Hard Cost vs Soft Cost in Construction and Development

by | Last updated Nov 25, 2020 | Construction Practices, General Architecture, Property Development

Hard costs are costs directly related to construction including material and labor costs. Soft costs are additional costs not directly related to the construction budget such as architectural fees or permit fees. Hard Cost and Soft Cost are terms used to differentiate the two basic categories of construction costs.


Hard Cost vs Soft Cost 

The terms Hard Cost and Soft Cost are very common in property development and the construction industry. These terms are meant to distinguish between different types of costs with regards to their relationship to the overall construction budget. The proportion of hard cost to soft cost will vary from project to project.



Hard Costs in Construction

In property development and construction the Hard Costs definition is:

Hard Costs in construction are costs that are directly related to the physical construction of a building. These costs include the building materials and labor for construction.

Hard Cost Examples:

  • General Contractor Costs including:
    • Labor
    • Overhead
    • Profit.
  • Subcontractors such as:
    • Electrical
    • Plumbing
    • HVAC
  • Materials including shipping:
    • Structural Materials
    • Finish materials
    • Fixtures & Appliances
    • Furnishings
    • Plants


Soft Costs in Construction

In property development and construction, the Soft Costs definition is:

Soft Costs in construction are costs that are not directly related to the physical construction of a building but still necessary to the property development. These costs include design, financing, and administrative expenses.

Soft Cost Examples:

  • Architectural and Engineering (A & E):
    • Architect Services
    • Engineering Services
      • Structural Engineer
      • MEP Engineer
      • Civil Engineer
    • Landscape Designer
    • Interior Designer / Interior Decorator
  • AHJ Fees (Agency Having Jurisdiction):
    • Permit Fees
  • Site Analysis
    • Survey
    • Geotechnical
  • Financing
  • Legal Fees
  • Administrative Expenses


Hard Cost vs Soft Cost Construction

As an architect, I study construction practices closely, but these are complicated and quite involved issues. In this article, we reviewed the basic points with regards to hard cost and soft cost differences in real estate development. This post does not assume to cover every possible issue or condition, but provide a general overview of the topic.


Thank you for reading our blog post on Hard Costs vs Soft Costs in Construction.

I hope this was helpful. If you would like to speak with an architect you can contact Fontan Architecture directly.


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Jorge Fontan

Jorge Fontan

This post was written by Jorge Fontan AIA a Registered Architect and owner of New York City architecture firm Fontan Architecture. Jorge Fontan has earned 3 degrees in the study of architecture including two degrees from the City University of New York and a Masters Degree in Advanced Architectural Design from Columbia University. Jorge has a background in construction and has been practicing architecture for 20 years where he has designed renovations and new developments of various building types.