Construction projects require careful planning and cost estimation to ensure they are profitable investments for business owners. One crucial aspect of creating an accurate construction cost estimate is understanding the difference between hard and soft costs in construction.
Below, we provide a comprehensive overview of hard and soft costs in construction, highlighting the key differences between these two types of expenses and how they can impact your project's overall cost estimate and budget.
Hard costs, also called "core" or "tangible" expenses, refer to the costs directly associated with the construction of a building or structure, such as materials, labor, and equipment. These costs make up the majority of a construction project’s budget (typically around 70%) and are calculated from the start of the project’s construction phase until the construction activities are completed. They are typically fixed and only change significantly if the scope of the project changes.
The following can all be considered hard costs in construction:At A.C.E. Building Service, we take pride in providing commercial and industrial construction services using the design-build project delivery method. With this approach, our designers and contractors collaborate as a single team, allowing greater transparency regarding all hard and soft costs associated with your construction project.
Soft costs, also known as "overhead" expenses, are intangible costs not directly tied to the physical construction of a project, such as planning permits and legal fees. The scope of your project, local regulations, and loan interest rates can all influence your project’s soft costs.
Soft costs are usually managed separately from hard costs and are spread out over the entire construction timeline, sometimes even continuing beyond the construction phase. This can make them more difficult to predict and estimate compared to hard costs.
The following are all examples of soft costs in construction:
It's important to remember that choosing partners that contribute to soft costs wisely can save thousands of dollars in overall project costs down the road. For example, partnering with an effective design team may help drive a more efficient building design and ultimately lower project costs. Ensure that you have strong legal, financial, and insurance partners as well to keep soft cost fees in check and your best interests in mind.
Click here for 5 inconspicuous factors you may not have considered in your initial project cost estimate!When the decision is made to build or expand, thoughts typically gravitate toward tangible elements like the price of wood and steel commodities, fuel, and labor. It’s easy to focus on hard costs as they are the items that make up one’s vision of their finished project, whereas closing costs, computer equipment, and office furniture typically don’t enter the discussion until later in the process - sometimes they are a complete afterthought.
Below is a summary of the key takeaways to remember when it comes to hard and soft costs in construction, giving you a clear understanding of what each cost is and how they differ from each other.
Learn how A.C.E. Building Service uses the design-build method to save time and money on commercial construction projects. Download our free eBook now!
At A.C.E. Building Service, we bring extensive experience to every commercial construction project. We’ll take the time to understand the complete scope of your construction project, including all hard and soft costs, providing you with the best project cost estimate.
We are proud to be an exclusive distributor of the Butler product line in Northeast Wisconsin and the Lakeshore counties of Manitowoc and Sheboygan. With the help of Butler’s pre-engineered metal buildings, we are able to design and execute functional, tasteful, cost-effective, and efficiently constructed buildings under compressed project timelines.
If you have any questions about hard and soft construction costs or about our construction services, we are happy to help. Contact us today! We hope to hear from you soon.