Commercial and residential real estate sales are different

Ohio law does not differentiate between commercial and residential Realtors. They carry the exact same license, but that is where the similarities end.

Like Venus and Mars, black and white, fast and slow, there are stark differences in the skill sets needed to successfully represent clients in either arena. While some people possess both sets of skills, because of the vast differences, most Realtors only choose one path. Here is why.

Residential real estate works around the emotion of buying. Preferences about how the neighborhood feels, how the house looks, and the number of bedrooms and baths all play a large part of a homebuyers’ choice. The choice of school systems and how they fit your childs’ needs, the proximity to a park, the type of subdivision, or even how a house feels are primary choices made by home buyers. Successful residential Realtors know that personal factors dominate the buying process. Knowing how to prospect to find the right home for you — or the right buyer for your home — is largely a process void of numbers or statistics. Calculators aren’t much help here.

Commercial and industrial real estate is a totally different animal. Where a property is located in relation to utilities, roadways or rail may be essential. Buyers don’t care if it is in one county or another. Look at the recent choice for HQ2 by Amazon, they wanted to be where the schools turning out well-educated millennials were and where they wanted to live. The exact city didn’t matter — it was about workforce and incentives.

Other factors commercial Realtors deal with are the ability of a building to serve the buyer’s needs. Look at the recent TJX choice to build a new building in Lordstown when it was evident that the Kmart distribution center north of Warren would be available. Both buildings are approximately 1.4-million-square feet and near a highway. However, TJX chose to spend seven to eight times as much to build new rather than move into an existing building.

In commercial real estate, the building’s form must follow the function of the user. Simply put, it may be more cost effective to build the exact building to suit the buyer’s function than to work around the existing building. Some users’ businesses require a 30-foot high ceiling; others need 8-inch reinforced concrete floors. Traffic patterns dictate how some businesses locate on a corner. Traffic counts, traffic lights, two lanes or four all matter immensely to some commercial buyers.

Commercial and residential buyers and sellers do have some similarities: Is the business expanding or shrinking? Same with families — need more or fewer bedrooms? The biggest difference is emotion vs. numbers. Most commercial and industrial sales are about the numbers. Is it better for a business to stay put or move, better to add on or build new? A calculation of square or cubic footage available, the return on the investment, or the electricity and sewer capacity matter immensely. Is it better that the building is on the business’s income statement or balance sheet? All these factors dominate the day-to-day workings of a commercial industrial Realtor. Even the nationwide internet “MLS” for homes is vastly different than the one for commercial industrial properties, and few Realtors would pay to belong to both.

Both disciplines offer the chance and need for more education for Realtors. Residential Realtors might get a CRS, ABR, or EPro designation, while commercial agents get CCIM or SIOR designations. It is rare to hear of an agent with a CCIM and a CRS designation, which leads me to the point. The residential agent you know and like is probably not the person you want to help you find an industrial building for your business, and vice versa. Generally, residential and commercial agents refer business back and forth, because both know that the skill sets are so vastly different and thorough knowledge of both markets is impossible for one person. It is our goal to make sure that your needs are served, so make sure you get the Realtor best suited for you needs.

This article was provided by the Warren Area Board of Realtors.


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