A geospatial modeling system may include a geospatial model database configured to store a digital surface model (DSM) of a geographical area, and to store image data of the geographical area. The image data may have a spectral range indicative of a difference between buildings and vegetation. The geospatial modeling system may also include a processor cooperating with the geospatial model database to separate bare earth data from remaining building and vegetation data in the DSM to define a building and vegetation DSM. The processor may also register the image data with the building and vegetation DSM, and classify each point of the building and vegetation DSM as either building or vegetation based upon the spectral range of the image data.