Colorado: A Construction Overview

Colorado’s construction industry saw moderate growth in 2025 and should continue to see strong activity in 2026 across infrastructure, energy, multifamily housing, and large-scale commercial development and public works projects. That activity is a testament to owners, contractors, and developers who continue to successfully navigate increasing pressures related to labor shortages, material escalation, insurance costs, volatile tariff and energy cost impacts, elevated interest rates, and evolving project risk allocation. Although the Denver multifamily and office markets face increasing vacancy rates and falling lease rates, strong performance in those sectors continues in suburbs, smaller cities, and mountain/resort communities, where housing shortages have hit the state particularly hard.

In 2025 and early 2026, Colorado lawmakers and courts focused heavily on balancing development incentives with consumer protections, while also reinforcing the primary importance of negotiated construction contracts and long-established mechanic’s lien remedies. And in one landmark decision, the Colorado Supreme Court reaffirmed a conventional understanding of claims related to public projects, bringing needed certainty to both public and private sector construction disputes.

One of the most closely watched legislative developments in Colorado construction law was the latest round of construction defect litigation reform, commonly referred to as the Colorado American Dream Act (“CADA”). The legislation is intended to encourage the construction of middle-market condominium and townhome projects, a sector that has struggled in Colorado for decades due in large part to construction defect litigation risks. The law created an opt-in “Multifamily Construction Incentive Program” that offers certain procedural and substantive protections to participating builders and contractors, including heightened requirements for an HOA to approve pursuit of construction defect claims and expanded affirmative defenses. At the same time, however, the legislation imposes significant additional costs on enrolled projects, including extensive third-party inspection requirements and extended warranties. Additionally, new attorney-fee-shifting provisions in the law may actually increase the incentives for litigation. Whether the new legislation meets its stated intent of incentivizing development and construction of for-sale multifamily housing will only be determined with time, but very few reports of enrolled projects have been noted to date.

Local and state legislators in Colorado also recently considered – but rejected – new regulations aimed at protecting Coloradans from the infrastructure costs needed to develop data centers as well as the potential environmental effects these facilities may have. Despite the lack of new regulations on data center construction in Colorado, the state also rejected legislation that would have incentivized data center development. As a result, Colorado has yet to see a significant uptick in data center construction, as Big Tech has focused its data center development efforts in more incentive-rich markets.

In the courtroom, Colorado courts continued a trend toward reinforcing contractual predictability and negotiated risk allocation in construction disputes. In Mid-Century Insurance Co. v. HIVE Construction, Inc., the Colorado Supreme Court reaffirmed the strength of the state’s economic loss rule by holding that negligence claims arising from duties memorialized in a construction contract are barred absent an independent duty of care. An insurance company seeking to recover damages after a fire caused by improper construction alleged willful and wanton negligence against a contractor in lieu of asserting that the contractor had breached its contractual duty to adhere to the plans and specifications. The Court nevertheless emphasized that parties cannot avoid contractual damages limitations and negotiated remedies simply by recharacterizing contract-based duties as tort claims. The decision reinforces the primary importance of contracts in Colorado construction disputes and will force insurers to honor well-crafted contractual limitations and remedies rather than asserting tort claims to avoid them. In fact, the Court placed special emphasis on contracts in the construction industry, where industry professionals set their fees in part based on their expected liability and exposure as reflected in their contracts. Parties doing business in Colorado who wish to avoid the application of contract remedies to conduct they consider to be outside the scope of the contract (such as willful and wanton acts) will need to take care to specifically define the applicable limits of their contract remedies.

Colorado also saw an important development relating to contractor payment protections and statutory remedies. In Ralph L. Wadsworth Construction Co., LLC v. Regional Rail Partners, the Colorado Supreme Court clarified that contractors may include disputed change orders in verified statements of claim (which are used in lieu of mechanic’s liens on public works projects), including certain delay and disruption damages, so long as the claimant has a reasonable good-faith basis for asserting the amounts are due. The Court further held that even if a claim is ultimately deemed excessive, the penalty is limited to the loss of statutory lien or bond remedies rather than the forfeiture of all related legal claims. The Wadsworth decision had far-reaching implications for Colorado’s construction industry, as the underlying litigation called over a century of conventional verified claim and mechanic’s lien practices into question. Had contractors lost the ability to include disputed change orders and delay damages in their mechanic’s liens, it would have led to a significant shifting of risk toward construction contractors. The cost implications for Colorado’s construction industry would have been significant.

On the heels of the Wadsworth decision, the Colorado General Assembly quickly followed with Senate Bill 26-074, which the Governor signed in April. The bill codified and expanded many of the principles addressed in Wadsworth by expressly authorizing disputed claims, delay costs, and disruption damages in both public works claims and mechanic’s liens where asserted in good faith. These developments significantly reduce uncertainty surrounding statutory payment remedies and reinforce Colorado’s continued efforts to protect contractors and subcontractors furnishing labor and materials on both public and private projects.

Outside the courtroom and legislature, project participants continue to face substantial external pressures tied to federal policy developments and workforce challenges. Seesawing tariffs affecting steel, aluminum, lumber, and other construction-related imports have increased concerns over material cost escalation, procurement timing, and supply chain disruption. At the same time, labor shortages remain one of the construction industry’s most significant operational challenges, particularly as immigration enforcement efforts continue to impact project staffing in Colorado and nationwide.

Looking ahead, Colorado’s construction industry is likely to remain highly active, but increasingly risk-aware. Owners, contractors, developers, and insurers are placing greater emphasis on front-end project planning, contract drafting, insurance coordination, and dispute avoidance strategies as projects become more expensive and legally complex. Efforts to address housing supply and resource-intensive commercial developments such as data centers will continue to garner the attention of Colorado legislators. Continued pressure from labor and material markets will likely shape the Colorado construction landscape throughout 2026 and beyond. Colorado remains an attractive place to live, work, and play, leading to a strong and constantly evolving marketplace for the construction industry.