diff --git a/components/server/src/workspace/workspace-starter.ts b/components/server/src/workspace/workspace-starter.ts
index 0cf215475d7770..71ba79268e6ae4 100644
--- a/components/server/src/workspace/workspace-starter.ts
+++ b/components/server/src/workspace/workspace-starter.ts
@@ -970,7 +970,7 @@ export class WorkspaceStarter {
             // Update workspace instance to tell the world we're building an image
             const workspaceImage = result.ref;
             const status: WorkspaceInstanceStatus = result.actuallyNeedsBuild
-                ? { ...instance.status, phase: "preparing" }
+                ? { ...instance.status, phase: "building" }
                 : instance.status;
             instance = await this.workspaceDb
                 .trace({ span })
@@ -1023,7 +1023,7 @@ export class WorkspaceStarter {
             }
 
             instance = await this.workspaceDb.trace({ span }).updateInstancePartial(instance.id, {
-                status: { ...instance.status, phase: "preparing", conditions: { failed: message }, message },
+                status: { ...instance.status, phase: "building", conditions: { failed: message }, message },
             });
             await this.messageBus.notifyOnInstanceUpdate(workspace.ownerId, instance);