The construction industry, plagued by declining productivity and rising expenses, could be poised for massive cost and time savings if artificial intelligence is widely embraced.
That’s according to interviews with industry executives, emerging corporate examples and specific findings released Wednesday by Boston-based construction giant Suffolk and the Massachusetts Institute of Technology.
One sample project analyzed in study findings — a multifamily development completed in San Francisco between 2021 and 2024 — showed potential savings of 17% to 20% in construction cost and 22% to 25% in building time had it incorporated AI.
The study focused on one of many industries expected to undergo massive changes in the era of AI, machine learning, robotics and other emerging technologies. The biggest potential gains are in process automation, scheduling and project feasibility analysis, according to “Construction in the Age of AI,” the analysis by Suffolk and the MIT Center for Real Estate and the MIT Media Lab City Science research group.
“The next step is to keep building the data foundation needed to understand where AI has the strongest impact, where the limits still are and how those findings can be translated into better decision-making across real projects.”
The findings come as companies involved in the commercial real estate industry more frequently talk about adopting AI, but specific examples of its use and precise benefits have been harder to come by. But construction executives say they are starting to see the results of their adoption of AI.
The results largely reflect what Erin Khan, a Los Angeles-based construction technology consultant and former Suffolk executive, is seeing in the field. Those shifts are coming as contractors adopt AI to evaluate project opportunities, analyze requests for proposals and accelerate estimating and preconstruction work, Khan, who wasn’t involved in the study, told CoStar News.
However, the technology is not a cure-all, and success depends on how well companies implement it and share data across project teams, she added.
“There’s a ton of high potential, and if we can all get together and agree on how to share the data and what that entails, that would put boosters on AI for everyone,” Khan said. “Contractors that understand the processes they are applying AI to are more likely to improve collaboration and communication across a job site.”
Transforming the industry
The study describes the industry as one of the world’s biggest and least productive, and one of the slowest to change. That leaves a need to change the way projects are planned and managed amid industry pressures such as rising costs and labor shortages.
The upside is higher profits and faster project completions for real estate developers, helping meet societal needs such as increased housing production.
“AI presents a real opportunity to transform the way we build,” John Fish, chairman and CEO of Suffolk, said in a statement.
If such savings can be achieved in practice, it would boost a developer’s overall profitability by two key measurements, according to the report: 5 to 6 percentage points on unlevered internal rate of return and 1 to 2 percentage points for yield on cost. The report said such increases “can be the difference between housing being built and housing not being built.”
Fish said that “fully realizing this opportunity will require us to rethink how projects are planned, coordinated and delivered, enabling us to build with greater speed, efficiency and precision.”
AI in action
Many construction firms already have been seeking out new uses of technology.
Construction giants like Stockholm-based Skanska — aside from landing billions in contracts to build data centers — are using robots armed with blueprint-reading AI models to track projects and police construction sites.
Skanska deployed robots made by Boston-based startup Nextera Robotics to take 360-degree pictures and videos during the construction of Kaye, Skanska’s 31-story, 324-unit apartment tower that opened last year in Seattle’s Belltown neighborhood.
Nextera’s Didge robots fed the images into its AI model, allowing Skanska to flag potential safety issues like water leaks, holes, exposed beams or misplaced fire extinguishers. The software also helps improve quality control by comparing the images against preconstruction schematics and 3D digital blueprints, helping keep the project on track.
Freeing up human workers that would be required to walk the site and take pictures saved the team up to 40 hours per week on the project, Stewart Germain, director of innovation and sustainability for Skanska USA’s commercial development arm, said in a Daily Journal of Commerce commentary. Skanska was not directly involved in the Suffolk-MIT study.
Kirkland, Washington-based Cordillera Homes has used AI tools to streamline planning, design and construction for its developments, including Central Peak Residences, a condominium project being built in downtown Kirkland, Washington, Michael Eney, the firm’s chief financial officer, told CoStar News.
“The time savings and results in coordinating planning and design, creating efficient schedules and reviewing budgets are a real game changer,” Eney said. “Delivering homes more quickly saves money on every project.”
Despite gains already being made by firms such as Skanska and Cordillera Homes, the Suffolk-MIT report calls for an industrywide adoption and integration of new technologies.
Currently, AI adoption among construction firms varies widely, with larger contractors often making dedicated investments, while smaller firms gain access through construction software platforms such as Autodesk and Procore that are embedding AI tools into their products, Khan said.
“Even if smaller contractors don’t have all the bells and whistles, they’re still dipping their toe in the water and getting into it,” she said.
Profit potential
Seventy-five percent of construction projects have cost overruns, and the industry wastes $30 billion to $40 billion annually in the U.S. alone through labor inefficiency, according to the report.
AI can be used to slash costs in six areas, the report says: design automation, offsite manufacturing, permitting, scheduling, skilled labor and subcontracting, and supply chain and procurement.
The study “starts to connect academic research with practical industry evidence,” James Scott, co-lead of the MIT Center for Real Estate, said in a statement.
“The next step is to keep building the data foundation needed to understand where AI has the strongest impact, where the limits still are and how those findings can be translated into better decision-making across real projects,” Scott added. “That kind of evidence base is essential if the industry wants to move from promising examples to durable, repeatable progress.”
Global management consultancy McKinsey & Co. estimates that AI and generative AI could create $18 billion in value annually for U.S. homebuilders alone, or about 10% of that sector’s revenue. That is one indicator of the massive potential AI offers for the broader construction industry, the report said.
AI can be used for time-intensive tasks such as technical review of drawings and models, forecasting risk and integrating workflow, the report found. Some long-established concepts, such as offsite prefabrication and modular construction, can be planned and coordinated by AI to reduce on-site congestion and overlap.
Amid a shortage of skilled workers, AI-driven robotics can be used for high-repetition tasks such as rebar assembly on factory floors, leaving humans to focus on judgment-intensive tasks on job sites, according to the report.
Another area the report identified as usefully incorporating AI is permitting, where more than 20,000 independent U.S. permitting agencies lead to fragmented application processes and slower project timelines.
“The companies and teams that act now will help define the future of construction,” Fish said.