What’s The Difference Between Retail and Commercial Spaces?

The line between commercial and retail spaces is getting blurry. 

The growing popularity of mixed-use properties, showroom-style businesses, and changing business models are reshaping the traditional retail categories, leaving even the most experienced retailers scratching their heads. 

This guide cuts through the confusion. So, whether you’re a retailer finding your first home, or an established business planning to expand, you can choose a space that moves your business forward.

What is commercial space?

Commercial space refers to buildings or areas used for business purposes. These spaces are where companies conduct their operations, sell products, or provide services.

Commercial spaces include offices, stores, restaurants, and warehouses. They are often found in busy areas of cities or towns and are built to suit specific business needs.

What is retail space?

Retail space is a specific type of commercial property where businesses sell products or services directly to customers. These spaces are designed to attract shoppers and showcase merchandise.

Some examples include stores, shopping malls, and boutiques. A traditional retail space often includes display windows, checkout areas, and storage rooms. You can find them in high-foot-traffic areas for easy customer access. 

Key differences between commercial and retail spaces

 

Purpose

Retail spaces are designed to sell products directly to customers. Think of stores where you buy clothes or groceries. 

Commercial spaces are used for a wider range of business activities, such as office work, manufacturing, product storage, and medical care. 

Location and accessibility

Retail spaces are usually in busy areas where many people pass by. They need to be easy to find and get to—parking spaces and visibility from the street are important. 

Commercial spaces can be in various locations depending on the type of business. Offices often cluster in downtown areas or business parks, while warehouses prefer spots near major highways or transportation hubs for efficient distribution. 

Commercial spaces don’t always need to be as visible or accessible to the public.

Size and layout

Retail spaces are often smaller and designed to showcase products. They have areas for displays, customer movement, and checkouts. 

Commercial spaces, on the other hand, can vary widely in size and design. They're customized to meet specific business needs. This might mean rows of cubicles in an office, open collaborative areas in a creative agency, or vast storage spaces in a warehouse. The goal is to maximize productivity and efficiency for the particular business type.

Lease terms and agreements

Retail leases are usually shorter, maybe three to five years. They often include rules about how the space can be used and decorated. 

Commercial leases tend to be longer, sometimes 10 years or more. They might have different terms about who’s responsible for maintenance and improvements.

Zoning regulations

Cities have rules about how different areas can be used. Retail spaces typically are allowed in zones meant for shopping and mixed-use areas. 

Commercial spaces are more limited to location. For example, a factory would need to be in an industrial zone, while an office could be in a business district.

Types of commercial spaces

Office spaces

If you can hear the soft tapping of keyboards, the hum of conversations, and the whir of printers, you’re in an office space. 

These spaces come in all shapes and sizes, from cozy single rooms perfect for small teams to sprawling buildings that house hundreds of workers. 

Inside, you’ll find a mix of open areas where colleagues brainstorm and private rooms for focused work or important meetings. Office spaces are designed to boost productivity and foster teamwork.

Industrial spaces

Industrial spaces are the powerhouses of the business world. They are where raw materials become finished products, goods are stored, and items begin their journey to customers. The scale can be impressive—think high ceilings that could fit a house and floors that stretch further than a football field. 

In these spaces, you might see forklifts zipping around, conveyor belts moving products, and workers operating large machines. While they might not be as sleek as office buildings, industrial spaces keep our economy running smoothly.

Mixed-use developments

Think of mixed-use developments as mini-cities within a city. You can live, work, shop, and relax all in one place. These designs fit various pieces of urban life together in a way that makes sense.

For example, you might start your day with coffee from the café on the ground floor, head up a few levels to your office for work, and then end the evening with dinner at a restaurant just an elevator ride away from your apartment. 

Types of retail spaces

Shopping centers and malls

Just like in the early 2000s when you flocked to Abercrombie & Fitch for graphic tees and cargo pants, malls continue to be a social hub (despite alarms about their decline). A recent market analysis from Coresight Research found that many malls have reported higher occupancy levels and bigger crowds than before the pandemic. 

Malls bring every type of retailer under one roof: big-name retailers, small boutiques, and food courts and restaurants. They are designed to keep shoppers comfortable and entertained, and even include play areas for kids or movie theaters. 

Standalone stores

Standalone stores are like the solo artists of retail. They are individual buildings dedicated to a single business, often surrounded by their own parking lot. You’ve seen examples like big-box stores, supermarkets, or car dealerships. 

Owners of a standalone store have more control over their space. They can customize everything from the building’s appearance to the layout of products inside. You can find them anywhere, too, from busy city streets to quiet suburban areas. 

Pop-up shops

These temporary stores can appear in random places and then vanish just as quickly. A pop-up might set up in an empty storefront, a booth at a farmers market, or even a converted shipping container. 

Pop-up shops are exciting for shoppers. Brands that create them often create unique shopping experiences to test new products, reach new customers, or generate buzz. 

For example, Dolce & Gabbana set up a traveling pop-up shop in the Hamptons in 2021, dubbed The Sicilian Cart. It was designed to immerse shoppers in the history of the Italian island through images and symbols.

How to choose between commercial and retail space

When picking a space for your business, think about the following factors: 

Business types

Consider your business’s needs and choose a space that fits. 

A retail space may be your best bet if you want to attract walk-in customers and showcase products. Think clothing stores, coffee shops, or bookstores. If you need a space that prioritizes functionality over curb appeal, you’ll need a commercial space. 

💡 Note: Some businesses might need a mix of both. For example, a bakery might need a retail space upfront for customers and a commercial kitchen in the back for baking.

Location

For retail, location can make or break your business. You want to be where your target customers shop or hang out. This might mean a busy downtown area, a popular shopping mall, or a neighborhood with lots of foot traffic.

High-traffic areas usually cost more, but they can bring in more customers. Think about nearby businesses too. Sometimes, being close to complementary businesses (like a coffee shop near a bookstore) can help both of you.

Commercial spaces have different location needs. They don’t always need to be in high-traffic areas. Instead, think about:

• How easy it is for employees to get there
• If clients need to visit often
• How close it is to suppliers or partners
• If you need to be near specific resources or facilities

Size and layout requirements

Retail spaces must balance customer areas, product displays, storage, and work areas. Consider:

• How much space you need for customers to move around comfortably
• Where you’ll put shelves, racks, or displays
• If you need fitting rooms or demo areas
• How much storage space you need for inventory
• If you need a separate area for employees

Commercial spaces focus more on employee needs and business operations. Think about:

• How many employees you have and might hire in the future
• What kind of work environment you want (open plan, private offices, or a mix)
• If you need meeting rooms or collaborative spaces
• Where you’ll put equipment or machinery
• If you need special features like loading docks or high ceilings

In both cases, make sure the space layout works for your daily operations and future growth plans.

Budget considerations

Your budget will include more than just the monthly rent or mortgage payment. Consider utilities, insurance, property taxes (if not included in the rent), and security systems. 

Retail spaces in prime locations often cost more per square foot than commercial spaces, but a good location might attract enough extra business to make it worth it.

For commercial spaces, you might save money on rent but spend more on transportation or marketing to compensate for a less visible location.

💡 Tip: Don’t forget to factor in your expected income. A general rule is to spend no more than 5% to 10% of your gross annual sales on rent, but this can vary by industry.

Lease terms and conditions

Pay close attention to the details when reviewing lease agreements. Here are some things to look for, whether you’re leasing a retail or commercial space:

• How often and by how much can the landlord raise rent?
• Who pays for repairs or upgrades?
• Are there restrictions on how you can use the space?
• Can you rent out part of the space if you don’t need it all?
• What happens if you need to leave before the lease ends?
• Can you easily extend your lease if things go well?

💡 Tip: Consider working with a lawyer or real estate professional to help you understand and negotiate lease terms.

Parking and transportation

Customers value convenience, and limited parking can turn them away faster than you’d think. 

When scouting retail locations, observe the parking situation at different times of day. Is it easy to find a spot? Are the spaces free or paid? If parking is scarce, look for nearby alternatives like street parking or public lots.

For commercial spaces, the parking focus shifts to employees and occasional visitors. Consider how your team will commute each day. Is the location easily accessible by car? If not, can people get there by public transportation? You’ll also want to ensure there’s adequate visitor parking for clients or partners who may drop by.

Don’t forget about deliveries and shipping needs. Whether you’re receiving supplies or sending out products, you’ll need a space that can accommodate the coming and going of delivery vehicles without causing disruption.

💡 Tip: Create an accessible space. Make sure your chosen location is easily accessible by people with disabilities, not just to comply with regulations, but to create a welcoming environment for all potential customers or employees.