Economic Outlook
Lower Hudson Valley Construction Industry Faces Changing Economic Landscape in 2026 and Beyond
By MICHAEL PATON
The construction industry in the Lower Hudson Valley enters the final months of 2026 in a relatively resilient position. The regional economy continues to expand, unemployment remains relatively low, and demand for housing and infrastructure remains substantial. Yet, beneath those favorable conditions, the composition of construction activity is changing. Traditional office construction has largely disappeared, while multifamily housing, adaptive reuse, infrastructure and institutional projects are becoming increasingly important sources of work.
The labor market provides a useful starting point. According to the New York State Department of Labor, private-sector employment in the Hudson Valley increased by 10,400 jobs, or 1.2%, during the 12 months ending in September 2026, reaching 854,900 jobs. Westchester County private-sector employment increased 1.5% over the same period. However, mining, logging and construction employment across the region increased by only 200 jobs, suggesting a moderation in construction hiring. Earlier in the year, the industry experienced considerably stronger employment growth.
The broader labor market nevertheless remains relatively tight. For construction employers, competition for experienced tradespeople continues to be a significant concern. Indeed, local business organizations recently announced a construction career awareness campaign in October designed to attract workers to the industry. The campaign highlights efforts by regional BOCES programs to prepare future construction workers through hands-on training.
Compensation reflects these conditions, particularly on prevailing-wage projects. According to New York State Department of Labor wage schedules, the July 2026 wage for a journey-level sprinkler fitter in the Hudson Valley was $60.78 per hour, plus $32.66 in supplemental benefits. Although that occupation is not representative of every construction worker, it illustrates the substantial cost of skilled construction labor in the region.
Perhaps the most interesting development is occurring in Westchester’s office market. The sector is no longer deteriorating at the pace seen following the pandemic, but improvement has not translated into demand for new office buildings. According to commercial real estate firm CBRE, Westchester’s office availability rate declined to 18.8% during the second quarter of 2026, down from 20.1% a year earlier. Net absorption was positive for the seventh consecutive quarter. Colliers, another major commercial real estate firm, reported an even more striking improvement in leasing activity. Its second-quarter survey found that leasing volume increased 89.1% from the previous quarter to approximately 568,000 square feet, the strongest quarterly performance in four years.
According to research conducted by the Regional Plan Association, Westchester has an estimated housing shortage of approximately 21,000 units. Rental vacancy is below 1.9%, far beneath the 5% to 8% level generally associated with a balanced market. Without substantially greater construction, the housing deficit could reach between 44,000 and 77,000 units by 2040. The shortage is already reshaping construction toward multifamily projects and transit-oriented development. New Rochelle demonstrates the scale of that transformation. According to the city’s 2026 environmental review, more than 4,500 residential units have been constructed since the downtown zoning initiative was adopted in 2015, while approximately 6,500 additional units have been approved or are in progress.
The economics driving these projects extend throughout the Hudson Valley. According to Hudson Valley Pattern for Progress, housing affordability has become a defining regional economic problem, with rents rising and wage growth generally failing to eliminate the affordability gap.
Infrastructure should provide another important layer of construction activity. According to local economists, approximately $6.2 billion in Metro-North improvements are included in the Metropolitan Transportation Authority’s current capital program. Planned work includes station improvements, power upgrades, Hudson Line resiliency projects and improvements to infrastructure serving Grand Central Terminal.
In September, the MTA awarded a $19.7 million design contract for a project intended to protect vulnerable portions of Metro-North’s Hudson Line against climate-related damage. A proposed $3.26 billion Propel NY Energy transmission project has received an important regulatory approval, potentially advancing another major regional infrastructure investment.
In conclusion, the Lower Hudson Valley possesses advantages that few suburban construction markets can duplicate: proximity to New York City, extensive transportation infrastructure, affluent communities, major healthcare and educational institutions, and an acute shortage of housing. The industry’s next expansion, therefore, may look quite different from previous cycles. It is unlikely to be led by suburban office parks. Instead, construction activity increasingly will revolve around apartments, mixed-use development, transit-oriented projects, infrastructure, institutional construction, renovation and the redevelopment of obsolete properties.
About the Author: Michael J. Paton is a portfolio manager at Tocqueville Asset Management L.P. He can be reached at 212-698-0800 or by email at MPaton@tocqueville.com.
Published: November 12, 2026.