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What are Soft Costs in Commercial Construction Projects?

Estimating the cost of a commercial building project may seem straightforward. If you are a first-timer, you may think this task entails including hard costs, such as labor, electrical, and materials. 

However, failing to include or underestimating soft costs can strain the project's finances and lead to delays. What are soft costs and hard costs? What are the examples of soft costs? We answer all your questions in this post. 

Understanding soft costs and hard costs

Also known as indirect costs, soft costs are not directly related to the physical aspect of building construction. Instead, they involve intangible items like design, marketing, permit, and insurance. They are usually incurred in the pre-construction phase and throughout the project.

On the other hand, hard costs are expenses associated with the physical construction of a building. Generally, these expenses are usually incurred during the construction phase of a building. Hard costs include labor, electrical, plumbing, mechanical, fixtures, furnishings, and so on. 

Examples of soft costs 

While they are not linked to the physical aspect of construction, soft costs remain crucial to a project's success. Examples of soft costs include:

  • Architectural and design fees

Fees for hiring professionals responsible for the project's design are soft costs. These professionals include architects, interior decorators, and engineers, such as electrical and mechanical engineers, who will create designs, blueprints, and schematics for the project. 

  • Permit fees

You must obtain permits from the local building department before proceeding with the construction. These permits ensure adherence to state and local code requirements. They are not free, though, with associated costs you should include in your estimate. 

  • Inspection fees

During the commercial build, the authorities will conduct several inspections. So remember to include fees for inspections that may be required at various stages of the project, such as building and occupancy permitting inspections. 

  • Insurance rates

Whether residential or commercial, construction projects require various insurance coverage to offer protection from unforeseen events. Insurance includes liability insurance, builder's risk, and sometimes even performance bonds, and comes at a cost. Discuss with your insurance agent to account for insurance costs in your estimate. 

  • Marketing costs

Commercial projects often need public relations campaigns and other marketing efforts to attract tenants or buyers. Marketing expenses are soft costs that may include advertising, signage, flyers, and banners. 

  • Legal consultancy fees

It's essential to have an attorney to guide you through the legal aspects of the project with your best interest in mind. A commercial construction attorney can review contracts, resolve disputes, get you through regulations, and more. They don't work for free, though. So it's important to add the cost to your budget. 

  • Post-construction fees

Soft costs don't always end when construction is complete. Post-construction expenses include costs associated with activities after the project's physical construction, such as landscaping costs, site cleaning and preparation, and additional taxes. 

Let the experts handle your commercial construction project today

From the initial conception to the final build, there's so much to consider - including the meticulous attention to hard and soft costs. 

To ensure a successful project, you can rely on Luxury Commercial Contractor's experience and expertise in commercial build. Call us today to explore our commercial construction services and learn how we can help. 


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