What is a soft cost in construction?

Soft costs in construction refer to expenses that are not directly related to physical construction materials or labor, but are essential for the completion of the project. Some examples of soft costs include:

1. Design and engineering fees: Before construction can begin, an architect or engineer must create detailed plans and blueprints for the project.
2. Permitting and inspection fees: Obtaining permits and meeting building code requirements often require fees paid to local government agencies.
3. Legal and insurance costs: Construction projects may require legal representation and insurance to protect against potential liabilities.
4. Project management fees: Hiring a project manager to oversee the construction process and ensure it stays on schedule and within budget.
5. Financing costs: Interest, loan fees, and other expenses associated with securing financing for the project.
6. Marketing and sales costs: For projects involving real estate development, marketing and sales expenses may be necessary. Soft costs typically account for around 30-40% of the total project cost and are important to consider when budgeting for a construction project. They are often overlooked, but can significantly impact the overall cost and timeline of a project.