Hot on the heels of the new residential zones, the Victorian Government has released the new commercial and industrial zones.

These zones determine what land can be used to site retail, commercial and industrial activity across the state. They are a key lever in the planning system and help drive business, investment and employment in Victoria.

The Victorian Government has made it clear that the new commercial zones are designed to provide greater flexibility and growth opportunities in Victoria’s commercial and business centres by enabling a wider range of uses.

The new Commercial 1 Zone broadens the range of activities that land can be used for without the need for a planning permit and generally removes floor area restrictions. For instance, there will be a capacity to build high density developments in this zone and all retail uses (other than adult sex bookshops) and accommodation (other than corrective institutions) will become ‘as of right’ uses.

The new Commercial 2 Zone will combine the existing Business 3 Zone and Business 4 Zone and is billed as being an ‘employment only’ zone. Uses such as a cinema, food and drink premises, office, restricted retail premises and trade supplies will no longer require a planning permit.

This zone will remove the floor area restrictions for office and retail uses and allow use for a small-scale supermarket and associated shops without a permit in the metropolitan area (but require a permit for these uses in rural areas).

Accommodation is a prohibited use, other than in limited circumstances. This zone will apply on land currently zoned Business 3 and 4 Zone.

The new reformed Industrial zones replace the current 3 Industrial zones by providing greater flexibility, especially for the siting of retail and office uses. The new zones remove default floor space area restrictions for an office in all three Industrial Zones, with the ability to specify locally set floor area caps.

While the prohibition on supermarkets and shops continues in the Industrial 1 and 2 Zones, limited forms of retail are allowed in the Industrial 3 Zone – including a small scale supermarket and convenience shop in the Industrial 3 Zone without a permit.

So what does this all mean?

These zone changes have not attracted much media attention but have far reaching consequences for the planning system, business investment and many neighbourhoods in Victoria. By removing restrictions on floor space and freeing up uses in many zones, businesses will be able to site their premises in a wider range of locations.

These zones could potentially threaten the viability of existing centres of commercial activity. For instance, smaller supermarkets and some retail will be able to locate in much cheaper industrial areas. This ‘out of centre’ development may see the loss of anchor tenants such as commercial offices from principal and major activity areas.

On the flip side some commercial zones may experience exponential growth and attract more jobs as retail and office uses bleed out to nearby residential streets.

For State Planning policy it is a significant change to the existing hierarchy of centres policy that dictates the pattern of development, encouraging bigger tenants to locate in the big centres and smaller uses into the smaller centres. These changes have the capacity to see a blurring of the transition between commercial and residential areas, creating more genuinely mixed areas.

For local government these zone changes mean they will need to ensure they have the right mix of tools in place to achieve aims such as promoting certain uses or preserving residential areas. Many councils will need to undertake further community consultation when updating their policies, strategies and overlays to reflect the more flexible nature of these new zones.

For communities these new zones will have an impact on those residents who live close to the current business zones. Currently most council policies provide a transition or buffer between different uses, helping protect the privacy of neighbouring areas. The creeping into residential streets of different uses caused by changes to both residential and commercial zones will bring changes that most community members will be unaware of.

For retail and commercial developers these changes will clearly create opportunities to move into areas they had previously been off limits. In particular smaller supermarkets and office developers will be able to seek out land to site their stores on a wider range of land, including the cheaper land on industrial sites.

These changes will take effect from 1 July 2013. Existing business zones and schedules will be deleted and converted to one of the new commercial zones and existing industrial zones will be amended.

The changes to commercial and industrial zones have the propensity to alter the landscape of our major suburban activity areas. Creating a greater mix may bring with it greater employment and vibrancy. However these changes also threaten to undermine the policy of concentrating certain uses in certain zones and providing a transition from areas of activity to areas of residential living. Whether these zones achieve the right balance of encouraging mixed use without destroying small centres and residential amenity will be a crucial test.