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Residential vs. Commercial Real Estate: Experts Discuss Three Key Differences

25 Oct

As any real estate agent will tell you, not all deals are created equal. This is especially true when discussing residential and commercial real estate transactions. Joe Pelayo, CCIM, SIOR and Carolyn Niemczyk of Total Real Estate Consultants discuss three of the main differences between residential transactions and commercial transactions.

Property Type:

“There is very little similarity between commercial transactions and residential transactions,” says Carolyn, “Commercial sales and leases are purely business related.” Where a residential transaction might include a user seeking a home for themselves and their family, a commercial transaction is when a user is seeking a “home” for their business. Business-related property types range from office buildings and retail spaces to warehouses and industrial facilities. 


Every municipality has zoning regulations that are stringently enforced. Each type of business is only allowed in a particular zone. There are retail zones, office zones, general business zones, warehouse zones, and many more. Zones range from allowing the business operations of coffee shops and medical offices to major warehouse distribution centers. Each zoning type has different regulations including parking requirements, signage standards, permitted outdoor storage, and more. For this reason, it is critical to understand the business type and general operations when working with a business customer. Joe says, “In commercial real estate transactions, I highly recommend working with an experienced commercial REALTOR® who can best advise a customer on which government agency can assist them with zoning compliance. The client will save a lot of time and money!”

Purchase vs. Lease:

Many times, companies prefer to lease as they do not want to be in the business of real estate property management. Carolyn says, “If a company does decide to purchase for their own use, they will have the benefits of appreciation and depreciation. This means that the property may increase in value over time and the business owner is not just paying rent.  Depreciation allows a commercial property owner to deduct a percentage of their purchase price over a certain time period.” This is a key difference in commercial real estate transactions, which enable the purchaser to benefit from a multitude of tax options. Residential purchases are usually for personal use and are often more emotional decisions.

For business owners that are seeking a property, we highly recommend working with agents that specialize in commercial real estate. In addition to the differences listed above, many times commercial agents are better prepared for the negotiation and contract processes required in a commercial real estate transaction. Contact us today!

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