Word on the Street: Issue 286

Three Years In: What We Got Right (And Wrong) About AI in the AE Industry

Way back in January 2023, in “Artificial Intelligence—First- and Second-Order Effects for the AE Industry,” I played a trick on our readers. ChatGPT had just debuted two months earlier and due to overwhelming demand and capacity issues, new individual users had to “wait in line” to use it. Finally, I was able to access it and some ChatGPT knockoffs in January. My Word on the Street article opened with four paragraphs about AI’s impact on the AE industry—predictive maintenance, the usual consultant-speak about “immense potential” and “careful integration.” It read fine. Competent, even.

Then I fessed up: I didn’t write those paragraphs. An AI copywriting tool called Anyword did. I gave it a topic. Three seconds later, it gave me copy.

But the parlor trick wasn’t the point. The point was what came next: two predictions about what AI would actually mean for the AE industry—the first-order effects and second-order effects.

The Two Predictions

First-order effects, I argued, would be about how AI transforms how the industry works. AI copywriting was a sideshow, I wrote. The real disruption would come from AI’s impact on planning, design, and operations. I predicted that AI could deliver better forecasting and “more accurate, more understandable, and less biased” reporting than most human COOs. And I warned that the combination of AI, machine learning, and deliverable digitization would “create the next big winners/losers fracture in our industry.”

Second-order effects were about what AI’s growth as a market for AE firms would mean. I noted that OpenAI was forecasting $200 million in revenue for 2023 and $1 billion by 2024—growth I called “exponential.” But here was the kicker: To power that growth, massive investment in processing power and supporting infrastructure would be required over the next decade. “That’s music to the ears,” I wrote, “of those AE firms designing mission-critical facilities and data centers.”

Three years later, let’s check the scorecard.

First-Order Effects: The Verdict

The first prediction is playing out—but unevenly.

Looking at last week’s ENR 2026 Top 500 Design Firms edition, at the leading edge, AI is doing exactly what we anticipated. At leading design firms like Little Diversified Architectural Consulting (Charlotte, NC) (ENR #281), AI design assistants now work alongside human architects from the earliest conversations—aggregating research, flagging program conflicts, and validating designs against code in real time. ASCE reports that at Skanska (New York, NY), an AI-powered “Safety Sidekick” delivers guidance to field teams. At Bechtel (Reston, VA) (ENR #20), AI agents evaluate scope changes and their downstream impacts on cost and schedule. Firms are using AI for generative design, knowledge management, predictive analytics, and QA/QC.

In the ENR 500 article, Rod Sommer, CEO of LJB (Miamisburg, OH) (ENR #287), brought it all together with: “The industry is being pushed to do more with fewer people, making the integration of AI and automation essential.” Nine in ten of the 80+ CEOs participating in The CEO Symposium in Dallas later this month are already deploying AI across their enterprises with plans to ramp up their usage. 

Meanwhile, an Arup survey of 5,000 built environment professionals from last year found that 42% of U.S.-based architects and engineers are relying on AI daily—well above the global average. And 80% of those surveyed said they’re “very excited” about AI’s potential. Only 8% see it as a job risk.

The industry is splitting. Not into optimists and pessimists, but into movers and watchers. The winners/losers fracture I predicted? It’s happening. You can see it in the gap between firms building institutional AI capability and firms still forming committees.

Second-Order Effects: The Verdict

This one wasn’t even close. We nailed it.

Data centers—the physical backbone of the AI revolution—have become the growth engine of the AE sector. According to the ENR 2026 Top 500 Design Firms report, the telecommunications market (driven largely by data centers) surged 31% between 2024 and 2025, and nearly 87% since 2023. Jacobs (Dallas, TX) (ENR #1) reported a 62% jump in its data center business, with its project pipeline up 500%. CEO Bob Pragada called it “a real growth engine” in an interview with CNBC.

Revisiting what we predicted in January 2023, “There’s going to be massive investment in processing power and the supporting infrastructure over the next decade. That’s music to the ears of those AE firms designing mission-critical facilities and data centers.”

Music, indeed. For some firms, it’s been a symphony. (One of the panel discussions at The CEO Symposium features the CEOs of two of the leading data center designers.)

The Window Is Closing

The competitive advantage of early AI adopters is showing up already in KPIs—win rates, margins, talent retention, and client delight. Eventually, the watchers will realize they’re not just behind—they’re becoming targets.

The firms that started early aren’t just ahead—they’re compounding their advantages. They’ve built internal expertise. They’ve trained their AI tools on proprietary data. They’ve worked through the cultural resistance and the workflow disruption. They’ve made the mistakes and learned from them.

The firms that are still waiting? They’ll eventually start. But they’ll be starting from zero, in a market where their competitors are already at scale.

The barriers global AEC firms cited in a 2025 Bluebeam survey—data security concerns (42%), cost and complexity (33%), regulatory uncertainty (69%), skills gaps (23%)—aren’t unreasonable. But they’re becoming worse excuses with every quarter that passes.

What CEOs Should Do Now

If you’re still in “wait-and-see” mode, here’s my advice: Stop waiting.

You don’t need to bet the firm on a single AI platform. But you do need to move past the pilot phase. Identify two or three use cases where AI can drive real efficiency—proposal development, project documentation, knowledge retrieval, QA/QC. Deploy. Iterate. Build institutional knowledge.

Get your leadership team aligned. The biggest barrier isn’t the technology, it’s the culture. If your senior architects or project managers are still treating AI as a threat, you have a leadership problem, not a tech problem.

Invest in training. Not a one-hour webinar—real, structured capability-building. The firms that win will be the ones that help their people get better at using AI, not just exposed to it.

And most importantly: Recognize that this isn’t about chasing a trend. It’s about staying relevant in a fast-changing industry. The question isn’t whether AI matters. The question is whether you’ll be early enough to gain the advantage—or late enough to become someone else’s acquisition.

The market has already answered. The only question left is whether you’re listening.

You may contact Mick Morrissey at [email protected].

The Four Personality Types CEOs Have to Convince

How CEOs need to adapt their communication styles to get anywhere fast

For AE firms, what used to unfold over a decade is now compressed into a few planning cycles. In this kind of environment, the limiting factor is rarely strategy itself. It is whether the individuals in your organization—who interpret and react to change very differently—can absorb, align around, and execute on that strategy with any consistency.

Many CEOs I work with have seen their technically brilliant principals stall an initiative with a few well-placed questions. They’ve watched a high-potential PM grow impatient with what feels like endless discussion. They’ve noticed that some of the most influential people in the firm rarely speak in meetings but shape the narrative afterward. The instinctive response is often to push harder, clarify the message, or repeat it more frequently. But while that approach tends to produce agreement in the room, it drifts everywhere else.

Why? Because people are wired to engage with change differently. The CEO’s job is not to eliminate those differences or simply power through them. It is to communicate in a way that accounts for them in a deliberate way.

There is no shortage of personality frameworks available, and if you want to have everyone take an assessment and compare colors, animals, or four-letter combinations, you certainly can. But in my experience, that exercise produces a brief spike in interest followed by a fairly quick return to normal behavior.

A more practical approach is to focus on what people actually do when change shows up.

When a meaningful shift is introduced, whether a new technology, a market repositioning, or a change in ownership structure, patterns emerge quickly:

• Some people start asking pointed questions, testing assumptions, and highlighting risk.
• Some push to make decisions quickly and move into action. 
• Some focus on what could be disrupted or lost in the process. 
• Some hold back until they understand the logic and data behind the move. 

These are not abstract personality types. They are observable responses, and most CEOs can identify who tends to fall into each pattern within a few minutes of thinking about it. And once you do, you can communicate accordingly.

But from what I’ve observed over the years, CEOs tend to lean on one of two communication styles. The first is vision-driven, where the emphasis is on direction, opportunity, and where the firm is headed. The second is logic-driven, where the emphasis is on rationale, data, and why the decision makes sense. Both are necessary, but neither is sufficient on its own.

If communication leans too heavily on vision, the more analytical members of the organization disengage because the case has not been made. If it leans too heavily on logic, the more action-oriented individuals lose patience and begin moving ahead without alignment. If the message does not address stability, a portion of the organization will resist, quietly or otherwise. And if it does not engage the skeptics, they will test it, both publicly and privately, until it either holds up or unravels.

The result is all too familiar—apparent agreement at the leadership level followed by uneven execution and a steady erosion of buy-in.

From what I can tell, most firms in this industry (or at least a whole lot of them) have four distinct audiences when it comes to change:

1. The Skeptics: “We’ve seen this before.” 

Skeptics are often viewed as resistant, but in many cases they are drawing on institutional memory. They have seen initiatives launched with enthusiasm and then abandoned when conditions changed or attention shifted. Their questions are usually less about the idea itself and more about whether it will actually stick. 

They listen for credibility, not enthusiasm. They want to understand what is different this time, what has been learned from prior attempts, and where the risks are. If those elements are absent, they will assume this initiative will follow the same trajectory as the last one.

CEOs who address skeptics effectively do not try to “sell” the change. Instead, they acknowledge the history and the risk directly. A statement like “We’ve tried versions of this before and didn’t get it right, so here’s what we learned and what we’re doing differently” tends to go a lot further than a polished case for why this time will be successful.

You can’t eliminate skepticism (nor should you want to). Informed support is what you’re after. When skeptics are convinced, they often become the most credible advocates in your firm.

2. The Drivers: “What are we doing and when do we start?”

Drivers are less concerned with whether the change is perfect and more concerned with whether things are moving. In the absence of clear direction, they will either create their own or check out and simply focus on what’s immediately in front of them.

They are listening for clarity and permission. They want to know what decisions have been made, what the next steps are, and where they can take ownership. Extended discussion without that kind of direction tends to frustrate them, particularly if they feel the organization is circling around a decision that is clear in their minds and should have been made already.

For this group, communication needs to be concise and specific. “Here’s the direction, here’s what we’re testing over the next 90 days, and here’s where I need you to lead” is typically more effective than a detailed walkthrough of how the decision was reached.

The risk with drivers is not resistance as much as it is misalignment. If they move too quickly without a shared understanding, they can create as many problems as they solve.

3. The Stabilizers: “What does this disrupt?”

Stabilizers are often mischaracterized as resistant to change. In reality, they are focused on continuity and risk management. They are the ones asking what could break, what could be lost, and how the change will affect people and systems that are currently working. They are listening for reassurance in the form of concrete boundaries as opposed to vague optimism.

They want to know what is not changing, how risk is being managed, and how the organization will support people through the transition. If those questions are left unanswered, stabilizers tend to default to protecting the current state, which can bog down implementation.

Effective communication with stabilizers should spell out exactly what is changing, and just as clearly, what is not. While certain elements of the business may shift, core areas such as key markets, client relationships, and delivery standards will remain consistent.

Failing to effectively address this group creates resistance.

4. The Analysts: “Prove it.”

Analysts are not persuaded by authority or enthusiasm. They are persuaded by logic. They are listening for the underlying reasoning, the assumptions being made, and the metrics that will determine whether the change is working. Without that structure, they tend to withhold judgment and stay on the sidelines—sometimes quietly, sometimes not.

I don’t recommend overwhelming them with data. But I do recommend presenting a clear, coherent case. “Here are the trends we are seeing, here is how they affect our current model, and here is why this move makes us better” is typically sufficient, as long as it’s well thought through and defensible.

When analysts do join the fray, they often play a critical role in reinforcing the message across the organization. They become the ones who can explain the “why” in a way that others trust.

To be an effective communicator, you don’t need to change your leadership style. You just need to become more deliberate about how you communicate. The same message will not land the same way with everyone, so adjust accordingly. When you do, change stops feeling like something you’re pushing uphill and starts to look more like something the organization is actually carrying forward.

Market Snapshot: Housing Permits

Weekly market intelligence for AE and environmental industry leaders.

The latest report on new residential construction, released last week by the U.S. Census Bureau and U.S. Department of Housing and Urban Development, underscored the housing construction market’s continued volatility, with new permits posting their steepest monthly decline since 2022.

After surging 11.0% in February, residential building permits reversed course in March, falling 10.8% to a seasonally adjusted annual rate of 1.372 million units. Single-family housing permits slipped 3.8% from February, while multi-family housing permits plunged 23.5%. Overall permit activity was down 7.4% from March 2025.

Permitting weakened nationwide in March, with the sharpest contraction in the Northeast, where permits plummeted by 29.0% compared to February. Year over year, permit levels edged up in the Midwest (2.4%) and West (2.2%) but fell 3.4% in the Northeast and 14.0% in the South, where a soft housing market has prompted builders to pull back.

The news was rosier for new housing starts, which surged 10.8% in March after a 3.0% dip in February—with single-family housing starts crossing the one-million mark for the first time in more than a year. 

For more insights on industry backlogs or questions about our market intelligence and research services, contact Rafael Barbosa.

Access the 2026 AE Industry Outlook Webinar. To purchase the recording and presentation slides, click here. 

Weekly M&A Round Up

M&A activity maintained a steady pace last week: Deal momentum continued last week, led by nine domestic transactions across NC, MI, ME, GA, TN, MS, NJ, and OH. Internationally, cross-border activity included an acquisition in Lebanon by Consertus (Miami, FL), one of our Ten Movers and Shakers to Watch in 2026. Check out all of the week’s M&A news here.