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
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)
