Soft Costs vs. Hard Costs

In regards to constructing and designing office buildings, there are two types of expenses to be aware of: soft costs and hard costs. They represent significant portions of construction costs, and you must be aware of them when planning out the budget for your office space. However, these two types of expenses are quite different, so it is important to know what makes them different. Continue reading to learn more about them.

What Are Soft Costs?

Construction Blueprints

Soft costs are any expenses that are not visible or tangible, and are not represented by physical materials or items. These costs are not directly related to labor, and represent any fees you need to pay to keep a project running smoothly. Examples of soft costs include inspection fees, project management costs, and insurance payments.

These costs also include accounting fees, as well as any loans you may have taken out to purchase the property you are working on. Essentially, if you pay for something that you cannot physically touch, then it is a soft cost.

Comparing to Hard Costs

Construction Workers

On the opposite side of the spectrum are hard costs, which represent physical products or pieces of equipment you need to buy for your business. These costs are used for the building materials that are directly used during any type of construction project.

Hard costs include and payments made for getting construction workers, building equipment, cement, and any other items used to actually create an office building. Other processes, like landscaping and site excavation can also be considered hard costs. These will make up the majority of your budget during a construction project.

Other Important Differences

In addition to everything mentioned above, there are other differences between soft costs and hard costs that you should be aware of. Since hard costs represent physical materials you need to build something, it is easy to predict how much you will spend on them throughout the duration of the project. Once the project concludes, hard costs are no longer factored into the equation.

Soft costs, on the other hand, are harder to forecast completely, as they can continue long after the office building in question has been fully built. This is because these costs refer to things such as safety inspections, which can occur long after the building is constructed. It is important to be aware of these differences so you have an easier time tracking your budget during a project.

Budgeting Around These Costs

Budget with Calculators

Being able to craft a budget around these two types of expenses is crucial if you want your project to run smoothly. As mentioned above, hard costs are easier to predict, but it is harder to predict soft costs, since they can extend beyond a project’s completion. As with any project of this nature, unforeseen circumstances can make you spend more, but it is necessary to know to have a general idea to go off.

In general, hard costs will make up at least 75%-85% of your budget, while soft costs could possibly make up 8%-12% of it. To get an idea for your budget, speak with the construction company you are partnering with to get an idea for how many workers and materials you will need to account for. Set aside extra money for to pay safety inspections, as well as some extra cash you can use for other services during the planning process.

Big Cat Solutions offers space planning services, and we can help you determine the best layout for your new office. Want to learn more?