What do hard costs in real estate development primarily encompass?

Hard costs in real estate development primarily encompass labor and materials costs because these are the tangible, direct costs that are directly associated with the physical construction of a project. Hard costs include expenses related to building materials, such as concrete, steel, and glass, as well as labor costs for skilled workers, contractors, and subcontractors who physically execute the construction tasks. This classification is essential because hard costs can typically be quantified with greater precision, allowing developers to assess their budgets more accurately.

Understanding the significance of hard costs is crucial for project management, as they represent a large portion of the total expenses incurred in any development. By focusing on these tangible elements, developers can manage and control their expenditures effectively during the construction phase, ensuring that projects remain on schedule and within budget.