What are the differences between residential and commercial real estate?

Real Estate is a broad asset class involving the purchasing, leasing, and structuring of land, buildings and more. Real estate is a form of real property, which are things that are permanently attached to the land. Anyone can invest in real estate directly by purchasing homes, rental properties or other property (vacant land, etc.), or indirectly through real estate investment trusts (REITs) which are bought and sold on exchanges.

The categories of real estate include residential, commercial, industrial, raw land, and special use. In this article, we'll compare just two of the categories: Residential and Commercial.

What qualifies as residential real estate?

Residential real estate can be defined as any property that individuals or families inhabit. In addition to the traditional detached house, some property types include condos, apartments, townhomes, and multifamily units.

What is the residential real estate industry?

The residential real estate industry encompasses purchasing, selling, renting, renovating, financing, managing, development, and construction of residences like single-family homes, for example.

Brokerages, developers, banks, trusts, architects, and builders all work with landlords and individuals to design spaces for occupancy.

Who buys and sells residential real estate?

Traditionally, individual buyers use residential real estate agents to find and purchase residential properties. Residential real estate may also be held by companies that serve as landlords to individual tenants. More recently, iBuyers, companies that uses technology to make an offer on homes instantly, are newer entrants in the evolving residential real estate field.

As we noted in a recent blog, residential real estate, namely single family homes, is a growing asset class among institutional investors. Historically, these funds and asset managers would purchase commercial real estate for their portfolio.

What qualifies as commercial real estate?

Any for-profit, non-residential property can be considered commercial real estate. In some states, residential property with more than a certain number of units may also be considered commercial property for borrowing and tax purposes.

What is the commercial real estate industry?

Commercial real estate encompasses buying, selling, leasing, financing, developing and constructing commercial spaces. These spaces can be used for all types of businesses, non-profits, warehouses, etc. In many cases, larger multi-family properties can be considered commercial real estate for tax purposes.

Who buys and sells commercial real estate?

While individuals, groups, and small companies can buy and sell commercial real estate, brokerage firms account for many of the deals happening within the commercial real estate industry. According to TRD's ranking, 2018's top brokerages by dollar-volume sales were Cushman & Wakefield, CBRE, Eastdil Secured, HFF, and Rosewood Realty Group.