Cost Categories

What Are Indirects?

Keep in mind that terminology can vary from region to region, but one of the more common terms related to costs and pro formas tends to be “direct construction” or simply “directs”.  I like to think of directs being the vertical construction elements that you can physically see, such as foundations, framing, plumbing and so forth.

When we talk about “indirects”, we tend to be referring to a variety of work effort and costs that go on behind the scenes to get construction completed.  Some of the more common indirect costs expected to be seen in a budget would include architecture, civil engineering, surveying, structural engineering, landscape architecture, site superintendents, temporary site facilities, and other consultants.  All are critical in the process, but you will not physically see the finished work in the field.

As another side note, the terms “hard” and “soft” costs are often heard.  Hard costs again will refer to work that you can physically see, such as directs, but also to grading and site improvement work.  Soft costs include the indirects, as well as some other cost categories such as marketing, finance, taxes, city fees, and customer service.

As noted at the beginning, this cost terminology can vary.  It is always a good idea to keep asking questions if you are not clear what is in each category.

Please share with us below any of your comments or questions.

John Kaye has over 30 years experience within the land development and homebuilding industries, having held senior management positions with The Irvine Company, Koll Real Estate Group, and Brookfield Homes. As a developer, John has overseen the land acquisition, entitlements, and development of master planned communities, residential tracts, urban infill sites, and land assemblages. His experience and skill sets include land acquisition, land brokerage, project management, market analysis, finance, and strategic planning.

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