It’s no secret Colorado is a great place to live. We’re biased, but the numbers don’t lie. Colorado cities consistently rank among the top 10 places to live in the country. Colorado is one of the country’s most highly educated states, with 38% of the population having a college degree. Annual household income is above the national average, and employment opportunities are in abundance across Denver Metro as well as other mid-sized cities.
Oh, and we’re an outdoor and nature-lover’s paradise, with some of the most diverse terrain west of the Mississippi. The majestic Rockies, sparkling lakes, and pristine rivers are just a few of the natural wonders that contribute to the state’s incredible quality of life. On paper, Colorado is an attractive bet to out-of-state developers looking for a safe investment. And in most respects, it is. But it often comes as a surprise to developers when they discover their projects don’t pencil out in the Centennial State.
We’re sharing five factors that drive up Colorado development costs and tips for your land acquisitions team to overcome these challenges.
Table of Contents
- How to Mitigate Entitlement Obstacles?
- How Does Water Access Affect Development?
- Is Home Rule a Blessing or a Curse?
- What Reports Do I Need?
- Are the Trades Really That Different?
- Final Takeaways
How to Mitigate Entitlement Obstacles?
The land entitlement process in Colorado presents its own set of challenges and frustrations, but they can be mitigated with the right team on the ground. The average entitlement timeline is not as long as a few other states, but it is significant, ranging from 18 to 36 months on average.
There’s also a lot to unpack and understand throughout the state’s many jurisdictions, which we will address in detail below. “It’s important to understand the network of different municipalities and which building codes they’re under and the various building departments’ idiosyncrasies,” says KGA’s Partner and Director of Design John Guilliams.
And if you are coming from an area of the country with more modest impact and access fees, you may be in for an unpleasant surprise. For example, water tap fees in some counties can be as high as $40,000. Having a clear understanding of these various fees can help determine the financial feasibility of your project and conserve your resources during due diligence.
A local and experienced architectural team knows the various agencies involved in each jurisdiction and has worked with many of them. Their in-the-trenches knowledge can help inform early site planning, what product types to use, and how to maximize density, to name a few. They can also make recommendations for engineers if needed and law firms that specialize in entitlements in Colorado to better anticipate and mitigate potential legal challenges to the development. In other words, a local architect can save your land acquisition team headaches, time, and money.
How Does Water Access Affect Development?
Like most of the Southwest, Colorado is vulnerable to droughts and water scarcity. According to the Colorado Water Conservation Board, 2022 was the state’s sixth warmest and 35th driest year on record since 1896. Water access is a major factor in new residential development. “Jurisdictions have their own requirements as they relate to water, and they’re evolving as jurisdictions are looking at different and more water-efficient development approaches,” says Matt Osborn, senior vice president of investments at The Resmark Companies.
Some regions of the state require developers to secure water rights in order to build, and the process is confusing and complicated. Water rights most resemble real estate transactions and are recorded as deeds in the county where the development will be built. Developers seeking water rights must petition a water court that manages water allocation across the state. And if a water court denies water rights, a developer must appeal through the Colorado Supreme Court.
Obtaining water rights can be lengthy and challenging. Enlisting the guidance of an attorney specializing in Colorado water rights can help simplify the process for your acquisitions team.
Is Home Rule a Blessing or a Curse?
As a home rule state, the Colorado legislature grants counties and municipalities a lot of self-governing autonomy. And while this is advantageous to Coloradans, is it less so for out-of-state developers. Each jurisdiction develops region-specific zoning and building codes, and it can be tough for developers and builders to identify which areas are more development-friendly.
Denver Metro and Boulder tend to make the national headlines when it comes to housing and construction, but they don’t set the zoning and coding standards for the rest of the state. Each jurisdiction has its own unique needs, preferences, and ways of doing things. An exception to this is the state’s recent development of green code language outlining Colorado’s shift from natural gas to renewable energy in new construction.
Knowing the idiosyncrasies of the jurisdictions in which you plan to build can help get your project off on the right foot, smoothing the bumps in the entitlement process and throughout the early stages of design development.
A Colorado architectural firm can identify which jurisdictions are friendlier to develop in depending on your proposed land plans, targeted densities, and housing types. And for those areas with more development challenges, an architectural firm can arm you with the knowledge you need to overcome them. What’s more, their experience may provide you with valuable insight on potential workarounds to the process that only local professionals with established agency relationships can provide.
What Reports Do I Need?
Colorado requires a geotechnical report for each lot, which is different from other regions of the country that may only require a report for multiple lots or a predetermined percentage of the project’s development area. And at approximately $3,000 per report, soil studies for a project add up quickly and often come as an unwelcome additional expense to unsuspecting developers and builders.
Much of Colorado soil is rich in bentonite, a highly absorbent clay. Soil expansion and contraction affect road construction and utility development as well as other critical infrastructure. And foundations and basements require different materials and methods that are not typical to other regions. For example, instead of a traditional slab foundation, a structural floor system could be required to limit the effects of soil expansion.
Geotechnical engineers and architectural firms in Colorado are familiar with the spectrum of soil properties throughout the state. Enlisting their expertise can provide workable and scalable solutions that meet local requirements.
Are the Trades Really That Different?
Knowing the local construction labor environment is critical. One of the biggest missteps developers make in Colorado is making assumptions about regional trades’ capabilities and availability. The good news is that statewide inroads are being made to increase the construction trade labor pool. But identifying specific labor representation can still be a challenge. With the recent release of electric and solar ready code language by the Colorado Energy Office, we may see a shortage of labor experienced with the construction and installation of specific products and systems.
Additionally, there are materials, methods, and best practices that vary throughout the state. Sometimes there is a large variance in material costs from region to region. For instance, lap siding is more prevalent in Denver than in Colorado Springs, where it can often cost twice the price. A local architect can partner with your purchasing team to prevent unwelcome surprises and costly changes during construction.
Final Takeaways
Land development in Colorado is unique and can be confusing, costly, and lengthy. But it’s worth it. We’re biased, but Colorado’s an incredible place to call home. And we are in critical need of new housing to meet pent-up demand and make home buying attainable for more households. If you’re a developer and have set your sights on Colorado, partnering with a local architectural firm can help identify the best areas for development, navigate entitlements, and connect you with pre-vetted industry professionals to set your project up for success.
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