The Difference Between Commercial and Residential Real Estate

Broadly speaking, real estate consists of two major branches: commercial and residential. On the surface, these two branches don’t look the same. Residential properties include both resale and new homes. This includes single-family homes, townhouses, vacation homes, investment properties, manufactured homes, and condominiums. Commercial includes shopping centers, medical and educational buildings, hotels, offices, and apartment buildings.

It’s not only structural and physical differences that separate commercial and residential. There are other aspects that further set the two apart when selling either type of real estate.

1. Purchasing factors

Buying and selling real estate can be emotional. Home buyers make their decisions based on how the house feels to them. Factors such as family-size, location, home style or layout also come into play.

The process can also be emotional for commercial real estate buyers. But the layout and feel aren’t as drastic to the decision-making process. This is because the buyer is investing in commercial real estate to gain profit. This includes managing a multi-family housing property, retail store, or restaurant. It all comes down to economics. The purchasing process will take a bit of analytics to determine what will be the best fit for the business.

2. Competition

Head-to-head, residential real estate is more competitive than commercial real estate. It’s hard for home buyers to find their perfect “dream house”. This is due to a number of considerations in the home-buying process. When they do find it, they will give anything to have it. If the house is that good, there will likely be other potential buyers lined up.

There’s less competition for commercial real estate. Certain properties work better for an office space and others for a restaurant. The analytic research will determine what is affordable. Also, what location will produce the most profit and what layout will be most effective.

3. Market stability

Residential real estate is less stable than commercial real estate. This is because there are many uncertainties. Including a declining market, a neighborhood status change, or a home type could go out of style. In commercial real estate, new companies will always need a space. Spaces can also be remodeled for various businesses. All that matters are the functionality and productivity within the building.

Ultimately, the real estate market is unpredictable and elaborate on either side. Each has its own set of perks for the real estate agent.