What are typically included in “soft costs” within construction?

In the context of construction, "soft costs" refer to expenses that are not directly tied to the physical construction of a building but are essential for the project to proceed. These typically include costs that arise during the planning and development phases, rather than the actual construction phase. Permits and legal fees fall under this category as they are necessary to ensure that the project complies with local regulations, zoning laws, and other legal requirements.

Permits might involve fees for obtaining the right to build, while legal fees could involve expenditures related to contracts or land use disputes. These costs are crucial for the project's success and legal standing, even though they do not directly contribute to the physical structure. Thus, recognizing permits and legal fees as soft costs is significant for project budgeting and financial planning.

Conversely, material costs, labor costs, and equipment rental are categorized as hard costs. Hard costs are directly associated with the physical aspects of construction and are often more straightforward to budget for, as they directly impact the construction process. Understanding these distinctions helps project managers and contractors manage their budgets and forecasts more effectively.