Commercial Real Estate: What It Is, Its Types and How It Differs from Residential Property

Commercial real estate comprises properties used for business: company operations, retail, storage, manufacturing and services. In market terms, this segment generally includes offices, shops, warehouses, industrial premises, hotels and other business properties.

Commercial property does not have to be let to a tenant. An office occupied by the company that owns it also belongs to this segment. Conversely, a flat let to residents retains its residential designation: earning income does not, in itself, change the legal status of the premises.

To compare properties properly, it is important to distinguish their designated use, technical capabilities and actual use. Here we look at the main types of commercial real estate, the characteristics of offices and the questions that help businesses choose suitable premises.

What counts as commercial real estate?

A property may be an individual unit, a floor, a building or a complex of buildings. Commercial projects also use land, but the feasibility of construction and operation on a particular site requires a separate assessment.

For example, an office suite in a business centre and a standalone headquarters are both office properties. A ground-floor shop in a residential building and a unit in a shopping centre are both retail properties. However, their scale, layout and day-to-day operation will differ.

When reading listings, it helps to distinguish four characteristics:

• Designated use — what the property is designated for in its official documents.
• Market segment — office, retail, warehouse or another type of property.
• Property format — an individual unit, a floor, a building or premises in a mixed-use development.
• Intended use — owner occupation, letting, redevelopment or subsequent resale.

These characteristics answer different questions. “An office in a mixed-use development” describes the segment and setting. “A tenanted property” describes its current use but does not establish whether it would suit another company.

How commercial real estate differs from residential property

Residential premises are intended for people to live in. Commercial properties are assessed primarily by the business activities they can accommodate: teamwork, client meetings, retail, storage or manufacturing.

Working from home does not automatically turn a flat into office premises. Article 17 of the Russian Housing Code permits professional and individual entrepreneurial activities by lawful residents, subject to the prescribed conditions, including respect for the rights of others and the requirements applicable to residential premises.

Working on a laptop at home and accommodating an entire organisation with employees, visitors and equipment therefore need to be assessed separately. For the latter, suitable premises and the conditions of their use should be checked in advance.

Are commercial and non-residential property the same thing?

These terms overlap but describe different aspects of a property. “Non-residential” refers to the designated use of the premises. In market descriptions, “commercial” indicates a connection with business activity or investment use.

Non-residential premises may be temporarily vacant, owner-occupied or used for an ancillary purpose. That designation alone does not confirm the presence of a tenant, any income or readiness for a particular business to open.

Before deciding to buy or lease, compare the Unified State Register of Real Estate (EGRN) records, technical documents, actual layout and proposed activity. A category in a listing is not enough.

Main types of commercial real estate

Classifying properties by function helps you choose the right segment first, before comparing individual properties.

For a shop, the flow of potential customers directly past the entrance matters. For a warehouse, it is the ability to accommodate the required vehicles and handle goods. For a headquarters, it is the conditions for daily work, business meetings and company management.

This is why the same floor area and a similar price do not make properties interchangeable. Premises well suited to a parcel collection point may be inconvenient as a client-facing office, even if they are close to a metro station.

What does “general-purpose premises” mean?

General-purpose premises, often abbreviated to PSN in Russian listings, is a common description for a property being offered for several possible uses. It does not confirm that the premises are ready for any type of business.

For example, a café may need a suitable extraction system, a medical centre a particular internal layout, and a workshop sufficient power and appropriate conditions for its equipment. The feasibility of these arrangements should be checked before the transaction.

Ask the owner for the documents and technical specifications, and compare them with your project requirements. “Suitable for any business” should be translated into concrete answers: what work is required, who must approve it and how long preparation will take.

Office property: the different formats

Office property accommodates administrative, management, project-based and other work carried out by companies and entrepreneurs. Within this segment, the choice depends on team structure, privacy requirements and growth plans.

A self-contained office suite

The company occupies a separate unit within a building. Workstations, meeting rooms, private offices and support areas can be arranged within the available floor area and technical constraints.

When comparing suites, check which facilities are within the premises and which are available only in shared areas. This affects convenience, costs and control over day-to-day work.

One or more floors

This format makes it possible to bring departments together and separate employee and visitor circulation. At the same time, connections between floors, wayfinding and the location of shared facilities become more important.

If employees frequently move between levels, check how convenient those routes are. The floor area may look sufficient on a plan, but practical working conditions depend on the locations of teams, meeting rooms and support facilities.

A standalone office building

This option appeals to companies that want their own entrance arrangements, dedicated grounds and the ability to shape the space around their organisational structure.

It is also necessary to establish in advance who is responsible for operating and maintaining the building and its systems. The extent of these responsibilities depends on the property and the agreements with management companies.

Office penthouse

A penthouse is a format defined by its position and architecture at the top of a building. An office penthouse combines business use with distinctive spatial features: panoramic views, generous ceiling heights and, sometimes, several levels.

For a business, such a property can serve as a headquarters or a client-facing office. The assessment should cover the entire working arrangement: where teams will sit, how meetings will take place, how visitors will reach the right area and how convenient the connections between levels are.

The word “penthouse” does not itself determine whether a property is residential or non-residential. That is established from the documents for the particular property.

Why office class and format should be assessed separately

Class describes a combination of building quality characteristics, while format describes how the space is organised. A large floor area or expensive finishes alone do not give a complete picture of building services, management or ease of operation.

The differences are explained in detail in our guide to mixed-use developments, business centres and office classes. For an initial comparison, it is enough to identify the features that are essential for your company.

Why businesses and investors buy commercial property

The same property may appeal to different buyers, but their decision criteria will differ.

For owner occupation, the premises are assessed as working infrastructure. Suitable capacity, location, the ability to organise operations and predictable costs all matter. A company may use an office for years without receiving separate rental payments from it.

For letting, the assessment covers demand from potential occupiers, the property’s condition, the owner’s costs and the terms of the lease. If a tenant is already in place, its obligations and actual payments must be analysed.

For redevelopment or a change of format, project feasibility, constraints, budget and timing need a separate assessment. Potential shown in a sketch still needs to be supported by technical evidence and documentation.

For subsequent resale, the potential pool of future buyers and the features that may help or hinder a sale should be assessed in advance.

When choosing an office for your own business, it is also useful to compare occupancy models. Our guide to buying and renting an office in Moscow City examines differences in costs, control over the premises and flexibility for the company.

What determines the price of commercial real estate?

The price reflects the property’s characteristics and the terms of the individual offer. Comparing an office, a shop and a warehouse solely by price per square metre tells you little: they serve different purposes.

Within a single segment, several factors should be assessed in turn.

Location and accessibility. For an office, this means staff commutes, visitor routes, the business surroundings and access to amenities. Even within the same district, building entrances, transport routes and vehicle access arrangements may differ.

Size and configuration. What matters is whether the space can accommodate the required functions. Columns, floor-plate depth, window positions and building services affect the layout.

Condition and readiness for occupation. A lower-priced offer may require substantial preparation costs. Existing finishes should also be checked: they need to suit the intended office arrangement.

Building services and management. Ventilation, power supply, connectivity, lifts and maintenance arrangements determine how the property will function after occupation.

Transaction and occupancy terms. The handover date, an existing lease, restrictions and the assets included can substantially alter the comparison between two offers.

A city-wide average price is no substitute for an analysis of comparable properties. For an initial shortlist, gather several offers with the same use and a similar scale and condition, then establish why they differ.

Which costs should you consider beyond the purchase price?

For an owner-occupied office, separate the calculation into preparation for moving in and ongoing upkeep.

Preparation may include design, fit-out, furniture, connectivity, equipment and relocation. The recurring budget may include operating charges, utilities, cleaning, parking and maintenance of internal systems. Tax and financing are calculated for the particular owner and transaction terms.

Check the scope of office operating costs in the offer documents. The same charge name does not always cover the same services.

For an initial comparison, use:

First-year budget = acquisition + preparation for occupation + upkeep over the chosen period + other confirmed costs.

When comparing lease options, use the relevant rental payments instead of the purchase price. Security payments and advances should also be shown in a cash-flow schedule to identify how much money will be needed and when.

How to tell whether a property suits your business

Start with a short premises brief. For example: “Bring the management team and client services department together, provide separate meeting rooms, organise visitor reception and retain the flexibility to change seating arrangements.”

This turns a viewing into an assessment of specific requirements.

For example, a company holding frequent confidential meetings may find premises unsuitable if meeting rooms have to be placed in a through-route. Sometimes this can be resolved, but the costs and implications should be assessed before choosing.

Legal due diligence takes place after the initial shortlist and before any transaction commitments are made. The process is explained in our guide to checking commercial property before purchase.

Commercial real estate in Moscow City: what matters to an office buyer

A mixed-use development may bring together offices, retail premises, accommodation and other functions. An address in a well-known tower therefore does not replace an assessment of the individual unit.

Three groups of questions are particularly important for an office buyer.

How the team works. How are departments connected? Is there enough space for collaboration and focused work? Can the building services accommodate the planned demand?

Visitor reception. Is the route from the entrance to the meeting room clear? Is visitor registration convenient? Can working and client-facing areas be separated?

Day-to-day operation. How are access, maintenance, deliveries and approvals for alterations organised? Which services are included in mandatory charges?

When comparing several properties, use our detailed criteria for choosing an office in Moscow City. They help relate your impressions from a viewing to the business’s practical requirements.

In the premium segment, the office also has a role in presenting the company to clients and partners. Architecture, views and meeting spaces can support the company’s positioning, provided that the day-to-day working arrangement also meets its needs.

One example of this format is the F-375 office penthouse in Federation Tower. Our website presents three levels with a total floor area of 2,642 m², including working and client-facing areas. You can review the floor plans and arrange a viewing to assess how the property would suit your company’s structure.

Common mistakes when choosing commercial property

Focusing only on the price per square metre. The comparison should take account of preparation costs and ongoing operation.

Assuming any non-residential property can accommodate any business. Suitability for the intended business depends on the documents, technical conditions and restrictions affecting the particular property.

Applying retail criteria to an office. For retail, footfall at the entrance may be decisive. For a headquarters, team organisation, meetings and business accessibility are likely to take priority.

Equating commercial status with guaranteed income. The outcome depends on demand, costs, contractual terms and property management. Periods without a tenant need to be allowed for separately.

Leaving due diligence until the final price is being discussed. An identified technical problem may affect the budget more than a negotiated discount.

Buying space without a clear plan for its use. Before viewing, define the essential functions, desirable features and conditions that would rule a property out.

Frequently Asked Questions

What is commercial real estate in simple terms?

It is property used for business: company operations, retail, storage, manufacturing and services. The segment generally includes offices, shops, warehouses, industrial premises and hotels. The scope for a specific use should be checked against the documents and characteristics of the premises.

How does commercial property differ from non-residential property?

Non-residential designation describes the legal status of the premises, while commercial use describes their role in business activity or income generation. Non-residential premises do not necessarily have a tenant and are not necessarily suitable for every type of business.

Does a rented-out flat become commercial property?

Receiving rental income does not, in itself, change a flat’s residential designation. The owner’s way of earning income and the legal status of the premises should be considered separately.

Does an office for your own company count as commercial property?

Yes. An office belongs to the commercial segment even when it is occupied by its owner. It does not need to generate separate rental income.

What types of commercial real estate are there?

The main segments are office, retail, warehouse, industrial and hospitality property, together with premises for services. They are compared using different criteria depending on the activity they need to accommodate.

What can you open in general-purpose premises?

That depends on the property’s documents, technical capabilities and restrictions. The PSN label does not confirm readiness for every business activity. The feasibility of opening an office, café, clinic or another business must be assessed separately.

How does an office penthouse differ from a conventional office?

An office penthouse is located at the top of a building and may offer distinctive architecture, panoramic views, generous ceiling heights and several levels. It is assessed against the same practical needs as any other office: layout, building services, access and convenience for the team.

What kind of commercial property should you choose for a headquarters?

First, establish the company structure, team size and requirements for meetings, privacy and growth. Then compare office suites, floors, standalone buildings or penthouses against those requirements and their total occupancy costs.