For investors who are deciding which real estate type in which to invest, it’s important to understand the different needs of a residential property versus a commercial one. Below we discuss the differences in residential versus commercial property management.
Licensure Requirements
In order to work as a Property Manager, or run a property management business, most states have a set of licensure and educational requirements. There are a few states that have zero requirements (ID, ME, MD, MA, VT), but most do in the form of a Real Estate Sales or Real Estate Brokers License. Louisiana falls under this licensure required category.
There is only a handful a states that require specific licensure and education to perform commercial property management, as opposed to residential. These are Washington D.C., Montana, South Carolina and South Dakota. To see the requirements for your state, click here.
Skill Sets
The largest difference between residential and commercial property management is the skill sets required to be successful. While some basic duties will overlap for both real estate types, commercial property managers are required to have a much broader, diverse and specific set of knowledge in order to successfully run their asset types.
Commercial property management requires a lot more education in regulatory and insurance information that simply isn’t necessary in managing apartment buildings. Since businesses are run out of or conducted in commercial space they come with a whole set of specific needs not seen in residential properties.
Commercial also covers an array of different property types (medical, office, retail, restaurant, industrial, etc.), which house drastically different businesses. Whether a plastics manufacturer leasing an industrial warehouse or a dentist leasing space in an office building, commercial property managers must know and meet the physical and legal needs of their tenants.
In addition to meeting needs as they arise, a large portion of commercial management is conducting risk assessment, which is much more difficult for commercial assets than residential ones. Since commercial property types and businesses that use them are so varied, the activities in those assets are varied as well. More activities mean more things that could wrong mean a larger array of hazards.
The Tenants
Another big difference between residential and commercial property management is the people that occupy the property. While every tenant has needs to service, those needs do not translate into dollars and cents for residential tenants as it does for commercial. Tenants in a commercial property are running a business in that space, and how that space functions directly affects the operational success of their business.
Think about it in terms of broken air conditioning. A residential tenant will be unhappy and uncomfortable, yes, but it isn’t an issue that loses them money. In a commercial property, having an issue with air conditioning means a tenant’s clients and staff will be uncomfortable and unhappy. This results in clients not coming in and staff being unproductive. Both things that can lose a tenant money if not properly handled.
