Soft Costs
Understand soft costs in Canadian construction — what they include, why they matter, and their role in development budgeting.
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
- Hard Costs (Construction)
- Draw Schedule
- Holdback (Construction Financing)
- Construction Loan
- Budgeting
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