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The Differences Between Commercial And Residential Buildings

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  • Admin
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  • leasing, Contracts, Customers, Buildings, Investment
  • Posted date:
  • 31-08-2022
The Differences Between Commercial And Residential Buildings

What is the difference between commercial and residential buildings? We look at the factors that make property suitable as commercial uses.

Differences Between Commercial and Residential Properties

Residential properties are buildings suitable for people to dwell, whereas commercial properties are for commerce and business purposes. Examples of the former are apartments, houses, and flats, whereas examples of the latter are industrial facilities, business establishments, and warehouses.

If you are willing to invest in either of these properties, it will be worth your while learning more about the differences between them. An investment can seem daunting and even overwhelming. That is why it is imperative to make a truly informed decision.

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Differences Between Commercial and Residential Properties

The name of customers in residential and commercial buildings vary. Residential buildings have customers called tenants, who pay a fixed monthly rent to live on the said property. Commercial customers, on the other hand, are called clients, business owners, or companies.

Investment Opportunities

Commercial properties have more investment opportunities in comparison to residential buildings.

Commercial property funds, such as Ediston Property Investment Company and Schroder Real Estate Investment Trust, are managed funds that allow easy investments in the commercial property market. All you need is a small amount of investment capital to apply.


Residential buildings

Residential buildings are vulnerable to wear and tear because they are used by tenants 24 hours a day and 7 days a week. These create simple problems that can be solved by a call to plumbers, electricians, or other local handymen.

Commercial property maintenance is more complicated. Since commercial buildings tend to be larger and have more facilities than residential buildings, an on-site property manager may be required to manage the property and deal with any maintenance work. In some cases, a property manager is required by law.

Renting/ Leasing Contracts

Leasing contracts are more complex than renting contracts because they are signed for the long term. Leasing contracts are based on the accounting standard of 19 / AS-19 and are usually fixed. After the term is over, the lessee can then purchase the commercial property.

Renting contracts are more flexible and can be changed by the landlord whenever they choose. While the normal leasing contract for renting is 1 year, they are signed for short or indefinite terms and don't follow any standard. The idea is to treat your tenant right so that they continue to rent from you and provide an uninterrupted income flow.

Another difference between renting and leasing contracts is that the responsibility and cost of maintaining the property lie on the lessee while renting rests on the tenant.

Residential Construction versus Commercial Construction

Permits and Codes

Construction projects must adhere to legal codes and health and safety regulations to ensure the project does not endanger anyone during and after construction. You must also obtain a permit from your local council to proceed with construction.

The legal rules of residential and commercial construction projects vary because safety concerns in industrial buildings are different from as in domestic settings. Furthermore, industrial buildings are larger and can house heavy machinery, naturally making them more dangerous than residential ones.

Building Materials

Building Materials Commercial And Residential Buildings

In terms of size, residential buildings are smaller than commercial structures, meaning that different materials and amounts are needed. Housing properties are predominantly made from wood and brick, while commercial buildings are created from cement, steel, and various other metals.

While wood and brick are durable, strong, and cheaper than steel, concrete and steel are more sturdy materials and provide longer lifespans to commercial buildings. These materials, in turn, make them much safer than residential buildings.

Equipment Used

Large pieces of equipment and cranes are used for large-scale commercial properties, whereas large houses rarely require the help of a crane.

The differences in equipment used for commercial and residential projects require different contractors. Commercial projects require crane operators, whereas residential properties hire the help of stonemasons and carpenters to work with the materials used in construction.

Residential projects don't use machinery that can be dangerous if operated incorrectly, whereas commercial projects do and require an experienced operator to avoid any such danger.

Completion Time

demand for commercial buildings

Due to the demand for commercial buildings to be used and sold immediately after construction, such projects are completed much faster than residential properties. For this reason, commercial project managers hire more workers to complete the project quickly than residential projects. Commercial buildings such as industrial warehouses can take about three months to complete, while it can take seven months to build a house.

Residential projects don't typically require much investment but are, in some cases, streamlined. For example, when large estates are being built, and houses are sold through catalogues, apartment buildings can be streamlined and completed quickly. On the other hand, commercial projects typically require higher investments, and investors can expect the work to be completed quickly.

Building Cost

The costs of residential and commercial projects vary significantly. Because of equipment, materials, and completion time, commercial projects cost millions more money than residential ones and are paid for differently. Unlike commercial properties, most residential properties are paid for by the government.

If they are eligible, people who want to build a homestead for themselves can apply for government bursaries. Sometimes, real estate projects can be funded by crowdsourcing platforms if, for example, a building has been destroyed by a natural disaster.


Another difference between residential and commercial construction projects is licensing.

Most contractors have general licenses that allow them to build both types of structures, while others have simple building contractor licenses. The latter does not allow a contractor to perform renovation work on either property type and is limited to building up to three floors on a residential property.

The reason a simple building contractor license prevents a contractor from building commercial projects is that they have not gained the relevant training and qualifications to do so yet.


Usually, commercial properties are built in the same manner as other local commercial properties for aesthetic and planning reasons, whereas residential properties can be built to the homeowner's requirements and customised appearance however they want.

Architects can be creative with a residential building's design and work together with the owner to create a result that satisfies both parties, is structurally sound, and looks pleasing. They cannot be creative with a multi-storey property because it becomes too structurally risky.

You should know the differences between residential and commercial construction projects so that you build, invest in, and use a building the way you want it that looks the way you want it.

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