Commercial and residential real estate are two very different animals. In fact, the agencies that deal with commercial and residential real estate are different, as are the agents. Residential real estate transactions close much faster and are generally priced much lower. Commercial real estate tends to follow a longer timeline with a larger pay out.
What is commercial real estate?
Commercial real estate consists of properties that investors purchase in order to lease. Investors intend to make money both from rental income and appreciation. Examples include apartment buildings, office buildings, warehouses, and factories. Though apartment tenants generally lease their units for no more than one year, offices and industrial properties are let on much longer terms, often 5 or more years.
In the simplest terms, as defined by Kimberly Amadeo “Commercial real estate is any property owned for the purpose of producing income. There is about $6 trillion worth of commercial real estate in the United States,” with the five main categories being, retail, apartments, hotels, office buildings, apartment buildings and industrial ventures.
Given the nuances of the sector, a commercial real estate agent is generally employed by a firm specializing in commercial properties, which are typically located in large cities or suburban areas to better cater to their customers. Agents work on a commission basis and typically work on deals for much longer than residential real estate agents. Commercial deals also often take more than a year to close.
What is residential real estate?
Residential real estate consists of the transactions that the general public is more familiar with, such as those for single-family homes, townhomes, and condos. Residential real estate is generally purchased in order to occupy, though some homeowners may choose to rent their properties at some point, which tends to blur the lines of commercial and residential. As a result, some properties that generate a revenue may still be classified as residential.
Given the current housing market, homes have been selling rapidly and for groundbreaking prices. As a result, transactions tend to be more expedited for residential agents. Many sales are now as simple as listing on an MLS program or running an open house because buyers are eager and the supply and demand is unbalanced. As described on Trulia, “Experts say timing will be paramount for homebuyers in the coming months, while sellers will likely have an easier time making a successful deal. Meanwhile, renters may find more amenities and negotiating power.”