What do soft costs typically include in a real estate development project?

In a real estate development project, soft costs generally refer to expenses that are not directly related to the physical construction of the building or property. These costs often involve professional services and regulatory requirements that are necessary for the project but do not include labor or physical materials.

The inclusion of legal, accounting, and lease expenses in soft costs is pertinent because these costs are essential for the planning, compliance, and financial management of the development project. Legal fees may cover contracts, zoning issues, and permits, while accounting costs are tied to financial management, audits, and tax preparations related to the project. Lease expenses may pertain to securing or negotiating leases for tenants once the development is underway, which also falls under the umbrella of operational and professional service costs.

In contrast, other choices relate directly to hard costs or capital expenses of the development. For instance, construction labor and material costs represent tangible expenses involved in building the project. Land acquisition and financing expenses typically involve the costs of acquiring the property and securing funding for the development. Architectural and engineering fees, while also categorized as soft costs, focus specifically on the design and planning aspects rather than the broader scope of expenses covered in the correct answer.