What Is the Current State of Construction and Development in Colorado Springs?
Colorado Springs' commercial construction market has entered a period of accelerating activity, with commercial building permits surging 31% in 2025 compared to the prior year. The Pikes Peak Regional Building Department approved nearly 400 new commercial projects, the most since 2022, signaling renewed confidence in the market's growth trajectory. For developers and investors seeking construction loans in Colorado Springs, these dynamics create opportunities across multiple property types while the financing environment rewards experience, conservative underwriting, and detailed project planning.
The numbers reflect a market that has moved past three years of declining construction activity. The building department approved permits for apartment complexes bringing more than 2,700 new units to the region in 2025, while over 4,500 multifamily units remain under construction. More than 4,100 units received certificates of occupancy during the year, demonstrating strong completion rates alongside continued absorption.
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Notable commercial projects approved in 2025 include the American Furniture Warehouse (estimated at $45 million), the Cheyenne Mountain Zoo Giraffe Exhibit ($25 million), and the After Sunset Hotel and Resort ($22 million). These institutional-scale projects demonstrate the range of construction activity taking place across El Paso County.
Colorado Springs' fundamental growth drivers support continued construction demand. The metro area's population of around 500,000 continues growing, supported by a defense and aerospace economy employing roughly 111,000 people across Fort Carson, Peterson Space Force Base, Schriever SFB, NORAD, and more than 200 defense companies. UCCS enrollment exceeding 12,000 students, the U.S. Olympic and Paralympic Training Center, and the tourism sector anchored by Garden of the Gods and Pikes Peak provide additional economic depth.
For borrowers exploring commercial loans in Colorado Springs, the construction lending landscape rewards developers who approach projects with thorough market analysis and realistic cost projections.
What Construction Loan Programs Are Available in Colorado Springs?
Colorado Springs developers can access several distinct construction financing programs, each designed for different project types, developer profiles, and risk levels. Choosing the right program significantly impacts project feasibility and returns.
Bank Construction Loans remain the primary financing vehicle for experienced Colorado Springs developers. Local and regional banks offer construction-to-permanent loans with rates between 7.0% and 9.0%, 18 to 36 month construction periods, and up to 70% loan-to-cost (LTC). These loans require personal recourse, significant borrower liquidity (typically 10% to 15% of total project cost in post-closing reserves), and guaranteed maximum price (GMP) contracts from qualified general contractors.
SBA 504 Construction Loans provide the most favorable terms for owner-occupied commercial construction in Colorado Springs. Business owners building their own facilities can access up to 90% financing at fixed rates between 6.0% and 7.0% for the permanent phase. The SBA 504 program is particularly well suited to defense contractors, technology firms, and medical practices building custom facilities in the Colorado Springs market.
Hard Money Construction Loans fill the gap for projects that do not meet conventional bank requirements. Rates range from 10.0% to 14.0% with 12 to 24 month terms and 60% to 70% LTC. Hard money construction lenders close faster than banks, often in 14 to 30 days, making them suitable for time-sensitive land acquisitions with near-term construction starts.
HUD/FHA 221(d)(4) Loans offer the most favorable terms for large-scale multifamily construction in Colorado Springs, with non-recourse financing at fixed rates around 6.1%, up to 85% LTC for market-rate projects, and 40-year terms. The program requires loan amounts of $10 million or more and involves a lengthy approval process of 6 to 12 months.
Mezzanine Financing supplements senior construction debt by filling the gap between the senior loan and developer equity. Mezzanine rates range from 12% to 18%, with combined leverage reaching 80% to 85% of total project cost. This reduces the developer's equity requirement but increases overall project cost.
Which Colorado Springs Areas Present the Best Construction Opportunities?
Colorado Springs' development landscape varies dramatically by submarket, with each area offering distinct opportunities, challenges, and financing dynamics for ground-up construction projects.
The Interquest/North Gate corridor has become Colorado Springs' most ambitious development zone. The Polaris Pointe development at I-25 and North Gate Boulevard, featuring a 375-room hotel, over 40,000 square feet of meeting space, and multiple food and beverage outlets, anchors a corridor that is rapidly attracting complementary commercial construction. The area's proximity to I-25, newer residential communities, and the expanding Briargate master-planned community of 9,600 acres make it highly attractive to construction lenders.
The Northeast/Powers Corridor represents the largest geographic area of construction activity. Zip code 80921 has seen the most active apartment development, and the planned Powers Boulevard Extension from Highway 83 to Voyager Parkway, with bridge construction anticipated to begin in early 2026, will further open this corridor to commercial development. Construction lenders recognize the infrastructure investment as a catalyst for continued growth.
Downtown Colorado Springs is experiencing a development renaissance anchored by the approved 27-story mixed-use building, one of the tallest structures proposed for the city. The ArtSpace project provides 51 live-work units in the downtown core. These projects signal a shift toward urban density that creates opportunities for complementary infill construction.
The Southeast/Airport Area near Peterson SFB attracts specialized construction including defense-grade facilities, flex industrial, and supporting commercial projects. The Colorado Aerospace Business Center's 84,750 square foot warehouse, completed in early 2026, demonstrates continued investment in this submarket.
The Fountain/South area benefits from Fort Carson's approximately $2.5 billion annual economic impact and over 25,000 military and civilian personnel. Multifamily and retail construction serving the military community continues to attract lender interest in this submarket.
How Do Construction Costs in Colorado Springs Compare?
Understanding Colorado Springs' construction cost structure is critical for developers seeking financing, as lenders underwrite projects based on total development cost relative to projected stabilized value.
Colorado Springs construction costs sit below Denver and most major Western markets while above the national average. Hard costs for commercial development range from $120 per square foot for basic industrial warehouse to $350 per square foot or more for mid-rise residential or hospitality. The city's elevation of approximately 6,035 feet adds marginal cost considerations for certain building systems, though the arid climate reduces moisture-related construction challenges common in other regions.
Soft costs, including architecture, engineering, permitting, legal, financing charges, and developer overhead, typically add 18% to 28% to hard costs. The Pikes Peak Regional Building Department, which saw a 31% increase in commercial permits in 2025, has maintained reasonable review timelines, though the surge in applications may extend processing times in 2026.
Labor availability remains a key cost driver. Colorado Springs competes with Denver for skilled construction trades, and the commute between the two cities along I-25 creates wage pressure as workers can choose between markets. Developers who secure general contractor commitments and GMP pricing early protect against cost escalation during the underwriting process.
Material costs have stabilized relative to the volatility of 2022 and 2023 but remain elevated above pre-pandemic levels. Concrete, steel, and lumber costs are approximately 15% to 25% above 2019 levels, and developers should budget for potential 3% to 5% annual increases when projecting construction costs for projects starting in 2026.
Using a commercial mortgage calculator helps Colorado Springs developers model construction loan interest carry and its impact on total project cost before selecting a financing structure.
What Do Colorado Springs Construction Lenders Require From Borrowers?
Construction lending represents the highest-risk segment of commercial real estate finance, and Colorado Springs lenders impose rigorous requirements to mitigate the inherent risks of ground-up development.
Development experience is the single most important qualification. Lenders require evidence of successfully completed projects of similar scope, type, and size. First-time developers typically need to partner with experienced development managers or general contractors to secure construction financing. The Colorado Springs market's relatively manageable project scales (compared to Denver) can provide an entry point for developers building their track records.
Equity requirements range from 25% to 40% of total project cost, depending on the loan program and borrower strength. The equity must be funded before the first construction draw, and lenders verify that the equity is not sourced from additional debt. Speculative projects without pre-leasing typically require 35% to 40% equity.
Guaranteed maximum price (GMP) contracts from qualified general contractors are standard requirements. The GMP shifts construction cost risk from the lender to the contractor. Colorado Springs lenders also require contractor bonding for projects above certain thresholds, typically $2 million to $5 million in hard costs.
Liquidity requirements extend beyond the equity contribution. Lenders typically require borrowers to maintain 10% to 15% of total project cost in liquid reserves post-closing, ensuring the developer can cover unexpected costs and interest carry during the lease-up period.
Environmental assessments including Phase I and potentially Phase II Environmental Site Assessments are required. Properties near military installations or former industrial sites in Colorado Springs may require additional environmental investigation.
How Does the Construction Draw Process Work in Colorado Springs?
The draw process governs how loan proceeds are disbursed during construction. Understanding this process is essential for managing project cash flow and maintaining a productive lender relationship.
Colorado Springs construction lenders disburse proceeds through scheduled draws, typically monthly, based on verified construction progress. Before each draw, a third-party inspector visits the project site to confirm that the work claimed in the draw request has been completed to specification. The inspector's report must reconcile with the general contractor's application for payment and the project budget.
The process begins after the borrower funds their full equity contribution. Lenders disburse equity first, meaning the developer's cash is spent before loan proceeds flow. This structure ensures the lender's capital is protected by the developer's financial commitment.
Retainage provisions are standard, with lenders withholding 5% to 10% of each draw until final project completion, certificate of occupancy, and lien waiver collection. This protects against incomplete work and contractor disputes.
Interest accrues only on amounts actually disbursed, not the full commitment. Monthly interest payments increase as more of the loan is drawn. Developers should model the full interest carry through construction and initial lease-up to ensure adequate reserves.
What Types of Projects Are Colorado Springs Lenders Financing?
Lender appetite varies by property type, reflecting the relative risk and demand dynamics across Colorado Springs' development landscape.
Multifamily Construction remains the most active segment. With permits approved for over 2,700 new units in 2025 and strong absorption across the northeast growth corridor, lenders continue to finance well-located multifamily projects. Projects near the Powers corridor, Interquest, and Briargate receive the most favorable terms due to demonstrated rental demand from military personnel, defense workers, and the growing general population.
Industrial/Flex Construction benefits from Colorado Springs' 5.4% industrial vacancy and defense sector demand for manufacturing, warehouse, and specialized facilities. The Colorado Aerospace Business Center demonstrates continued institutional interest in purpose-built industrial development. Lenders favor industrial projects with pre-lease commitments from defense contractors.
Hospitality Construction has attracted significant capital, with the Polaris Pointe hotel ($45 million+) and the After Sunset Hotel and Resort ($22 million) demonstrating confidence in Colorado Springs' tourism and conference market. Construction lenders evaluate hospitality projects based on market demand studies, franchise relationships, and developer track records.
Build-to-Suit Projects with signed leases from creditworthy tenants represent the lowest-risk construction lending opportunity. Colorado Springs lenders offer the highest LTC ratios (up to 80%) and lowest rates for projects with pre-committed tenants, as the lease eliminates lease-up risk.
Retail Pad Development for QSR and national retail tenants along the I-25 and Powers corridors attracts construction financing backed by the signed lease from the tenant. These smaller-scale projects provide entry points for developers building construction lending relationships.
What Risks Should Colorado Springs Construction Borrowers Plan For?
Construction projects face several categories of risk that borrowers must anticipate and plan for during the underwriting and project planning process.
Cost overruns remain the most common risk. Despite GMP contracts, change orders, unforeseen site conditions, and material price increases can push costs beyond initial budgets. Building a 10% to 15% contingency into the project budget protects against moderate cost overruns.
Permitting and regulatory delays can extend timelines. While the Pikes Peak Regional Building Department has managed the 31% surge in commercial permits, individual projects may face review delays, plan revision requirements, or zoning complications that add to carrying costs.
Market timing risk affects projects with long construction periods. A development that breaks ground in a strong absorption period may deliver units into a market that has shifted. With over 4,500 multifamily units under construction across Colorado Springs, absorption rates will determine whether the market can support the incoming supply.
Interest rate risk affects floating-rate construction loans. A 100 basis point increase during a 24-month construction period can add significant cost. Developers should model multiple rate scenarios when sizing their contingency reserves.
Labor shortages and contractor availability can affect both timelines and costs. Colorado Springs' construction boom creates competition for skilled trades, and developers should secure contractor commitments early in the planning process.
Contact Clearhouse Lending to discuss your Colorado Springs construction project and explore financing options tailored to your development plan.
How Do Interest Rates and Terms Vary Across Programs?
Construction loan pricing reflects the elevated risk of development financing and varies significantly across programs and borrower profiles.
Bank construction loans currently price at prime plus 1.0% to 2.5%, translating to effective rates of 7.0% to 9.0%. Hard money construction loans price at 10.0% to 14.0% regardless of the index rate. SBA 504 construction loans offer the most favorable permanent phase rates at 6.0% to 7.0% for qualifying owner-occupied projects.
Loan terms include the construction period (12 to 36 months depending on project scope) plus an optional extension of 6 to 12 months for lease-up. Construction-to-permanent loans convert to fixed-rate financing upon stabilization, eliminating the need for a separate refinance.
Origination fees range from 0.5% to 1.0% for bank construction loans and 2.0% to 4.0% for hard money financing. Exit fees, if applicable, add 0.5% to 1.0% at maturity or refinance.
Borrowers should model the all-in cost of capital, including origination fees, interest carry, inspection fees, and legal costs, when evaluating construction loan proposals. The total cost significantly exceeds the stated interest rate.
Frequently Asked Questions About Construction Loans in Colorado Springs
What is the minimum loan amount for a construction loan in Colorado Springs?
Minimum loan amounts vary by program. Bank construction loans typically start at $1 million to $2 million. SBA 504 construction loans are most practical for projects of $500,000 or more. Hard money construction loans start as low as $250,000. HUD 221(d)(4) multifamily construction loans require a minimum of $10 million. The minimum that makes economic sense depends on the fixed costs of underwriting, documentation, and inspections relative to the total project budget.
How much equity do I need for a construction loan in Colorado Springs?
Equity requirements range from 10% to 40% of total project cost. SBA 504 loans require as little as 10% for owner-occupied projects. Bank construction loans typically require 25% to 35%. Hard money lenders require 30% to 40%. HUD multifamily construction loans require 15% for market-rate projects. Land value can count toward equity if the borrower owns the site free and clear, reducing cash equity needed at closing.
Can I use land as equity for a construction loan in Colorado Springs?
Yes, lenders typically credit the appraised value of land you own toward the equity requirement. If you purchased below current appraised value, the appreciation further reduces required cash equity. Lenders order both an as-is land appraisal and a prospective value appraisal based on the completed project to determine how much land equity they will credit.
How long does it take to close a construction loan in Colorado Springs?
Closing timelines range from 30 to 120 days depending on the program. Hard money construction loans close in 14 to 30 days. Bank construction loans require 60 to 90 days. SBA 504 construction loans take 90 to 120 days. HUD 221(d)(4) loans require 6 to 12 months. The timeline begins after submission of a complete loan package including plans, environmental reports, contractor agreements, and detailed budgets.
What happens if my construction project in Colorado Springs goes over budget?
The borrower is typically responsible for funding cost overruns from personal resources. Lenders do not increase the loan after closing to cover overruns. This is why lenders require contingency reserves (5% to 10% of hard costs) and personal liquidity post-closing. Significant overruns that exhaust contingencies can trigger a loan default if the borrower cannot fund the shortfall.
Do Colorado Springs construction lenders require pre-leasing?
Requirements vary by project type. Speculative multifamily and industrial projects may not require pre-leasing, though pre-committed tenants improve terms. Build-to-suit projects inherently have pre-leasing. Condominium construction typically requires 30% to 50% pre-sales. Retail and office construction usually requires 40% to 60% pre-leasing from creditworthy tenants.
Planning Your Colorado Springs Construction Project
Colorado Springs' construction market has entered a growth phase, with commercial permits up 31% and significant projects breaking ground across the northeast corridor, downtown, and the I-25 commercial zones. The metro area's defense-driven economy, steady population growth, and improving infrastructure create a supportive environment for development projects backed by realistic underwriting and experienced execution teams.
The key to securing competitive construction financing is matching your project profile with the right lending program and presenting a complete, well-documented loan package that demonstrates feasibility and borrower capability.
Contact Clearhouse Lending to discuss your Colorado Springs construction project and connect with lenders who specialize in ground-up development financing along the Front Range corridor.