Impact of Commercial Development on Local Real Estate Markets

Commercial development has always had a tremendous impact on local real estate markets. In the last decade, the impact of commercial development has become even more noticeable, with more businesses opening, creating new jobs, and bringing in more people. As a result, real estate prices have become increasingly volatile. This article will explore the effects of commercial development on local real estate markets, and how it affects the average person.

What is Commercial Development?

Commercial development is the development of properties, such as businesses, malls, and office buildings, in order to generate income. Commercial development can be done in a variety of ways, ranging from the construction of new structures to the renovation of existing buildings or even the purchase of existing businesses. It is an important part of urban development, and has been a key factor in the growth of many cities across the United States.

How Does Commercial Development Affect Local Real Estate Markets?

The impact of commercial development on local real estate markets is two-fold. First, it can increase the demand for rental units, as businesses will often need office space or storefronts. This can push up the prices of rental units, making them more expensive and often out of reach for lower-income tenants. Second, commercial development can increase the value of existing buildings, as businesses may take up space in older buildings in desirable areas. This can also push up the price of existing buildings, resulting in higher taxes and maintenance fees.

How Can the Average Person Feel the Effects of Commercial Development?

The effects of commercial development can be felt at multiple levels, including rent prices, taxes, and maintenance costs. For example, an influx of businesses to an area can cause an increase in rent prices, as more people are now competing for the same space. This can be particularly damaging for lower-income tenants, who may be unable to afford the rent increases.

At the same time, commercial development can increase taxes for a neighborhood, as businesses tend to increase both the assessed value of a neighborhood and the city’s tax rate. Maintenance fees may also increase, as businesses tend to need more upkeep than residential buildings.

How Does Commercial Development Benefit Local Real Estate Markets?

Despite the potential negatives, there are also some positive effects of commercial development on local real estate markets. For starters, businesses often bring in more people, which can be a boon for other businesses in the area. This increased clientele can be beneficial to local businesses, as higher demand often leads to higher sales and greater profits.

In addition, commercial development can bring in more jobs, which can help spur economic growth in the area. This means more money being spent in the local economy, resulting in increased economic activity in the area.

What Are the Risks Involved with Commercial Development?

As with any development, there are some risks that come with commercial development. These risks include the potential for over-development, where too many businesses may end up in an area, leading to there being more competition for a limited amount of space. This can lead to businesses being pushed out, and can negatively affect the economy of an area.

In addition, commercial development can cause gentrification in an area, displacing existing residents in the process. This could lead to a neighborhood losing its distinct culture and identity, as a more homogenized group takes over.

What Is Being Done to Manage the Effects of Commercial Development?

In order to manage the effects of commercial development, cities and towns have begun to implement strategies that can reduce some of its more negative impacts. For instance, zoning laws have been used to designate certain parts of a city for residential use, while others are earmarked for commercial development. This ensures that neighborhoods don’t experience drastic changes, and can provide some protection against gentrification.

In addition, some cities have implemented rent control measures, such as rent caps and rent stabilization laws, in order to protect tenants from rent increases. These measures can help ensure that lower-income tenants are not forced out of their homes due to rising rental prices.


Commercial development can have a significant impact on local real estate markets, both positively and negatively. While it can bring in increased economic activity and jobs, it can also lead to rent increases and gentrification. Fortunately, there are measures that can be taken to mitigate some of the more negative effects of commercial development, such as zoning laws and rent control measures. By understanding the potential effects of commercial development, cities and towns can take the necessary steps to ensure that local real estate prices remain stable and accessible.

What are the pros and cons of commercial development in local real estate markets?


-Commercial development can lead to improved infrastructure, amenities, and services such as public transportation, healthcare, and retail outlets which can benefit local residents.

-New commercial developments can result in increased economic activity and job creation, which contributes to the overall health of the local real estate market.

-Commercial development often requires infrastructure upgrades, which can result in long-term economic benefits to the local area.

-Commercial development often increases the available housing stock, which can be beneficial for renters and buyers alike.


-Commercial developments can often be capital-intensive, and can cause strain on local finances if not properly managed.

-Commercial development can cause increased traffic and congestion, leading to negative impacts on air quality and the environment.

-Commercial developments can often displace existing inhabitants in the area, thereby reducing the diversity of the local real estate market.

-Commercial development can lead to the displacement of existing businesses and services, which can have a negative impact on the local economy.

Q: What impact does commercial development have on the residential real estate market?

A: The impact of commercial development on the residential real estate market can be both positive and negative. On the positive side, commercial development often leads to job growth, which can drive population growth and homebuyer demand, ultimately leading to increased home values. Additionally, commercial development may add amenities, such as restaurants, stores, and other services, which can attract buyers to the area. On the negative side, increased traffic and parking difficulties can be an issue, and may cause potential buyers to look elsewhere. Additionally, commercial development projects can often be intrusive to local neighborhoods, and many buyers may not feel comfortable in areas with large construction projects.

Q: How does commercial development affect property values in a residential area?

Commercial development can have both positive and negative impacts on property values in a residential area. On one hand, commercial development can bring jobs, increased tax revenue, and improved infrastructure to an area, which can lead to improved property values. On the other hand, commercial development can lead to increased traffic, noise, and other externalities that can have a negative effect on property values. Ultimately, it depends on the type and scale of the commercial development, as well as local market conditions.

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