Just a crazy suggestion, I know a lot of people aren't going to like it, But I went a totally different route than building a shop on my property... that could also alleviate any concerns about building on shared property.
5 Years ago now, I started renting a shop in an industrial complex 15 minutes from my house. (BTW, it's 1200 Square feet like you are looking at, and it's not big enough for 3 projects once you have all the tools like an engine hoist, jack stands, welder, plasma cutter, hydraulic press and a lift in it.) I have the space on my property to build one, but crazy zoning laws like building can't be higher or larger in square feet than the residence made it impractical. (My house is a Ranch Style home, 980sqft)
I just this year actually bought the unit I've been renting, the purchase price was comparable to what it would have cost me to build a shop.
Having the building in an industrial area separate from the house provides some really big benefits, I have two Autoparts stores and a Lowes within easy walking distance, also two tire shops and state inspection stations, And most importantly, A gas station with good coffee! (Wawa). Oh, a Bojangles and a Sonic too...
If I'm pounding on panels or making lots of noise at 7am on Sunday morning, I don't piss anyone off.
It is now an asset that is easy to divest myself from, If it's on your property, it's impossible to sell it separately, nor can it be separated from the house if you need to move, so you limit the market for the house.
If I stop doing work on my own rigs, I can rent the shop out for extra cash if I don't want to sell it.
When I work on stuff at the house, I can look up and see it's 2 in the morning without even realizing it, I Find it much easier to set a time to clean up and quit for the night when I know I still have to drive home.
If you set up an LLC to buy it, and then rent it to yourself, you can deduct Mortgage Interest, Property Tax, and maybe some other expenses (I haven't done this, so don't know all the ins and outs.)
Some drawbacks are you'll need a commercial insurance policy that covers neighboring units (Mine is $500 a year for $1,000,000 liability) and if you have to mortgage it, I also found it's difficult to buy commercial real estate without a business, but doable, as long as your personal income is high enough to cover the mortgage. Also, You'll have to put at least 15% down on a commercial loan.