What does project costs encompass in real estate development?

The total cost of development encompasses all expenses incurred throughout the real estate development process, which includes both hard and soft costs. Hard costs primarily refer to the tangible expenses that are directly associated with the physical construction of the project, such as materials and labor. In contrast, soft costs encompass all other expenses that are not directly tied to construction, including design fees, permits, financing costs, and other overhead expenditures.

Understanding this comprehensive view of project costs is crucial for developers, as it allows for more accurate budgeting and financial forecasting. It ensures that all aspects of the development project are taken into consideration, ultimately impacting the project's feasibility and profitability. By recognizing both hard and soft costs, real estate developers can better assess their investment and manage resources throughout the development lifecycle.