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Friday, August 26, 2011

Soft costs can be a large part of commercial development

By Pankaj Ladhar of Manos • Alwine P.L.

Before the first shovel of dirt is turned over at the site of most commercial real estate ventures, a lot of money has already been spent.

Consider the stadium being built at Community Maritime Park in Pensacola, Florida. To date, the project has cost nearly $14.8 million. That number does not include the soft costs - money spent to pay architects, engineers, planning consultants and so on.

At Maritime Park, $9 million in costs not directly associated with the actual construction have been spent so far. This translates into about 18 percent of the total $54.7 million budget as compared to the normal 10 to 15 percent for a typical waterfront development project.

The head of the Community Maritime Park Association blames the higher soft costs on problems with the project early on including the firing of the original developer and a major redesign that resulted in additional fees being paid to architects and engineers. Additional real estate and legal fees were incurred to purchase a strip of adjacent land without which, the stadium would not have fit.

The costs continued to add up including changes in the landscaping design when it was more than 60 percent complete. A redesign of the storm water system design saved construction costs, but added over $50,000 to the soft costs.

The contracting of a Double-A baseball team meant additional development costs had to be spent to accommodate the requirements of a Double-A baseball club.

Some design changes are unavoidable in any building project, but it seems that Community Maritime Park has had more than its share. The hope is that stadium operations will return enough of a profit to pay for the extra costs needed to get the project finished.

Source: Pensacola News Journal "Maritime Park: What you see isn't all that's spent" Jamie Paige, Aug. 20, 2011
 


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