More than a year after Colorado Springs leadership greenlit plans to construct the city’s tallest building, a $225 million, 27-story apartment tower downtown, dirt has yet to move.

Though the City Council in April 2025 denied an appeal that sought to block the OneVela project entirely, an action that helped clear the way for construction to begin, developers estimate it’ll still be another four to six months before building gets underway on the high-rise planned at the northeast corner of the intersection of Sahwatch and West Costilla streets.

What’s responsible for the temporary halt? Developers recently pointed to volatile capital markets and a local real estate market that area experts have said is now beginning to stabilize following a period of hyperactive building during the COVID-19 pandemic.

Falling rents across the city, combined with landlord concessions to entice renters, a recent swell of new multifamily units coming online and shifting interest rates that have made it more expensive to borrow cash to build are some of the biggest contributing factors.

Representatives with Springs-based private equity group The O’Neil Group and VeLa Development Partners, a Kansas City, Mo. high-rise and multifamily developer, recently updated the Urban Renewal Authority Board of Directors at its regular June meeting about the status of the project.

Developers have received an urban renewal designation for the OneVela site. This designation allows them to use increased property and sales tax revenues generated by the project to help fund it, a financing mechanism called tax-increment financing, or TIF.

Constrictive equity markets and lower-than-hoped-for construction activity in the southwest part of downtown, where the OneVela project is planned, are among other factors that pushed back construction’s start, they said.

But some tides seem to be turning and the project is still a go, they said..

“We remain extremely bullish about this project, about the market, about the long-term potential for this project to be successful in and of itself, but also to be a catalyst for growth in Colorado Springs,” Nick Benjamin, principal at VeLa Development Partners, told the board.

Capital markets have improved and access to money to build new products is strengthening, said Jeff Black, senior vice president within CBRE’s debt and structured finance platform, who advises institutional, private equity and developer clients across the U.S. CBRE is a Colorado commercial real estate services firm.

Nationally, equity markets have faced headwinds over the last 24 months such as inflation, ongoing geopolitical conflicts and fluctuating interest rates, among others. But “pioneering projects” in growing areas, Black said, such as the 400-unit mixed-use OneVela high-rise, have investors’ attention.

When completed, OneVela will be the tallest building in Colorado Springs, surpassing the 250-foot Wells Fargo Tower, the current tallest. OneVela will stand between 295 feet and 312 feet tall, depending on what is considered the top point of the building, developers have said.

Black estimated the project will be completed in 2029 or 2030.

“Growth markets in the Mountain West, the Springs in particular, are in high demand from capital allocators who are pursuing open business environments,” Black told the Urban Renewal Authority Board. Conventional capital has shifted, he said, “to markets that are open and embracing of transformative projects” such as OneVela.

The pause in starting construction will allow developers to “take advantage of what’s been particularly dramatic improvements in the debt capital markets over the last six to eight months,” VeLa’s Benjamin told the board.

“Generally, across the country for this type of project, debt spreads have come down, appetite for leverage has come up, and that’s setting up a dynamic in the long term … that creates a healthier environment … for the success of the project,” he said.

The number of new multifamily units being constructed in Colorado Springs, across the Pikes Peak region and across the country has slowed, which is improving construction costs, developers said. Construction costs soared in recent years, driven by labor shortages, increased materials costs, supply chain disruptions and new tariffs.

In February 2025, there were about 6,000 apartments being built across the Pikes Peak region, the regional building department said at the time. That number is dropping as several projects reach completion. As of June 17, there were 3,854 apartments currently under construction, the department said in a social media post.

“So even in the face of some unknowns, like tariffs that have come up over the last six to nine months, generally, there is an ability to hold pricing,” Benjamin said. “From a long-term perspective, pricing is about as favorable as it’s been in the last 24 months.”

Developers feel interest rates are becoming more stable and the war with Iran, among other global hostilities affecting equity markets, may be slowing.

Kevin O’Neil, founder and chief executive officer of The O’Neil Group, told the Urban Renewal Authority Board his team is working to organize its capital stack, or all of its financing instruments related to the project.

“There’s still more than one war going on, but we’re trying to feel good about the interest rates stabilizing a bit before a large construction loan like that,” Patrick Stephens, The O’Neil Group’s chief financial officer, said in a separate interview with The Gazette.

He added that developers are not making any material changes to OneVela’s current design in an effort to lower the cost to build it.

O’Neil told The Gazette the biggest factor for the stall in construction is rental rates across Colorado Springs, including concessions offered by landlords to entice residents, such as multiple months free of rent. Concessions can help new construction projects build up occupancy but can also reduce net effective rents and influence net operating income.

“Even if you’re 95% to 100% occupied, you might have given two months of free rent,” he said.

Average monthly rents in the Colorado Springs area have fallen since developers first proposed the project in November 2023, data show.

Average monthly rents in the first quarter of 2026 were $1,389 a month, compared with $1,420 in the first quarter of 2025 and $1,446 in the first quarter of 2024, according to a recent report from 1876 Analytics, an affiliate of Denver-based Apartment Appraisers & Consultants and whose statewide apartment market reports are sponsored by the Colorado Housing and Finance Authority.

1876 Analytics examines only established apartments and excludes newer properties that haven’t completed their initial lease-ups. To determine rents, its reports focus on market rate apartments and don’t factor in landlord concessions.

Colorado Springs area vacancy rates have also been elevated since an influx of new multifamily units came online in recent years, though real estate experts say demand is still strong and residents are moving into units at record rates.

Vacancy rates peaked at 8.3% in the fourth quarter of 2025, the highest quarterly vacancy rate in the last six years, according to 1876 Analytics data.

In the first quarter of 2026, they were lower, at 7.3%. That’s compared with 7.6% in the first quarter of 2025 and 7.2% in the first quarter of 2024, data show.

O’Neil said there’s also a perception that there isn’t as much investment activity in the southwest area of downtown as developers and investors would like to see.

Outside of Weidner Apartment Homes’s Experience at Epicenter apartment and retail complex adjacent to Weidner Field, located at West Cimarron and South Sierra Madre streets just a few blocks south of where the OneVela tower is proposed, much of the apartment construction activity is happening on Colorado Springs’ east side, Stephens said.

“If we move in an investor to bring in substantial capital and come alongside us in this project, you have to show them the community,” O’Neil told the board last month. “If we’re not seeing cranes in the air (like) we are in other cities … then we have investors asking, ‘Well, why isn’t anybody else building … here?’”

Laura Nelson, executive director of the Apartment Association of Southern Colorado, recently repeated concerns she previously shared with The Gazette that some state legislation could hamper future apartment construction and other investments in the Pikes Peak region.

As examples, she highlighted 2021 legislation that extended the eviction process to four months and another bill, which went into effect in January, that makes it more difficult for landlords to bill individual renters for master utilities for their units.

Laws like these can make it hard for developers to make financial sense of a project, “which is why you’re not seeing so much building,” she said. “… We’re fortunate here, because the Department of Defense and the Space Force are still attracting residents … but at the end of the day, costs have to be covered,” she said.

If state law affects how developers recoup their costs, some companies who have options may choose to build outside of Colorado, Nelson said.

O’Neil assured the Urban Renewal Authority Board he still plans and desires to build OneVela, with a team and capital in place to start.

“It’s just a matter of making sure that the lender on this would say it (makes sense),” he said.