There are many ways to distinguish between different types of construction projects. For many businesses, especially when looking for a construction loan, it is important to understand the difference – and the grey areas – between two types of projects: Commercial Construction and Residential Construction.
Residential Construction vs. Commercial Construction
Residential Construction refers to projects that involve a single-family home or dwelling like an apartment, an individual condo or townhouse.
Commercial Construction covers essentially any other type of project, such as:
Education: Schools, colleges and universities
Entertainment: Casinos, concert halls, movie theaters, museums, amusement parks
Government: Police & fire stations, military bases, prisons, courthouses
Infrastructure: Roads, highways, bridges, retention dams, power lines, power stations and substations
Landscaping/ Sitework: Golf courses, parks, athletic fields
Lodging: Hotels, motels, resorts
Medical: Assisted living facilities, hospitals, medical offices, nursing homes
Retail: Supermarkets, convenience stores, fitness centers, shopping centers
Transportation: Airports, bus stations, parking garages, rail stations, subways
Other: Offices, data centers, bars, restaurants
Note: If a project involves a mixed-use building with both residential and commercial, it is typically considered commercial construction.
Why does it matter?
Whether you specialize in residential or commercial construction projects has an impact on the size and scope of your project and your business overall.
Commercial projects on average require larger and more expensive equipment, more employees, additional overhead costs and other components like payment/performance bonds. They are often funded by a government agency, corporation with bank financing, or by an owner/developer. The agency, owner or developer then hires a general contractor, who in turn hires subcontractors to do the work.
The majority of residential projects are paid by the homeowner, through cash on hand, insurance or a bank loan. In some cases, such as a natural disaster, they are paid for by a government agency like FEMA. Residential projects can involve interacting directly with homeowners or renters and are more often found through referrals than a competitive bidding process.
If your company is looking to make the transition from residential to commercial construction and you need funding for bond premiums, labor costs, materials or equipment leases, we may be able to help. Click here to reach a Mobilization Funding representative for a free consultation.