Friday, November 8th, 2019 November8th2019

Sell for More Trivia: What are “hard costs”?

Published on November 8th, 2019

Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.

 

Last week we discussed soft costs.  Click here if you missed it.

When budgeting for a commercial development project, tenant improvement project or capital improvement project it’s important to remember that costs typically break down into two broad categories: hard costs and soft costs.

What are Hard Costs?

These costs consist of tangible and quantifiable materials and elements of the development project.

Here are some common construction hard cost items:

Building Shell
This category includes all materials required to complete the whole building or structure. The structure consists of the foundation, framing, floors, roof, finishing work, etc.

Parking and Additional Paving
This includes grading, paving, striping, curbs, and any parking islands. Some of the work may fall into the off-site improvement category and might include items such as a pedestrian sidewalk, along with curb and gutter.

Site Work and Landscaping
Site work typically includes all utilities underground, water systems, drains, fire, grading, to name a few. As for landscaping, these costs involve putting in grass, trees, shrubs, mulch, and other aesthetic items.

HVAC, Electrical, and Other Equipment
These costs are for HVAC units, installation, and cranes and other equipment needed to install the units. Technology and security costs. Electrical and other equipment will include lighting, technology and security costs, phone and communication systems.

Construction Labor
Beyond just the physical elements that make up the interior and exterior of a site, you have to account for the costs of the labor. This includes general contractors and subcontractors such as carpenters, electricians, plumbers, and any other specialties.

Change Orders
These can vary from market conditions and labor costs to weather conditions and other unforeseen circumstances.

Contingency
This cost covers the amount of money reserved for unforeseen conditions that might affect the construction process.  This money is on reserve and is not allocated to any specific area of work.

Hard costs typically account for roughly 70% of your total construction budget.  Determining hard costs are challenging, and the accuracy of an estimate can make a difference in whether or not a project is feasible.

 


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com