Defined by tight delivery windows, 24/7 operations, and increasingly sophisticated tenant demands, zoning due diligence has become one of the most consequential components of a successful acquisition or development of an industrial or logistics property. Yet it remains among the most underestimated.
Stakeholders often assume that if a property “looks industrial,” zoning will support industrial operations. As many buyers and lenders discover the hard way, this assumption can derail closings, delay occupancy, and expose owners and tenants to long-term operational and financial risks.
“Industrial assets tend to look deceptively simple,” said Alan Hall, vice president of Zoning Solutions at LightBox. “But zoning determines whether a facility can actually operate as intended, expand over time, or even survive a tenant change. That risk is easy to overlook until it’s too late.”
The Hidden Complexity Behind Industrial Zoning
Industrial and logistics properties carry unique zoning hazards that differ materially from typical commercial assets. Heavy truck circulation, outdoor storage requirements, specialized operating hours, and rapidly evolving design standards all collide with local zoning codes that were often drafted decades ago with vastly different industrial profiles in mind. This mismatch creates fertile ground for surprises, many of which can only be identified through meticulous, expert zoning analysis.
“Industrial assets are attractive because the economic value proposition feels straightforward,” said Carl Goner of Palisades Property Trust. “But the zoning issues tied to use, access, and entitlement are often far more complex than they appear. What looks like a simple box can contain constraints that limit current operations or eliminate future value-added potential.”
The risks become most apparent in a handful of recurring scenarios. Below are two of the most common and consequential zoning pitfalls, along with examples of how they can derail a transaction or impair an asset’s long-term performance.
Non-Conforming Use: The Silent Deal-Killer
Among the zoning risks that catch industrial buyers off guard, non-conforming use is both the most common and the most dangerous, often hiding behind years of uninterrupted operations and assumed compliance.
A surprising number of warehouses, manufacturing plants, and logistics hubs operate legally only because they pre-date current zoning regulations. These uses may be “grandfathered,” but they often lack replacement rights meaning the right to rebuild or resume operations after a change in use, operational modification, vacancy, or casualty.
Consider this scenario:
A buyer acquires a distribution center operating as a legal non-conforming use. The tenant intends to modernize the facility with improved dock configurations, expanded trailer parking, and upgraded mechanical systems. Following closing, the tenant applies for building permits only to discover that even minor modifications trigger zoning compliance requirements. Suddenly, the municipality determines that the use is not permitted under current zoning and cannot be expanded or altered.
The consequences cascade quickly:
- Operating restrictions may limit hours, truck intensity, or sub-uses essential for tenant viability.
- Lender concerns emerge when the use cannot be legally confirmed, reducing collateral certainty.
- Asset value falls sharply because future leasing is constrained by entitlement risk.
- Insurance complications arise if the structure cannot be rebuilt in its current configuration following a casualty loss.
What initially appeared to be a straightforward acquisition becomes a distressed asset scenario—all because the underlying zoning status was not fully vetted prior to closing.
Truck Circulation and Access Requirements: Geometry Meets Regulation
A second area where zoning problems routinely surface involves truck circulation and access standards. Municipalities increasingly impose turning-radius standards, access spacing from intersections, and designated truck routes.
These requirements can render an otherwise attractive industrial property functionally obsolete, especially for modern logistics tenants who rely on high-volume, fast-turnaround truck activity.
Consider this scenario:
Imagine a cross-dock facility on a site constrained by public roads and adjacent development. During due diligence, everything appears operationally sound—ample pavement, multiple ingress points, and a history of industrial use. But a zoning compliance review uncovers that the existing truck entrances fail to meet current spacing requirements from the nearest intersection. Under today’s code, the site would be required to relocate its primary truck access point dozens or even hundreds of feet, an impossible reconfiguration given the surrounding built environment.
The fallout can be substantial:
- Loss of truck access may render the facility unusable for Class A logistics operations.
- Retrofits if even feasible, can require costly easements, road widening, or signalization improvements.
- Municipal approvals may trigger a formal site-plan amendment, reopening issues such as screening, landscaping, and parking requirements.
- Tenant agreements tied to throughput capability may be breached, exposing ownership to claims or vacancy risk.
Truck-related zoning issues often hide in plain sight. Without a dedicated zoning expert, buyers may not recognize that minor-seeming dimensional standards or access regulations can completely undermine the operational viability of the facility.
Why Experienced Zoning Providers Are Essential
“Zoning diligence for industrial assets isn’t a box-checking exercise,” Hall noted. “It’s about understanding how real-world operations intersect with codes that were often written for a very different era of industrial use.”
Experienced zoning analysts know where problems typically hide: sub-use restrictions, outdoor storage limitations, overlay districts, parking ratios, and unverified Certificates of Occupancy, to name just a few. They also understand how jurisdictions apply their codes in practice, which can be as important as what the code says on paper.
Goner noted that experienced zoning providers play a critical role in identifying and managing these risks early in the transaction process. At Palisades Property Trust, that work is handled through LightBox’s PZR zoning due diligence platform.
“PZR is best in class at clearly characterizing complex zoning issues,” Goner said. “That clarity allows us to sidestep pitfalls early in the process and move forward with confidence, even when a site presents regulatory challenges.”
In a capital environment where speed matters and entitlement risk is difficult to price, the cost of overlooking zoning issues far outweighs the investment in a thorough review. Industrial investors, developers, lenders, and corporate occupiers have learned that the most profitable deals are often the ones with the fewest surprises—and zoning-related surprises are among the most costly.
Zoning Due Diligence Protects Industrial Asset Value
In a capital environment where speed matters and entitlement risk is difficult to price, the cost of overlooking zoning issues far outweighs the investment in a thorough review. Industrial investors, developers, lenders, and corporate occupiers have learned that the most profitable deals are often the ones with the fewest surprises—and zoning-related surprises are among the most costly.
As industrial and logistics facilities evolve to meet modern supply-chain demands, zoning risk is rising in parallel. A property may appear to be an ideal acquisition target, but without expert zoning due diligence, buyers cannot be confident they can legally operate, expand, or re-lease the asset.
The message for the market is clear: zoning is no longer a procedural step in diligence. It is a strategic discipline that protects value, enables operations, and determines whether industrial assets can adapt over time.
