Commercial Construction vs. Residential Construction

Published Categorized as Construction
Commercial vs Residential Construction

Commercial construction and residential construction are the two main activities of the construction industry. Everyone knows that commercial construction deals with the construction of large commercial buildings, whereas residential construction deals with the building of homes and living units. But how do the two compare in other aspects of construction?

Commercial construction projects typically have higher stakes than residential construction projects. They have a much more elaborate pipeline involved, and also a much larger overhead. Residential construction is much more lax in terms of the pace of work, permits required, and the intimacy of the crew.

In this article, we will cover all of this in much more detail. We will begin with a basic definition of the two types of construction and six key factors to consider for each. We will then move on to a much more detailed comparison.

Commercial Construction

Commercial construction deals with the construction of a commercial property. Commercial property is a building that is constructed so that it can later generate profit either via capital gain or rental income. It could include anything from schools, casinos, movie theaters, skyscrapers, prisons, hotels, golf courses, airports, bus stations, etc.

Benefits of Commercial Construction

  • A large and dissociated crew that is well managed such as those employed in commercial construction can make for an extremely efficient workforce.
  • While Commercial Construction projects are only suitable for big-budget projects, if scaled-down, they are a lot more economically efficient than residential construction.
  • The larger budget of a Commercial Construction allows it to employ expensive and sophisticated machines/equipment that can make the job a lot easier.
  • Commercial Construction projects have much higher stakes in getting the job done in time since only a good reputation will lead to the procurement of future projects.

Residential Construction

A residential construction deals with the construction of a residential property. Residential property is either a single-family home or a unit in a multi-family residential building. It is constructed for a family to live in.

Let’s now take a quick look at some of the benefits of residential construction. This should help you know when it’s advantageous to use them.

Benefits of Residential Construction

  • Owing to the small size of the projects, residential construction projects don’t require as many permits or safety regulations as commercial projects.
  • The more intimate size of the crew in a residential construction helps the workers maintain a healthy social life at work. It also helps the client develop a close relationship with them which can have its advantages.
  • Residential projects are a lot more customizable than commercial projects.
  • The scale of a residential construction often means that the materials don’t have to be of industrial quality. For instance, a wooden frame will suffice instead of a much more expensive steel frame. This will reduce the cost of construction.

Commercial Construction vs. Residential Construction

In this section, we’ll take a detailed look at the differences between commercial construction and residential construction. We’ll start with the ‘permit requirements’ for the two types of construction:

Permit Requirements

This is perhaps the most important difference between commercial and residential construction. While both types of construction are required to secure a fair bit of permit from the local government body, getting the necessary permits for commercial construction is a much more difficult process.

The reason behind this is that commercial construction projects, owing to their much more massive size, have greater safety requirements and code adherence requirements to follow than residential construction. These may include anything from safety factors of the building (electricity, fire, etc.) to the development of parking lots or parking garages.

For this reason, getting all the necessary permits for commercial construction can be a lot more difficult.

Most commercial builders deal with this problem by employing lawyers who handle the procurement of all the necessary permits. And there will be instances where the procurement of a certain permit will require the designers of the building to change some of the original design.

Getting permits for residential construction is usually a lot easier owing to the lower stakes involved. Also, since most residential buildings are much more identical to one another than commercial buildings, the designers and contractors are well aware of all the necessary requirements and regulations.

Crew Size

Crew size is another area where the two types of construction vary substantially. Commercial construction projects are a large scale affair that employs large workforces. These include regular construction workers, engineers, technical experts, and the operators of special machinery and equipment like cranes.

Due to the industrial scale of the workforce, crew members in commercial construction are often less intimate with one another.

Often, crew members won’t even know who they’ll be working with before the work actually starts. While this may be a major disadvantage for the crew members, it often makes for very efficient operation. This is quite intuitive when you consider how much more hesitant one is in opening up and fooling around with strangers compared to someone one already knows.

Residential construction projects often employ a small crew. Given the smaller scale of the job, an intimate team where everyone knows and trusts each other makes for an efficient workforce. The small size also means that the client often has the option to develop a close relationship with the crew members. This can have two advantages.

Firstly, a closer relationship helps maintain a better communication channel in terms of design/development requirements or dissatisfactions. Secondly, one could end up building a good relationship and a contact that lasts for many years. But a small crew size also has its disadvantages.

If a crucial member (or some members) that are part of the construction pipeline fails to show up for whatever reason, it could potentially stop the entire process. Another disadvantage (in terms of work efficiency) is that crew members in a smaller team often know each other well enough to spend a lot of time fooling around or talking.

While this isn’t going to be a huge problem for most residential construction, it could adversely affect some projects.

Materials Used

When it comes to the materials used in construction, there is once again a big difference between commercial and residential construction. The former mostly use steel frames while the latter uses wooden frames.

The reason behind this is due to the high cost of steel and the expected durability of a commercially constructed building. After all, there is a reason why commercial construction projects operate on a higher budget. In contrast, the use of steel frames is economically neither feasible nor practical for the average homeowner.

Another factor worth considering is that most commercial and residential contractors have a long-standing relationship with the suppliers that provide the material for the construction. This relationship is a lot more volatile with residential contractors, who may be tempted to switch suppliers at the last moment for a better deal.

This stability is a lot more solid with commercial constructors, who can’t afford the volatility for a very important reason. Like we’ve mentioned above, a commercial construction consists of an extensive pipeline that needs to operate precisely to get the whole job done in a cost and time-effective manner. Any last-minute changes in suppliers can bring forth a lot of unwanted problems.

A steady flow of materials is absolutely crucial for both residential and commercial construction if they are to remain on schedule. But the stakes are obviously much higher for a big-budget commercial construction.

Equipment/Machines Used

This is another area in which commercial construction varies greatly from residential construction. Commercial construction projects are much larger than residential projects. They usually deal with projects like skyscrapers or large hospitals. As such, they require a lot more heavy machinery and equipment compared to residential projects.

With commercial construction, it isn’t far-fetched to expect the use of large cranes or hydraulic lifts among other heavy-powered equipment. Not only are these machinery expensive, but they also require specifically trained crew members to operate them. All of this extra cost can only be justified given the large budgets of commercial projects.

In terms of the project, the machinery actually makes the process much more cost-efficient. That is, if the project were to be scaled down to the size of a typical residential construction with the same equipment/machines, the project would actually be a lot more economically efficient.

But this simply isn’t the case with residential construction where you are highly unlikely to find the use of big machinery. A few ladders and some power tools can often get the job done much more efficiently.

Another thing that has to be mentioned when considering the use of machinery is that they significantly increase the chances of accidents. This is why safety requirements are a lot stricter with commercial construction compared with residential construction.

Heavy and expensive equipment and machinery are used for various purposes in commercial construction. The most common equipment includes the following:

  • Backhoe: Excavating trenches in weak soil; lifting; loading and unloading of materials
  • Bulldozers: Lifting/removal of weak soil
  • Compactors: Compacting soil surface or materials
  • Dragline Excavator: Larger depth excavation
  • Dump Trucks: Carrying a large quantity of material of waste from one site to another
  • Excavators: Excavating soil; lifting; cutting trees
  • Feller Bunchers: Felling large trees in the construction site
  • Graders: Leveling of soil; removing of snow and dirt from the surface
  • Loaders: Loading materials, scraps, soil, etc. onto dumper trucks
  • Telehandlers: Hoisting materials from the ground up to a certain height
  • Tower Cranes: Hosting materials from the ground to the top of a tall building under construction
  • Trenchers: Excavating trenches; suitable for both hard soil and weak soil
  • Wheel Tractor Scraper: earth moving; leveling of soil


The customizability of design is also an important factor to consider when differentiating between commercial and residential construction. In fact, this is one of the key factors that differentiate the two types of construction. That is because it is as difficult to implement changes to the original design of commercial construction as it is easy to do the same with residential construction.

Commercial constructors are a lot more tied up compared to residential constructors when it comes to dealing with changes in the design while the construction is ongoing. This is because a commercial construction crew usually has a much more complex pipeline compared to residential constructors. So even the smallest changes can get magnified in terms of stakes when it has to be enforced down the entire pipeline.

Last-minute changes can often delay a commercial construction project by quite a bit. But as long as the changes in design are specified early on, the project will not suffer. As long as there isn’t a significant addition to the design, the process can go on with little to no change in the cost or time of construction.

This usually isn’t that big a deal with residential construction, which is a lot laxer. The builders and designers constantly request changes to the original plan, and they can be implemented quite easily. This is because of the smaller scale of residential construction, which makes changes a lot more feasible. Also, the more intimate size of the construction crew and the smaller stakes involved help make this possible.

Pace of Work

Another thing that will vary greatly between commercial construction and residential construction is the pace at which the work takes place.

Commercial construction projects are usually expected (much more so than residential construction) to meet specific deadlines. This is due to the fact that commercial construction projects have a lot more invested in them. This is because there are a lot more personnel and a lot more materials involved in these projects.

Commercial construction projects also have a lot more at stake since the clients expect to put the building to use as soon as possible.

This isn’t necessarily the case with residential construction, where the work is a lot laxer, and the stakes aren’t as high. But despite this requirement, the rate of construction is a lot more predictable with residential construction.

This is because, with commercial construction, a much larger amount of materials and equipment are required. Also, the size of the crew is much larger. So there are plenty of outside factors and trades or internal conflicts that could delay the work.

One example of how external factors can largely influence the pace of work of commercial construction is the construction of the Shanghai World Financial Center. Designed by Kohn Pedersen Fox and developed by the Mori Building Company, the characteristic trapezoid aperture at the peak of the tower was originally intended to be circular.

But amid protests from Chinese officials (who claimed that the circular shape resembled the rising sun design of the Japanese flag), the design was changed. This delayed the work by some time.

To summarize, when a client is looking at a number of commercial contractors for consideration, they will place a specific value on the contractor’s track record of success in meeting the deadline. For homeowners, although important, other factors like cost will influence the decision.

Final Bill

In general, commercial construction projects end up costing a lot more than residential construction projects. And that is after we have factored in the relatively massive scale of commercial projects compared to residential ones. And even when the projects are of the same size, commercial construction ends up costing a lot more than residential construction.

This is because commercial construction employs a lot more people and uses plenty of heavy machinery and equipment such as cranes and hydraulic lifts to get the job done faster and more efficiently. Of course, smaller commercial projects don’t justify the cost of the construction. But with bigger projects, the cost is absolutely justified.

Commercial construction also ends up costing a lot more owing just to the high quality of materials used. Usually, commercial buildings are expected to last much longer under much more intensive use than residential buildings. For this reason, they typically use materials like steel to build their frame.

Residential buildings however, avoid this by using wooden frames, which are a lot cheaper, although not as durable.

Due to the low cost of residential construction, these projects are typically funded by the homeowner’s own cash or bank loans. Occasionally, there are scenarios when natural disasters occur, and the government or an insurance company covers the cost of construction.

With commercial construction, the situation is often a lot more serious. Owing to the massive size of the project, it isn’t uncommon to find commercial construction projects being funded by bank financing. The government is another popular client among commercial contractors. They will constantly be funding projects like hospitals, schools, libraries, public centers, infrastructure, etc.

Other possible sources of funding include wealthy developers and corporations.

It is also not uncommon for there to be a lag in the payment in commercial construction projects. The contractors usually have a pretty good setup with the suppliers of materials and the laborers, which is why they can handle the occasional delays. This is highly unlikely with residential projects.

Choosing Your Contractor Wisely

This section is specifically aimed at homeowners or bigger clients trying to decide between the two types of construction. Who exactly do you pick? And how do you pick them?

Have a Draft of the Design

The first thing you need to keep in hand as a person looking for the right contractor is a rough estimate of the final design that you’re looking for. Without this, it will be virtually impossible to figure out the right numbers when it comes to the cost. And this may, in turn, lead you to choose the bad deals.

For this reason, have the basic design drawn up and use it to get your quotations.

Most people looking to build homes or living units should ignore the hype of commercial construction. The best construction method for these projects is often residential construction. The project will involve fewer workers, less equipment, and as a whole, less bustle.

In the end, you will end up with exactly what you were looking for, and you could even end up developing a personal relationship with the team.

This simply isn’t going to happen with commercial construction.

The Downsides

This construction method is so well organized and regulated that it will almost feel like it were an extremely efficient machine doing the job rather than a group of people.

But getting to develop a real human connection with the workers has its own benefits. First of all, you will be better able to communicate your desires and maybe you might get to a point where you want to change something in the design at the last moment. A personal connection helps in this case as well.

Commercial construction projects are, in general, more suited to larger projects like skyscrapers, hospitals, schools, libraries, etc. These big projects can be completed to perfection at the optimal cost via commercial construction. The massive size of these projects means that they are much more subject to chaotic factors that hinder the construction process.

In such a scenario, efficiency definitely triumphs over building a human connection with the crew.

Because commercial construction projects are much more expensive, they usually require backing from a large corporation or government or at least need to be financed by bank loans. This is because payment is absolutely crucial in these projects. You won’t be able to just abandon a building halfway through as easily as you can a home.

Commercial Construction vs. Residential Construction: Pros and Cons

We have just explained in great detail the difference between commercial construction and residential construction. It was a lengthy explanation, so in this section, we will attempt to summarize all that we have covered by looking at the pros and cons of each of these two types of construction.

Pros of Commercial Construction

  • There are enough safety enforcements in place to make for a safe working environment.
  • The projects are much more detailed in terms of the planning and the specifications.
  • You will be working with a team of actual construction professionals that is built and managed under realistic expectations.
  • You can still get creative with the construction process just so long as you put it across with the design team early on.

Cons of Commercial Construction

  • There are far more legal implications with commercial construction projects. Also, make sure you’re prepared for all the paperwork that’s headed your way.
  • There will likely be more of a lag in payment in commercial construction compared to residential construction
  • It will be difficult to build a close relationship with the team you will be working with since most of the time, the teams are put together with the job in mind.
  • The work schedule in commercial construction will often depend on a lot of outside entities and trades, so it may be a lot harder to stick to one.
  • The price can be hugely influenced by competitive bids.

Pros of Residential Construction

  • You will be working with a much more intimate construction team.
  • If you do a good job of properly mitigating the risks involved in residential construction, you could end up with more profit.
  • It is a much better choice if you have problems with your cash flow.
  • The payment terms are a lot better on residential construction projects.
  • The work schedules are a lot more flexible than on commercial construction projects.
  • Also, the actual construction work comes with a lot of personal freedom and flexibility. You get to be more creative.
  • You could potentially end up cultivating a nice personal connection with the homeowner and builder.

Cons of Residential Construction

  • Since the contracts for residential construction are a lot looser than those for commercial construction, it can be a lot harder to win the cases if a conflict arises between the two parties.
  • Since the contract sizes are usually a lot smaller for residential construction, it will take a lot of projects to actually build an efficient pipeline.
  • The construction sites have a lot fewer safety enforcements.
  • You will have to constantly resell your company’s qualifications.

Closing Thoughts

Commercial construction is a higher stake affair compared to residential construction. Sure, the potential profits are higher, but so are the overhead costs and the management requirements. The crew size will be much bigger compared to residential construction, and there will be a lot more equipment and materials used. There are also many more licenses and permits to procure.

Residential construction projects are laxer in comparison. And this is mostly due to the relatively lower stakes involved. The crew is a lot more intimate, and there are plenty of spaces for last-minute changes to the design.


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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