What’s the difference between a commercial and residential realtor? This is one of those questions I get a lot when I tell someone what I do for a living.
If you’re not in real estate, or if you’ve only ever worked in single-family homes or small multifamily properties, it can be hard to understand what makes commercial real estate different. And if you’ve never worked with a commercial realtor, it might not be clear why specialization matters so much.
Let’s clear it up.
What Qualifies as Commercial Real Estate?
The term “commercial” sounds broad, and that’s because it is. But for classification purposes, the dividing line is actually pretty clear.
If a property has four or fewer residential units, it’s considered residential. That includes:
- Single-family homes
- Duplex, triplex, or fourplex properties
- Townhouse or condo units, either individually or in quantities of four or fewer
Once you hit five or more units, it becomes a commercial asset. Commercial also includes the uses you might have already assumed:
- Warehouses
- Development land
- Retail centers and strip malls
- Office buildings
- Industrial properties
- Medical facilities
- Gas stations
- Businesses like golf courses and wedding venues
Commercial properties are valued, financed, and managed differently from residential properties. That’s why they’re usually represented by commercial brokers, not residential brokers.
Specializations Inside Commercial Real Estate.
Commercial real estate isn’t just one category – it’s a collection of specialized niches. You’ll rarely find a commercial agent who handles every kind of deal.
In our office, we each focus on different product types:
- I primarily work with apartment buildings and development land.
- One of my partners works almost exclusively in industrial, both leasing and sales.
- Another partner represents national and regional corporate clients.
- A senior advisor on the team represents local tenants seeking new spaces.
Each property type has different value drivers, tenant types, and lease structures. It makes sense to specialize, because things can vary greatly. That’s how we stay sharp and actually provide value to our clients.
One thing you don’t necessarily see specializations in for commercial real estate is leasing versus sales – unless it’s for apartment buildings. Because non-apartment commercial property types have such unique needs, many agents handle both sales and leasing. The knowledge applies either way, and traditional residential property managers typically don’t understand the different needs for non-apartment commercial tenants and owners.
That doesn’t mean commercial real estate agents handle all aspects of property management, though. Capstone’s team includes a dedicated property manager, who coordinates lease renewals and the day-to-day needs of a property – allowing agents to focus their time and attention on attracting new tenants to ensure your success.
What About Licensing?
Here’s something many people don’t realize: in most states, there’s no legal distinction between a residential and a commercial real estate license. A licensed agent can technically represent someone in either space.
But should they?
If you’re a residential agent, you probably don’t have the experience and specialized knowledge to properly value and transact a warehouse listing. Conversely, a commercial agent who has never worked in residential likely doesn’t have the toolkit to sell a luxury home.
Unfortunately, you can sometimes run into the problem of agents trying to take on a property type they don’t understand.
The standard in our industry is clear: agents shouldn’t engage in a transaction they don’t have the knowledge to properly handle. Doing so risks harming the client – and that goes against the foundation of trust that our industry should be built on.
That’s why agents should refer deals out. If I were asked to handle negotiations on a large office lease, for example, I’d send it to one of my partners who specializes in that. And residential agents should do the same when they’re approached about a commercial property.
Conclusion
Commercial and residential real estate are two different worlds. The properties, valuations, clients, and timelines all operate differently. If you’re working with a specialized asset, make sure your realtor is just as specialized. It can make a world of difference in your outcome.
If you’re looking to lease, sell, or buy a commercial property, work with experts who specialize in the asset type you’re interested in. Capstone has over 110 years of collective experience across all commercial property types, and we’d love to help you with a successful deal. Contact us today to get started.
