others, it is important to understand the zoning regulations in the area. Understanding zoning regulations will help you distinguish properties more likely to increase your return over time. To stay informed about changes in commercial property zoning in Melbourne, investors can work with local property boutiques to stay ahead of the curve and identify the best-suited properties for them.