Real Estate

Residential and Commercial Construction – Key Differences

The majority construction industry falls into two equally important halves: residential and commercial. The former provides people with housing, while the latter provides space for companies that serve their daily needs.

Okay, that sounded like the Law & Order intro – but apart from that noticeable difference, how else do commercial and residential construction differ? Once you dig beneath the surface, you’ll find plenty of differences. And we’re going to explore some of the biggest ones right here!

Differences Between Residential and Commercial Construction

Residential and Commercial Construction

Different Sizes

While this isn’t always the case, commercial structures are usually much larger than residential ones and serve more people. Conversely, residential properties are generally smaller and constructed with families and individuals in mind.

Necessary Equipment

Commercial construction generally functions on a larger scale, requiring sophisticated and specialized equipment to complete the project. This includes cranes and earthmoving machines, along with various other heavy equipment.

On the other hand, this also means that the people handling these machines must be seasoned and licensed professionals. The fact that a commercial general contractor has to use these professionals also drives the cost of commercial construction further upwards.

Different Regulations

Any property needs a building permit and must comply with local building codes. However, you’ll find that commercial properties face much stricter regulations than the ones governing residential construction.

There are special regulations to ensure that a commercial building has the proper level of safety. For example, a commercial project must adhere to predetermined guidelines on its materials. These guidelines concern:

  • Construction techniques.
  • Design
  • Size
  • Construction materials.
  • Plumbing
  • Electrics.

Of course, following these guidelines doesn’t just ensure the project’s legality; it also makes it successful because they’re all quality guidelines.

Naturally, safety matters for residential construction too. However, residential projects generally face a lower complexity level than commercial ones.


Every new building design uses different materials – however, some parallels can be drawn in general. For example, residential projects (like houses) tend to use timber frames; they’re an excellent fit for small and medium-sized projects, particularly because they’re an affordable choice.

On the other hand, most commercial projects require more complex materials – such as steel. They’re generally more intricate designs, which inevitably require a broader palette of materials.

Steel is a particular staple of architectural design because many commercial buildings are much higher than residential ones. Because of this, they require hardy materials like steel to ensure durability. This is also why commercial projects are usually far more expensive and have much more complex supply chains.


As we’ve mentioned above, commercial structures are significantly more expensive than residential ones – even those of a similar size. The cost differences partially come from the material and compliance expenses we’ve already mentioned and from equipment, labor, and overhead costs.

The number of required workers and the need for specialized equipment are crucial factors that contribute to the bigger final costs of commercial construction. That’s why commercial projects are usually funded by wealthy owners, bank-financed corporations, and government agencies.

Design Freedom

Freedom of design is another stark difference between the two main types of construction. When a residential building is in construction – like a one-family home – the owner can personalize the design and approach the layout creatively.

Commercial construction can’t afford that freedom because everything has to comply with pre-existing guidelines and standards. You’ll find that regulations for commercial projects are far more stringent regarding plan changes and any last-minute alterations. Plus, any changes inevitably delay the project, which is far more problematic with costly commercial construction.

Of course, this is also because residential construction is a lot less complex. Any changes affect fewer moving parts and can be implemented relatively quickly. In comparison, the larger scale of construction projects means that changes are more challenging to make in practice as well.


Real estate professionals have that famous adage – “Location, location, location” – and it holds for construction as well. Where you’ll build your commercial project matters just as much as it does for residential ones, perhaps even more.

Every type of construction has an appropriate type of location. For example, some commercial structures require busy roads and areas always brimming with people. On the other hand, owners of residential objects usually prefer more privacy and seclusion.

However, this brings us back to the question of costs – acquiring land at a city periphery is less expensive than buying something downtown or near a busy road. That also means commercial projects require more serious investments and are more expensive.

Naturally, this doesn’t mean homeowners aren’t interested in the location of their construction project, too; they’re just interested in it for different reasons.

A homeowner will look for safer suburbs in better school districts and consider nearby amenities for everyday life. So, that’s both a difference and a similarity; residential investors look at the location too, they just look at different things.

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About the author

Roy Ross

Roy is a self-proclaimed personal finance nerd. When he isn't writing about budgeting, finance, getting out of debt, making extra money and living a frugal life, you can find him building furniture, home making, fly fishing or developing websites.