7 Differences Between Commercial and Residential Construction

Published Categorized as Construction
Commercial Building Under Construction

Commercial and residential construction make up a significant portion of the construction industry. One houses people while the other provides the infrastructure to meet their daily needs.

Aside from their uses, however, there are a few differences that distinguish the two building types. Some notable differences between commercial and residential construction include the infrastructure and building systems required, building materials, funding sources, and time to completion.

This article delves into the distinctions between residential and commercial construction and how they impact construction projects.

Popular Types of Commercial and Residential Property

Commercial structures typically – though not always – tend to be larger in scale and serve a larger number of people, whereas residential structures are usually smaller in size and are built for individuals and families.

Commercial construction includes:

  • Land investments
  • Office buildings
  • Large-scale multifamily structures
  • Storage units
  • Retail space
  • Industrial buildings

On the other hand, residential construction includes:

  • Single families
  • Detached homes
  • Condominiums
  • Townhouses
  • Triplex, duplex
  • Housing cooperatives

1. Codes and Permitting

Both commercial and residential properties require a permit and must adhere to building code requirements. Regulations in commercial property construction are greater and generally stricter than residential construction. 

In addition to existing regulations governing commercial properties, other rules apply to ensure that the building’s safety level is satisfied. Commercial construction projects have pre-set guidelines regarding the materials used. The laws are enacted to ensure that the following aspects of the structures are addressed.

  • Electrical systems
  • Plumbing
  • Construction materials
  • Size
  • Design
  • Techniques for construction

Following these requirements until the end will benefit the project in the long run. When all the electrical systems are correctly set-up, plumbing is well-done, the construction materials are bought in standard quality, the size is ideal, the design works well, and the construction techniques are sound, the final project will be successful. 

Safety is important for both residential and commercial structures. They are designed to handle emergency situations appropriately to ensure there are no fatalities. Today’s structures need to have the most effective and reliable safety measures in place in case of an emergency or accident.

The concerns for residential construction tend to be less. However, this doesn’t mean that they should be neglected. The legality and safety of all stakeholders involved in the project should be taken into account regardless of whether it’s a residential or commercial property.

The level of complexity faced when dealing with commercial construction is higher than that of residential settings. This includes, for instance, developing the parking lots and garages, safety factors such as elevator permits, additional electric requirements, and more technological needs such as more wiring for internet connectivity.

Generally, commercial projects have greater complexity in terms of permits and codes because these buildings need to take into account a lot more than residential properties. Restrictions on commercial construction include the building techniques, materials, electrical systems, size, and plumbing systems used.

Residential structures have far fewer restrictions to adhere to, and this gives them an easier time with the relevant authorities and compliance as opposed to their commercial counterparts.

Commercial construction projects require more scrutiny in terms of the likely pollution they will cause on the surroundings. This is because a residential project is less detrimental to the environment and fewer people, if any, will be inconvenienced by it.

2. Building Materials

Every building design calls for different building materials. This means that each project will require an entirely unique set of materials in terms of both quality and quantity.

Residential building materials differ significantly from those for commercial property. Most homes have timber frame construction since it’s considered affordable and structurally ideal for small to medium-sized residential spaces.

Most commercial buildings are architecturally-designed, meaning they require steel and all the other complex construction materials you can imagine. When the design is intricate, more materials will be needed, some of which are quite different from the regular timber used in the average residential house.

Steel remains the best option for commercial buildings because of the significant height the buildings go to and the incredible durability expected. Buildings made of steel are exceptionally durable and strong, and this is why the financial investment into such projects is usually enormous.Most commercial construction projects are enormous, and the concerned builders need to have a good rapport with suppliers to ensure that the construction is never stalled before its completion. For commercial projects, it is possible to set attainable deadlines and targets, and a bad relationship with suppliers should not affect your project’s progression.

3. Cost

The cost of building commercial structures is significantly higher than residential buildings, even if they are of comparable size. The difference in costs does not only stem from compliance standards and materials used but also overhead costs, equipment, and labor.

The number of workers involved and hiring or buying specialized equipment are key factors contributing to the large final costs. These projects are usually funded, relying on different entities. In most cases, commercial projects are funded by:

  • Government agencies
  • Corporations with bank financing
  • Wealthy owners
  • Developers

The entity that funds a commercial project hires a general contractor to manage the entire project, hire and schedule subcontractors using competitive bidding procedures. The homeowner basically pays for the residential project money using a loan from the bank. There are other methods used to pay for residential projects which include the following:

  • Insurance loan
  • Bank loan
  • Government agency
  • Cash

Assembly plants, hospitals, office buildings, retail spaces, warehouses, and any other retail space for business all fall within the commercial construction umbrella. Most people overlook the fact that commercial builders must keep in mind the diversity of building tenants since various businesses will end up occupying the same facility.

This could mean a range of tenancies from office space, a hospital, a shop or supermarket, or even a conference room. The typical residential builder making a single-family apartment or home structure only needs to concern themselves with building for a single client type with all the freedom they want.

Given the intensity of use and sophistication of equipment applied to commercial projects, some of them might need to be insured against damage or even theft. The project may have to incur significant expenses, insuring all the significant machines on the site that were hired from different sources.

This makes the cost relatively high when compared to residential construction, which does not require equipment insurance for costly machines. If any fault arises with the machines under the project contractor’s care, it becomes their sole role to manage the particular problem.While there is no doubt that the difference between commercial and residential costs are significant, commercial properties do make higher returns. The investment is likely worth it, despite the initial costs. A residential home will likely not generate the same returns when compared to investing in a commercial building and leasing out the entire property.

Commercial industry players typically decide to invest significant money in order to get lucrative returns within predetermined lengths of time. Maintaining the facilities is also expensive when compared to maintaining a home or a residential apartment.

4. Required Equipment

Commercial construction is typically larger in scale and requires the use of specialized and sophisticated equipment for most projects. Earthmoving machines and cranes, among other heavy equipment, must be used to perform the work. For project safety and job quality, the handlers of these machines and equipment must be highly seasoned professionals.

Bulldozers and earthmovers are massive machines that might not be too friendly to the soil structure and the environment. They produce a lot of noise pollution and fumes from the incomplete combustion of fuel. By that, a commercial project has already impacted the environment, something a residential project would not do, at least not to the same degree.

During residential construction, neighbors can for the most part go along with their business, but that is not the case when talking about a commercial construction project. The least the project initiators can do is ensure that minimal pollution is done to the surroundings.

5. Time and Deadlines

Commercial projects take relatively shorter periods to complete than residential projects. While this isn’t always the case, for the most part, commercial construction is performed more quickly. Residential projects are slower to completion, but they are less complicated and have fewer requirements.

The completion of these projects depends on urgency, and with the right resources available, it cannot last longer than expected. Owners want their projects to end fast, and so do the builders. Companies know that if they are able to build more quickly, they will incur lower labor costs, motivating the construction team to work faster and make more money in the process.

A homeowner takes time, rethinks some new decisions throughout the construction period. Residential sites usually have fewer workers, who also juggle several other projects at once. Combined with the tedious nature of handling and working with wood, these factors contribute to the more extended periods taken on residential construction projects.

Another aspect that may contribute to the slow rate of completion in residential structures could be funding. Homeowners usually support themselves or are financed by a bank loan, and this money may or may not be adequate, leading to the stalling of the entire residential construction project. 

Unlike residential construction projects, commercial ones hardly stall due to money, but rather for other reasons such as construction materials and licenses. The money for a commercial project is usually set and determined well before the project even starts, and this is why it takes less time to complete.

6. Customizability of Design

The customizability of design is another factor that sets the two types of construction apart. In residential buildings, the owner can be creative and personalize their layout. However, in commercial structures, everything must be in agreement with the pre-set standards and guidelines.

Commercial construction projects are stricter when it comes to dealing with design or plan changes while the project is in progress. Additionally, a last-minute and irrelevant change only delays the project. On the other hand, design changes that are stated early won’t have a significant impact on the project.

Residential construction is a lot laxer compared to commercial construction. Builders, as well as designers, frequently demand changes to the original design and are able to implement the changes quickly. This is because residential buildings are smaller in scale which makes it a lot more achievable. Also, the smaller size of the construction crew makes design change more possible.

7. Location

The location of either a residential or a commercial structure matters a lot. There are suitable and appropriate places for commercial facilities, just as there are those suited for residential structures. For commercial purposes, the structures need to have proximity to busy roads and active places booming with people. A residential construction may be situated in a more secluded setting.

Acquiring land close to the road is more expensive than acquiring a piece of land in the periphery of the city. Given the value of land, commercial projects are usually set on a massive budget from the onset of the project. Comparing the purchase of land near roads or closer to urbanized centers is costlier than buying land in the outskirts. This is a significant difference between commercial and residential construction projects.

Investors and their customers will always have a keen interest in the project’s location before they go forward with the venture. Given the magnitude of investment put into the project, it may be necessary to time the market after the commercial facility is set up. Therefore, the location should be bubbling with life to ensure business picks up sooner.

Residential projects may not have the same geographic requirements, however, that doesn’t mean that homeowners don’t take location into account. Homeowners want to ensure that the place they settle in serves them and their family’s interests. Some factors people consider when choosing a place to stay include:

  • Location
  • Proximity to roads
  • Proximity to schools
  • Hospitals
  • Social amenities
  • Security
  • General infrastructure
  • Religious centers
  • Recreational facilities

Due diligence is essential, especially when moving to undertake a project in a new location. It pays to research the history of the new place. Outgoing people may want to stay close to an area where recreation will be easily accessible. Commercially, it might not matter much whether the next-door neighbor is less hospitable, but in a residential set-up, it matters.

In addition, buyers will want to ensure that the relevant factors that are likely to expedite demographic growth are in place for business expansion. People who are moving in with their families as homeowners will need schools, hospitals, boreholes, and social halls, security, and good roads.

Ideal Company and Contractor

Generally, commercial construction projects tend to be built more expeditiously than residential ones, even though they involve more costs. Commercial projects also require stricter building permits and codes than residential projects. Residential structures primarily utilize timber and other wooden materials and require less specialized equipment – though it takes longer to complete a project.

The firm selected to handle small or large-scale construction projects must come highly recommended and have a clean track record of project winning contracts. The company should also have all the equipment required for the specific project. It must also have experienced and highly-skilled workers who will carry out the project. It’s important to research and determine that the firm is licensed to be operational in order to avoid dealing with illegitimate companies.

Whereas seeking a contractor for a residential project does not require the market’s best contractor, a commercial developer is motivated to look for the best contractor in order for the proposed structure to come out perfectly. It takes more time and resources to select the best from a pool of many professionals, some of which are highly specialized.

In addition to preference and judgment, the best way to find the best fit is to seek reliable references and referrals. A particular company may possess all the equipment and sophistication needed for a commercial project, however, it can be a risk to hire them if they lack a good reputation and a lot of experience.

The Bottom Line

Commercial apartments have more significant variations than residential structures. Buildings designed for business are usually modeled differently according to the specific venture, while residential structures may have the same features applied to multiple structures.

Once the building has been constructed, it’s important to maintain it. Regular maintenance routines should be upheld. Relevant professionals to help in areas such as cleaning and maintaining various systems should be engaged in order to provide structure longevity. Proper maintenance should not only be done for commercial buildings but also residential ones.


By Giovanni Valle

Giovanni Valle is a licensed architect and LEED-accredited professional and is certified by the National Council of Architectural Registration Boards (NCARB). He is the author and managing editor of various digital publications, including BuilderSpace, Your Own Architect, and Interiors Place.

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