Soft Costs

Understand soft costs in Canadian construction — what they include, why they matter, and their role in development budgeting.

Soft Costs

August 01, 2025


What are Soft Costs?

Soft costs are the indirect expenses incurred in a construction project that are not directly tied to physical building materials or labour.

Why Soft Costs Matter in Real Estate

In Canadian real estate development, soft costs can make up a significant portion of a project budget and must be accurately estimated to ensure financial viability.



Examples:
  • Architectural and engineering fees
  • Legal and permitting costs
  • Marketing and financing expenses



Understanding soft costs helps developers create realistic budgets and secure sufficient financing.

Example of Soft Costs in Action

The project’s soft costs included architectural fees, municipal permits, and interest payments during construction.

Key Takeaways

  • Indirect costs not tied to physical construction
  • Include design, permits, legal, and financing fees
  • Essential to estimate accurately for budgeting
  • Often 20–30% of total project costs
  • Affect overall project profitability

Related Terms

Additional Terms

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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