Word on the Street: Issue 225

Eight Predictions for 2025

I’ll get right to it. I’m shockingly bad at making predictions. If you’re looking for someone to tell you what’s going to happen next, I’m not your man. My team knows this all too well. “We’ll never launch a podcast,” I declared last year. Sure enough, our first pod featuring Mike Carragher, CEO of VHB (ENR #62), drops this month. “I just can’t see us having an office in the Midwest any time soon,” I said confidently in last June’s all-team meeting. So it was no surprise this week when Jon Escobar posted photos of our four-person Chicago team out to dinner celebrating our new Windy City office. 

But while my predictive powers are as suspect as a Magic 8 ball, that’s hardly the case with my esteemed teammates. Here are eight predictions for 2025 from the Morrissey Goodale team:

1. Playing the golden oldies: 2025 will bring a shift in federal infrastructure priorities. The new administration will roll out a back-to-basics agenda focused on traditional projects like roads, bridges, and highways. Firms specializing in renewables will need to lean harder on state-level funding or private clients. Firms geared toward conventional infrastructure will book up fast. (Mark Goodale, Managing Principal, Natick, MA)

2. But clients may come back onshore: Manufacturing, oil and gas, and other critical industries to national security will feel pressure to bring production back onshore. This will require additional capacity in the U.S. and spur AEC services such as site selection; industrial, manufacturing and data center design and construction; and increasing available energy to power these new facilities. (Stafford Palmieri Sievert, Principal Advisor, Salt Lake City, UT)

3. Increasing globalization: Global deal volume will increase, driven by overseas buyers looking to enter or increase their positions in the super-hot U.S. market. As if to prove the point, the first two acquisitions of the new year involving ENR 500 firms were to overseas buyers. In the first, Tata Consulting Engineers (Mumbai, India) acquired CDI Engineering Solutions (Houston, TX) (ENR #201). Link to details.  In the second, the SOCOTEC Group (Saint-Quentin-en-Yvelines, France) strengthened its position in the U.S. with the acquisition of Ninyo & Moore (San Diego, CA) (ENR #212). Link to details. Global deal-making is up 10% over the past 12 months. (Nate Wentworth, Vice President, Denver, CO)

4. The juggernauts keep rolling: As the industry continues to consolidate, we will see a shift in deal size. There will be more “mega mergers” among the ENR Top 100, creating new multi-billion-dollar companies seeking to dominate the industry. (Brendon Cussio, Principal, Sell-Side Practice Leader, Denver, CO)

5. The pendulum swings back to buildings: While infrastructure firms have made up most of industry consolidation over the past decade, 2025 will see increased focus on firms serving buildings and vertical markets. Stabilizing interest rates, easing inflation, and corporate return-to-office mandates will fuel private-sector investment in real estate, mixed-use developments, and institutional markets such as health care and education. Firms serving these markets are poised to reclaim a more prominent role in the M&A spotlight. (Jon Escobar, Principal, Buy-Side Practice Leader, Chicago, IL) 

6. The separation between haves and have-nots will become clearer and clearer: The haves—those who invested in technology and see AI as a way of solving the chronic talent gap—will find their work done faster, their clients happier, and their firms worth more. The have-nots—those stuck in systems and processes that worked great 10 to 20 years ago—will fail on all counts. (Nick Belitz, Principal, Advisory Services Leader, Denver, CO)

7. This time we really mean it: Long a technology laggard, the industry will accelerate automation efforts. The aging workforce and immigration climate will continue to add more stress to the domestic labor supply, accelerating automation investments. Capital available from private equity will be invested to fund efforts on AI implementation resulting in ever-increasing strains on our power grid. (David Thornhill, Vice President, New York, NY)

8. 6%-7% mortgage rates are actually normal: Project owners will throw in the towel and accept that even though current interest rates are among the highest in 15 years, this increase is likely here to stay. The ultra-low interest rates since the 2008 financial crisis were exceptional by historical standards, and we shouldn’t expect to see those levels again anytime soon. As a result, business models that require low interest rates will fizzle and private owners will focus on cost efficiencies and high-value projects. (Allie Tepper, Principal Advisor, San Francisco, CA)

Kick off 2025 in the sun, meet our entire team of soothsayers, and network with over 200 AE industry executives, investors, and experts at our 11^th annual Southeast M&A and Business Symposium in Miami this March. Check out some of the firms that have already registered to attend here. New for this year are our exclusive peer-to-peer networking dinners hosted by our principals Nick Belitz, Brendon Cussio, and Jon Escobar. These are almost sold out, so register now to reserve your place at the table. 

What are you predicting for 2025? Email or call Mick Morrissey at [email protected] or 508.380.1868.

10 Ways to Make 2025 One for the Books

Well, 2025 is here—and what a dynamic and challenging year it will be. You’re not just riding the waves of political change and economic uncertainty; you’re steering your ship through a perfect storm of shifting client expectations, technological disruption, and a relentless pressure to innovate. The strategies you deploy this year will impact your firm’s trajectory for the next decade. So, what does success look like in 2025, and how do you get there? Here’s the map:

1. Double down on client-centricity

In 2025, clients aren’t looking for order-takers; they’re seeking partners who understand their organizations and businesses, anticipate their needs, and deliver value beyond the project scope. Your competitors are no longer just other AE firms—they’re multidisciplinary organizations offering integrated solutions, boutique firms with laser-sharp focus, and yes, even AI platforms.

To stand out, you need to:

• Deepen relationships: Make 2025 the year of client intimacy. Know their industries as well as they do, and position your firm as an indispensable ally. Think about how your current organization structure either helps or hinders this goal.
• Add value at every touchpoint: Go beyond the basics by identifying opportunities to enhance client outcomes at every touchpoint, from initial consultations to post-project reviews. Leave the client better off after every interaction, big or small. 
• Customize experiences: Whether it’s tailored project management dashboards or client-specific sustainability metrics, personalization matters more than ever.

2. Embrace AI—but do it strategically

AI isn’t coming; it’s already here, reshaping how you design, plan, and manage projects. But let’s be clear: Adopting AI for the sake of having it isn’t a strategy. You need to integrate it where it truly adds value.

Here’s how:

• Boost efficiency: Automate routine tasks such as drafting, scheduling, and cost estimation to free up your team for higher-value work.
• Enhance creativity: Use AI tools to generate design alternatives, allowing your architects and engineers to focus on refinement rather than iteration.
• Improve decision-making: Leverage data analytics and predictive modeling to make smarter, faster decisions.

3. Navigate the political landscape

2025’s political climate is likely to be a mixed bag. With potential changes in infrastructure funding, tax policy, and environmental regulations, staying agile is non-negotiable.

To remain nimble, keep an eye on:

• Infrastructure investments: The new administration is expected to focus federal funding on traditional infrastructure projects such as roads, bridges, and highways. Sustainable or climate-resilient initiatives may see less support. Ensure your teams are prepared to capitalize on the associated opportunities and challenges.
• Regulatory environment: With environmental and labor regulations likely to be rolled back, focus on leveraging regulatory shifts strategically. Position your firm to help clients navigate these changes, offering services that optimize compliance cost-effectively while identifying opportunities to integrate innovative, sustainable practices where they align with long-term client goals.
• Local adaptation: With the incoming administration possibly deprioritizing urban development and community initiatives, state and local governments will likely carry more of the responsibility for project funding and policy decisions. Build strong relationships with local officials and stakeholders to adapt to these changes and maintain a steady project pipeline.

4. Prioritize talent retention and development. 

The fierce competition for talent isn’t over, and 2025 will test your ability to attract and retain the best. The younger workforce has clear expectations: meaningful work, flexibility, and a strong sense of purpose.

Here’s your playbook:

• Flexibility still wins: Remote work isn’t going away, but balance it with opportunities for in-person collaboration.
• Invest in training: Upskilling your team in emerging technologies such as AI and sustainability practices isn’t optional.
• Mentorship matters: Create programs that connect senior leaders with younger staff to foster knowledge transfer and engagement. Coach the coaches, too.
• Culture is key: Build an environment where people feel valued, challenged, and aligned with your mission. Highlight your firm’s contributions to societal impact—it’s a major draw for top talent.

5. Think beyond sustainability—focus on resilience

Sustainability is table stakes; resilience is the new(er) frontier. Clients are asking tough questions about how their buildings and infrastructure will perform under the pressures of climate change, supply chain disruptions, and future pandemics.

What you need to do:

• Innovate with materials: Explore new materials and construction methods that can withstand extreme weather and reduce environmental impacts.
• Design for adaptability: Buildings and infrastructure have to evolve with changing needs. Incorporate flexibility into your designs.
• Collaborate across disciplines: Resilience isn’t just an engineering problem. Bring together environmental scientists, urban planners, and economists to create holistic solutions.

6. Harness the power of data

Your firm sits on a gold mine of data. In 2025, leveraging this asset could be the difference between thriving and just competing.

You can employ data to improve:

• Operational efficiency: Use data to identify bottlenecks in your workflows and improve flow efficiency as well as resource allocation.
• Client insights: Analyze past projects to understand what drives client satisfaction and success.
• Future forecasting: Combine internal data with external market trends to predict where your firm should invest next.

7. Expand thought leadership

2025 is the year to amplify your voice. Clients want to work with firms that aren’t just following trends but setting them.

Here’s how to own the narrative:

• Content strategy: Publish white papers, host webinars, and speak at conferences. Make your expertise impossible to ignore.
• Social media savvy: Don’t just post project photos. Share insights, thought-provoking questions, and client success stories.
• Collaborative partnerships: Partner with universities, think tanks, or even other firms to tackle big issues such as climate change or urban mobility.

8. Build financial agility

Economic uncertainty will persist in 2025, and your ability to pivot financially will be critical.

To bolster your bottom line:

• Optimize capitalization structure: Evaluate financing options (equity, debt, etc.) to maintain financial flexibility and ensure your firm can invest in growth opportunities while staying resilient against economic volatility.
• Diversify revenue streams: If one sector slows down, others can pick up the slack. Explore new markets or service lines.
• Focus on profitability: Revenue growth is great, but margin growth is better. Streamline operations and avoid low-margin projects that drain resources.

9. Cultivate a global perspective

Even if your firm operates locally, global trends will affect your projects and clients. Climate policies, supply chain disruptions, and geopolitical shifts are shaping the built environment.

To take a universal view:

• Stay informed: Monitor global economic and environmental trends that could impact your firm and its projects.
• Adopt best practices: Look beyond your borders for innovative solutions and apply them locally.
• Leverage global expertise: Tap into cross-border knowledge to develop innovative solutions tailored to increasingly diverse client needs.

10. Strengthen your firm’s purpose

Finally, in 2025, your firm’s purpose isn’t just a mission statement; it’s your North Star. Clients, employees, and even investors are drawn to organizations with a clear sense of why they exist.

Here are the steps to take:

• Communicate your firm’s impact: Show how what your firm does improves communities, protects the environment, and creates lasting value.
• Live your values: Make sure every decision and action—from hiring to project selection—aligns with your stated purpose.
• Engage your team: Purpose-driven firms attract and retain purpose-driven people. Make sure your employees know how their work contributes to the bigger picture.

So how serious are you about making 2025 one for the books? If very, don’t wait long to get started on this list.

For help with developing your firm’s strategic plan in 2025, contact Mark Goodale at 508.254.3914 or email [email protected].

Market Snapshot: Colorado

50 states in 50 weeks – The new series leverages our vast market intelligence database to bring you powerful AE industry insights. Let’s get started with Colorado.

Colorado is poised for significant growth in the architecture and engineering industry. The Centennial State is among the top 10 states in terms of AE industry revenue and employment. The state also ranks third in forecasted pace of growth for construction starts over the next five years (Source: ConstructConnect), indicating strong and expanding market opportunities. Additionally, Colorado holds the number four position in labor force participation rate, demonstrating a robust workforce to support this growth. The state, which has the eighth highest GDP per capita in the country, also ranks sixth in projected population growth from 2020 to 2030 (Source: University of Virginia’s Weldon Cooper Center for Public Service), reflecting both a growing economy and an increasing demand for infrastructure and services. On the transportation front, Colorado places sixth in state and local air transportation revenue and tenth in transit ridership (Source: Bureau of Transportation Statistics). See the grades below for Colorado based on Morrissey Goodale’s State Economic Performance and Outlook ranking model:

Colorado Economic Performance and Outlook Grade: A-

• GDP Strength: A-
• Population: B
• Workforce: B
• Financial/Fiscal Health: C+

For sector-specific insights or questions about our market intelligence and research services, call or text Rafael Barbosa at 972-266-4955 or email at [email protected].

For more market insights and a comprehensive outlook for 2025, don’t miss the 2025 AE Market Intelligence Webinar on January 28. Click here for details.

Weekly M&A Round Up

The Southeast continues to grow rapidly: Last week, we reported a total of five new deals in the Southeast, this time in FL, SC, NC, and GA. It was a busy week for M&A with additional domestic transactions announced in CA, CT, TN, NY, CO, TX, MI, UT, OH, and IL. Internationally, we reported transactions in Canada, Finland, the UK, and the Netherlands. You can check all the week’s M&A news here.