What Is the Difference Between CRE and RRE?
To invest, develop, or lease property in Phoenix, you must understand the differences between commercial real estate (CRE) and residential real estate (RRE). These two types of real estate serve different purposes, attract different types of investors, and cater to unique occupants.
Our proven Phoenix industrial property broker team is here to help you see how CRE differs from RRE, giving you the insights you need to make informed decisions as you move forward.
Purpose and Use of Commercial Real Estate: Business vs. Living
Regarding real estate, the main difference between commercial and residential properties lies in their purpose. Commercial real estate spaces are meant for business operations and income generation—think office buildings, shopping centers, warehouses, hotels, and multifamily units with five or more apartments.
In Phoenix, commercial properties are particularly appealing to investors. With thriving industries such as healthcare, logistics, and technology, CRE presents a fantastic opportunity for consistent income and long-term growth.
Conversely, residential real estate is dwellings that people call home, including single-family houses, townhouses, and smaller apartment complexes with up to four units.
Phoenix Investment Opportunities and Risks
Investing in commercial real estate in Phoenix typically demands a larger initial investment, but it often pays off with a better return on investment (ROI). The lease terms for CRE are usually longer—ranging from 5 to 10 years—offering a more consistent cash flow than residential properties, where leases span generally just 6 to 12 months. On the flip side, residential real estate is generally more accessible for first-time investors because of its lower costs and easier management.
However, it can lead to less reliable income due to shorter lease lengths and higher tenant turnover.
For instance, in the Midtown and Tempe areas of the Metro Phoenix area, multifamily CRE projects are gaining traction among investors who desire steady rental income and potential capital growth.
Phoenix Occupancy and Lease Agreements
Residential real estate properties are typically owner-occupied or leased directly to tenants who live there. In contrast, in commercial real estate, the tenants are businesses that rent spaces for offices, retail shops, or industrial purposes.
This business-to-business (B2B) dynamic can simplify lease enforcement and lower risks, particularly when dealing financially sound commercial tenants.
In Phoenix, commercial leases often take the form of triple net leases, where tenants are responsible for property taxes, insurance, and maintenance, which helps ease the financial load for property owners.
Types of Commercial Real Estate in Phoenix
CRE encompasses a variety of property types in Phoenix:
- Office buildings in Downtown Phoenix and Camelback East
- Retail spaces in Scottsdale and Biltmore
- Industrial properties along the I-10 and I-17 corridors
- Multifamily complexes in Tempe, Mesa, and Chandler
- Hotels and resorts near Phoenix Sky Harbor and Desert Ridge
- Special-use properties like medical centers or self-storage units
These asset types come with different leasing models, maintenance needs, and investment strategies.
How to Get Started Investing in Phoenix CRE
You can invest directly in Phoenix commercial real estate by purchasing a property or indirectly through Real Estate Investment Trusts (REITs), crowdfunding platforms, or real estate ETFs. Indirect methods require less hands-on involvement and are great for diversifying your portfolio.
When you aren’t sure where to begin, a commercial real estate broker in Phoenix, like Sam Rowe, can help you navigate legal regulations, zoning laws, and market opportunities.
Pros and Cons of Commercial Real Estate in Phoenix
Phoenix is among the hottest commercial real estate markets in the country. It’s drawing in investors thanks to its strong economic growth, a surge in population, infrastructure investments, and a pro-business climate.
A recent survey placed Phoenix among the top 10 U.S. metros for commercial real estate investment in 2025. While the CRE market here is full of promising opportunities, weighing the investment benefits and challenges is crucial.
With that in mind, let’s explore the pros and cons of commercial real estate in Phoenix.
Pros of CRE in Phoenix:
- Higher ROI potential
- Longer, more stable leases
- B2B tenant relationships
- Tax benefits and scalable investments
Cons of CRE:
- Higher capital requirements
- More complex regulations
- Longer sales cycles
Final Thoughts about Phoenix CRE vs. RRE
When you want to create lasting wealth, broaden your investment portfolio, or take advantage of Phoenix’s booming economy, commercial real estate offers more promising prospects than residential real estate. However, each investment type has risks, costs, and complexities.
At Rowe & Associates, our team will help you remain current with Phoenix commercial real estate trends. Call (480) 933-0004 to contact us today to learn how our business property realtors can help you find your ideal property.