Michael got it right. Obviously, unless you own an airplane hangar, you won't fit a perfect 1:87 scale model of an entire prototype subdivision in your space. First you can cross-off 99% of those long-distance main line stretches thru flat rural areas. The hard part is deciding which of your favorite activity scenes to scale-down or eliminate.
If you're modeling an industrial park, for instance, you can show only the faces of the factories/warehouses that adjoin the railroad; the large sprawling part can exist off-layout. Same with parking lots: I some of my city scenes, I have signs on buildings that say "Parking in rear -->" where the "rear" of course is off-layout. [This also spares me from spending a bundle on those Busch HO scale automobiles!]
From my own experience: Since I model the steel industry, I would have needed an area 4x the size of my 24' by 24' garage to model a complete integrated mill. So I settled for my favorite parts of the operation that involve railways, and relegated the remainder [mile-long rolling mills etc.] to somewhere just beyond the benchwork. And I compressed the modeled structures to be small enough to fit, but still large enough to resemble the real thing.
There have been whole books written on this topic, published by Kalmbach and Carstens and others. What I've said just barely scratches the surface.