Soft costs are the indirect costs of delivering a construction project that aren't embedded in the physical building itself. Major categories: architect and engineer fees, permits and entitlement fees, legal fees, financing cost (loan origination, interest carry, points), insurance during construction, FF&E (furniture, fixtures, equipment beyond what the contractor installs), tenant improvement allowances, marketing and pre-leasing cost, owner's rep, commissioning, and contingency reserves.
Soft costs commonly run 15 to 30% of total project budget on commercial work. The owner's pro forma always shows hard costs and soft costs as separate lines because they have different timing, risk profiles, and contingency requirements. The contractor's contract usually covers only hard costs. Soft costs sit on the owner's budget. Misunderstanding the boundary between the two is a frequent source of scope and contingency disputes during construction.