Construction costs generally fall into two main categories: soft costs and fixed costs.

Hard construction costs are directly related to the actual construction of a building – costs such as materials and labor, while soft costs are costs that are not directly related to the construction work, such as architectural fees and permit fees.

Let’s explore the terms in detail.

Soft costs vs hard construction costs

As stated above, soft costs are additional costs not directly related to the actual construction of a building but necessary for the delivery of a project.

Some of the common types of soft costs in construction include:

• Architecture, planning and engineering fees
• Site analysis fees
• Investigation costs
• Geotechnical costs
• Legal fees, permits and taxes, property and construction insurance
• Construction loan fees, interest and other related financing charges
• Administrative expenses

Indirect construction costs can also include expenses incurred after the completion of a building, including marketing costs, security, rental charges, maintenance costs, etc.

It should be noted that indirect costs can have a direct impact on core costs. For example, hiring a great construction team (at a high price) can increase your overhead costs but lower your core costs by reducing wasted building materials.

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Higher ancillary costs today can also reduce future costs. For example, hiring a great team can help create a building that will last for decades with minimal repairs.

Hard costs

Also known as “brick and mortar costs” or “tangible costs”, core costs are directly associated with the actual construction of a building. These costs are more tangible and easier to estimate as opposed to the less tangible soft costs.

Fixed construction costs include:

Building Materials and Labor: Cost of purchasing all required materials such as steel, wood, glass windows, doors, insulation, etc.

Installation of utilities: cost of electrical installation, plumbing, water and sewer connection, etc.

Interior finishes: cost of paint, wallpaper, flooring, etc.

HVAC: cost of installing heating, ventilation and air conditioning systems.

Security systems: cost of installing fire alarm systems, sprinkler systems, fire escapes, etc.

Site improvements: cost of paving/walkways, gazebos, outdoor furniture, etc.

Landscaping: Costs of landscaping items such as flowers, trees, mulch, etc.

FAQs

What are material costs versus soft costs in construction?

Material costs are the expenses associated with the actual construction of a building, while material costs are the expenses associated with the planning, approval and financing of a project.

What are considered soft costs in construction?

Soft costs are expenses which are not directly related to the actual construction of a building but which are necessary for the realization of the project, for example architect’s fees, insurance costs, etc.

What percentage of the construction cost is a soft cost?

The incidental costs of a project vary depending on the nature of the project and the demands of the client. However, the ancillary costs of the construction generally represent 8 to 12% of the total budget.

What are considered fixed costs in construction?

Costs directly associated with the actual construction of a building are considered essential costs in construction. These include construction material costs and labor costs.

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