Commercial vs. Residential Real Estate Development: Differences & Similarities

Commercial vs. Residential Real Estate Development: Differences & Similarities

The 2020 year proved to be challenging for many individuals and businesses, including the real estate market. In April 2020 the market in North Carolina alone dropped 22.2%. This was due to the extensive shut-down amid the COVID-19 pandemic. However, this has caused a pent-up demand for properties as we move through 2021. In February of 2021, there was a year-over-year increase of 6.6%. Right now, the current demand for properties far outweighs the current on-hand supply. This trend is only expected to increase over the coming months and subsequent years. 

 

Both commercial and residential real estate are on the road to recovery in the Charlotte, Raleigh, and Nashville areas. They each come with their list of advantages and potential growth forecasts. 

 

While these two areas of real estate may sound fairly similar in what they accomplish, they also have distinguishing characteristics. Sometimes, one of the industries may be sluggish while the other is booming, and vice versa. In order to understand the similarities and differences of the commercial and residential real estate development worlds, let take a closer look at what they are exactly.

 

 

What Is Residential Real Estate Development? 

 

Residential real estate is a category of real estate in which someone resides or lives. This can be an individual or family and can be a single-family home or multi-family residence, such as an apartment building, or duplex. It also includes condos and co-ops. 

 

With respect to growth opportunities, particularly in the Charlotte and Raleigh areas, it comes down to affordability. Currently, renting in these areas is more affordable than homeownership. This is attractive to those looking to invest in residential single and multi-family rental properties. The increased job forecasts for these areas are projected to grow 2.7% throughout 2021 alone. Furthermore, the population is expected to increase by 1.5%. Therefore the demand for affordable residential units is expected to grow with this trend.

 

Residential investment opportunities are sometimes seen as being less risky than their commercial counterparts because of a higher demand and more regulation. Although they may not have the same potential for larger profit margins, they do provide the chance to generate consistent and stable income.

 

 

Commercial Real Estate

 

Commercial real estate, on the other hand, is known as property which is used solely for business-related purposes. Usually, these spaces are leased to those looking to generate an income. These properties can be used for:

 

– Office Space

– Retail Outlets

– Food and Beverage Outlets

– Industrial Operations

– Factories

 

The list of commercial property development possibilities are nearly endless. However, in the wake of the 2020 economic reckoning, a large number of brick and mortar storefronts have unfortunately resulted in permanent closing. The lack of demand for commercial property is certainly taking a toll on the commercial real estate development industry around the country. However, several cities are expecting to not only survive, but thrive in subsequent years. 

 

Areas such as Charlotte, Raleigh, and Nashville are continuously developing cities that are drawing in new residents. This draw is resulting in continued commercial development and attracting many new businesses to the area.

 

While commercial real estate development may provide less control over individual properties and considered a higher-risk investment, it doesn’t come without its share of benefits. As the saying goes, higher risk yields higher reward. These properties have the opportunity to generate significantly higher profits than residential real estate developments. 

 

 

The Bottom Line

 

Both forms of real estate development, residential and commercial, have an incredible opportunity to generate steady revenue for investors. They each will encounter their growth struggles as the country continues its recovery through the COVID-19 pandemic. Those who can see this time as an opportunity will be able to reap the rewards as the economy continues to grow and bounce back.

 

If you’re interested in learning more about entering the Charlotte, Raleigh or Nashville commercial or residential real estate development market, contact the professionals at Capital Catalyst Partners. With many years of experience in both commercial and residential real estate, our industry experts are leading the charge in real estate investment.