Best & Worst States for Business Regional Report: The Southeast

Home to two of the country’s fastest-growing state economies, the Southeast lures investment with a lower cost of living and engaged workers.

While the Southeast is sometimes overlooked in national conversations about economic development, it is a powerhouse of manufacturing economic growth. At a time when populations on the coasts are shrinking, the Southeast is home to some of the nation’s fastest-growing cities, including Greenville, South Carolina, and Fort Myers, Florida. Residents flock to many of these areas in search of lower costs of living and growing opportunity, but many corporations are also headed south. Florida and North Carolina are among the nation’s top 10 fastest-growing economies, with GDP growth rates more than double the national average.

In Alabama, the nation’s most engaged workforce continues to drive aerospace manufacturing. Georgia remains a growing hub for finance and fintech, and reduction in red tape is spurring the growth of aluminum manufacturing in Kentucky. From the pines of the Florida Panhandle to the hills of Tennessee and Virginia, the federal government and Fortune 500 companies are even bringing multi-billion-dollar investments to rural areas.

#2 FLORIDA: Manufacturing Shines in the Sunshine State
The Sunshine State attained a GDP growth rate of 3 percent in 2016. Florida is home to more than 19,000 manufacturing businesses that employ more than 330,000 workers. Lockheed Martin currently has nearly 1,000 employees working on various projects along the “Space Coast” and has announced it will move more workers from California to Florida in 2018 and 2019.

In the northwestern part of the state, Eastern Shipbuilding in Panama City recently announced the addition of 2,000 jobs to support a $10.5 billion contract to build more than two dozen U.S. Coast Guard cutters. “We’ve got the workforce and infrastructure for these manufacturers and you don’t have to look very far to see it,” says Mike Grissom, interim president and CEO of Enterprise Florida.

Tampa Bay and Orlando, which both ranked among the top-10 fastest-growing metro areas in 2016, are experiencing strong growth in tech and manufacturing. A $15 billion infrastructure investment in Orlando includes an overhaul of Interstate 4 and expansions of the rail system, international airport and Port Canaveral.

Grissom says the state’s business-friendly climate and its lack of a personal income tax have driven growth. Florida has invested more than $63 billion in its ports, airports and highways in recent years. The state’s growth as a logistics hub is also being fueled by the recent Panama Canal expansion and upgrades at ports to accommodate larger ships.

“We continue to be the gateway to Latin America, and there are few places in the state where you’re an hour from the interstate or coast,” Grissom says.

#3 NORTH CAROLINA: A Growing Base for Educated Talent
The rapidly growing state of North Carolina now has more than 10 million residents and is the ninth most populous state in the U.S. Chris Chung, CEO of the state’s Economic Development Partnership, says many workers relocating there have a bachelor’s degree. Well-respected universities such as Duke and UNC Chapel-Hill contribute to the strong talent base. “It has become a virtuous cycle. They’re coming here for jobs and economic opportunity. And the growing talent pool is attracting companies,” Chung says. Credit Suisse announced in May 2017 that it would invest $70 million and add another 1,200 jobs to its Raleigh operations. Many of these jobs were being relocated from New York City and other areas to help reduce costs. In March 2016, Novo Nordisk broke ground on a $1.8 million diabetes medicine production facility in Clayton. And in April 2017, smart grid company Trilliant

*Ranking in the 2017 Chief Executive Best & Worst States for Business (ChiefExecutive. net/2017-Best-Worst-States) announced a new headquarters in Raleigh. CEO Andrew White said the Research Triangle offers “some of the brightest and most innovative talent for a high-tech company like us.” Yet the benefits of North Carolina’s growth also present challenges. Chung says planners are considering how the social infrastructure, transportation and educational system can support the population growth. “I don’t think it’s uncommon to any state that has seen the same degree of growth, but it’s a big issue,” Chung says.

#4 SOUTH CAROLINA: A Bright Future for Manufacturing
According to the Census Bureau, South Carolina is now one of the fastest-growing states in the nation. And it’s attracting not only people but corporate investments. The South Carolina Department of Commerce says the state recruited more than $3.4 billion in capital investment in 2016, much of it in the manufacturing sector. BMW announced in June it would invest $600 million in its Spartanburg facility to grow the site’s total workforce to 9,000 and annual production to 450,000 vehicles. Samsung also announced its intent to open a $380 million plant in Newberry County.

Greenville is now one of the top 10 fastest-growing cities in the country. Yet Kay Maxwell, vice president of the Southern Regional Development Alliance, says the growth in population, manufacturing and activity at the ports is also spurring more development in rural areas of the state. She says there has been strong growth in the food processing sector and in logistics and distribution plants. In order to address the surges in volume at the ports of Savannah and Charleston, South Carolina and Georgia are joining forces on a Jasper Ocean Terminal, a new 1,500-acre container port in Jasper County. “It’s a perfect storm, and South Carolina is positioned so well with the trends you are seeing nationally and internationally,” Maxwell says. “We have this great opportunity this area never had before in manufacturing and distribution.”

Earlier in the year, the state’s Department of Commerce announced the South Carolina Innovation plan, which is intended to provide direction on how to best encourage the growth of tech-related entrepreneurial activity and innovation through workforce development. Secretary of Commerce Bobby Hitt called the plan a “roadmap” to focus on innovative companies and concepts in advanced manufacturing, life sciences, computer hardware and software sectors.

#7 TENNESSEE: Expanding Workforce and Education
Tennessee’s Drive to 55 program aims to equip 55 percent of Tennessee residents with a four-year college degree or certificate by the year 2025. The initiative offers high school seniors tuition-free attendance at any of the state’s 13 community colleges or 27 colleges of applied technology. Ted Townsend, COO for the Tennessee Department of Economic and Community Development, says it was the first state in the nation to make this kind of promise to its citizens. “We’ve made a commitment that education beyond high school is a top priority and it’s important for our workforce,” he says.

Companies have responded with notable investments and expansions. Last year, GM announced a $788 million expansion at its facility in Maury County and, in 2015, Nissan further expanded its facility in its Smyrna campus. “All of our automotive OEMs have had expansions and that has had a multiplier effect with driving expansions from the supply chain,” Townsend says.

One challenge the state faces is expanding economic development to its rural areas. Townsend says 78 of Tennessee’s 95 counties are rural, with 19 of those considered “distressed” by federal definitions. In 2016, Tennessee passed the Rural Economic Opportunity Act to improve rural infrastructure and make tax credits more accessible  for rural business.

#8 GEORGIA: The Southeast’s Financial Hub
Atlanta has been building on its long-held position as a financial and commercial center. More than 70 percent of the financial transactions in the U.S. are routed through home-based payment processors such as World Pay, First Data and Global Payments. In recent years, Atlanta has become one of the country’s top fintech capitals. Eloisa Klementich, CEO of Invest Atlanta, says the area is home to 90 fintech companies employing more than 30,000 people. The tech-related activity and talent is also spurring development in other sectors.

More than 20 major companies, including Home Depot, Panasonic, Boeing and Siemens, now base innovation centers in the state. Klementich says the development is being fueled not only by the corporate talent base, but by the community of more than 250,000 students at the area’s four major universities. “There’s an explosion at the crossroads of technology, innovation, entrepreneurship and each of our clusters,” he says.

Out on the coast, the Port of Savannah has also been growing in national and international significance, reaching record cargo volumes in 2017. It is now one of the few ports on the East Coast that can accept the largest ships coming through the expanded Panama Canal. Griff Lynch, executive director of the Georgia Ports Authority, believes the port’s impact on the state will grow as the Savannah Harbor Expansion Project is completed in 2020.

 #15 VIRGINIA: A Global Data Center
Home to more than 4.5 million square feet of data center space, Virginia is a transit point for 70 percent of the world’s Internet traffic and is the largest data center market in the U.S. Amazon Web Services recently announced a new corporate campus in Herndon, adding 1,500 new jobs to the 7,000 workers it already employs in the state. Leading tech company IOMAXIS also plans to add more than 500 jobs over the next three years to support its mission to thwart cyber threats. “To stay ahead of that challenge requires a talented, diverse workforce and policies friendly to small companies seeking to grow rapidly. Virginia provides these things,” said Bob Burleson, CEO of IOMAXIS.

Stephen Moret, CEO at the Virginia Economic Development Partnership, says the state also has robust manufacturing and finance sectors. There are roughly three dozen Fortune 1000 companies headquartered in the state, including Capital One, Freddie Mac and Northrop Grunman. Nestlé USA announced in February that it would move its headquarters from California to Arlington. “Virginia is a quiet state and doesn’t always make itself known, but it’s a place where the world’s leading brands do business,” Moret says.

While Virginia’s economy is branching into new directions, a large portion of it is still linked to government-related activity that can be susceptible to federal spending slowdowns. “Our single biggest sector is business related to the federal government so we’re trying to focus more attention on diversifying economic growth and other parts of the economy,” Moret says.

#19 ALABAMA: Highly Engaged Workers Fuel Manufacturing
A recent Gallup survey found that Alabama has the most engaged workers of any state in the country. Thirty-seven percent of Alabama workers said they were “highly involved in and enthusiastic about their work and workplace.” This excitement is being fueled by workforce investments, strong economic growth and an influx of high-paying jobs.

In January 2017, Alabama initiated its Accelerate Alabama 2.0 program to focus on trends in advanced manufacturing and other sectors. It identifies recruitment and retention initiatives, and the state has restructured seven new regional workforce councils made up of companies and educational institutions in those regions. “[Accelerate Alabama 2.0] is providing a lot of value-added services to companies that are either expanding or relocating here for the first time as an incentive,” says Greg Canfield, Alabama secretary of commerce. “We recruit workers and provide pre-employment screening and training at no cost.”

The National Association of Manufacturers recently named Alabama one of the top five states for manufacturing growth. Canfield says the sector now generates 17 percent of state GDP. Last year, Alabama hit a new annual record of $1 billion in manufactured good exports. In late-June, Jeff Bezos’s space company, Blue Origin, announced a $200 million investment in a 200,000-square-foot plant to build its BE-4 rocket engines. In April, Aerojet Rocketdyne announced it would construct a facility in Huntsville to produce its next-generation rocket engine. Eileen Drake, CEO, said Huntsville was a “logical choice” to locate production of its new AR1 engine due to the “top-tier talent” in the area.

#22 KENTUCKY: Training Initiatives Fuel Manufacturing Sector
Economic development in Kentucky is gaining momentum. Terry Gill, secretary for the Kentucky Cabinet for Economic Development, says the Bluegrass state attracted nearly $7 billion in new investments in the first half of 2017, shattering the full year record set in 2015. Gill attributes this to initiatives like right-to-work legislation and the Red Tape Reduction Initiative. “We move at the speed of business—not of government,” says Gill. “That’s been pivotal in our ability to take major projects from corporate inquiry to closed deal in as little as 90 and 120 days.”

Toyota recently announced a $1.33 billion investment in its Georgetown plant to refurbish and replace equipment to prepare for the company’s new global platform. Ford Motor also announced a $900 million investment in its Kentucky Truck Plant in Louisville. Gill says the state’s aluminum industry is “on fire” and being fueled by demand from automakers, parts suppliers and the aerospace industry. Braidy Industries will construct a $1.3 billion aluminum rolling mill in Greenup County that will create 550 advanced manufacturing jobs. Craig Bouchard, CEO, said that the passage of the right-to-work legislation was a key factor in bringing the project to the state.

#32 MISSISSIPPI: Quiet Growth in Aerospace and Automotive
Economic growth in Mississippi has trailed national averages in recent years, but the state’s manufacturing sector continues to expand. Glenn McCullough, Jr., executive director of Mississippi Economic Development, says it is the only state with both a Nissan and Toyota assembly plant and that it has seen more than $2 billion in auto manufacturing investments since 2012. Mississippi is also experiencing strong growth in aerospace manufacturing. Northrop Grunman, which recently celebrated the 10-year anniversary of its advanced manufacturing facility in Moss Point, announced a lease extension and additional investments to expand production of its unmanned systems. The aerospace sector also continues to grow at the NASA Stennis Space Center in Hancock County.

Aerojet Rocketdyne announced last year that it would expand its Center of Excellence for Large Liquid Rocket Engine Assembly and Test to assemble its ARI advanced liquid rocket engine. “Man will go to Mars one day but the road there travels through Hancock County,” McCullough says. “The rockets that have powered every manned flight to outer space for the past 50 years, and the next 50 years, will be tested there.” Continental Tires is also performing site prep work on a $1.45 billion state-of-the-art manufacturing facility in Hinds County that is expected to start production in 2020 and create 2,500 jobs.

#33 LOUISIANA: A Global Hub for Chemical Manufacturing
Falling oil prices took a bite out of Louisiana’s economy in recent years, but that’s been offset by an influx of big investments by global chemical manufacturers. Don Pierson, secretary of Louisiana Economic Development, says investments in chemical manufacturing facilities have totaled more than $135 billion over the past five years. Many of these facilities are being constructed by foreign firms to supply the global market. Projects include an $8.9 billion ethane cracker outside of Lake Charles by South African firm Sasol, a planned investment in a $9.4 billion plastics facility in St. James Parish by Formosa Plastics of Taiwan and a $1.4 billion ethylene plant in Iberville Parish by Japanese firm Shintech.

Outside of the chemical industry, Louisiana has been diversifying its economy in recent years with more technology-driven sectors. Pierson says corporate and entrepreneurial tech development is thriving in many of Louisiana’s cities. In April, New Orleans startup Lucid announced a $60 million

minority investment to expand its global reach. In the Shreveport-Bossier region, tech is now one of the fastest-growing sectors, driven by recent investments from IBM and CenturyLink. “Many cities are hosting IT development opportunities and we’ve been able to utilize our higher education facilities with partnerships around workforce development,” Pierson says.

#37 WEST VIRGINIA: Making the Coal to Shale Transition
West Virginia has faced tough economic times in recent years due to the collapse of its coal industry. According to the WVU College of Business and Economics, the state produced 80 million tons of coal in 2016, roughly half of what it produced in 2008. Woody Thrasher, West Virginia’s secretary of commerce, says the state is aiming to capitalize on new opportunities arising in the shale gas industry. He says shale gas could not only be extracted but also refined there, and he points to the cluster of refineries on the Gulf Coast as an example of what shale could do for the Mountain State.

“I don’t think it’s out of line to think we could see $100 billion [in investments] in the next five to 10 years,” Thrasher says. “Now that the raw material is here in the U.S., the manufacturing facilities are coming back.” He adds that the multiplier effect of such investments is “enormous” and could create ripple effects in other sectors.

While there’s hope shale can help pull the state from the coal slump, Thrasher says there’s an even bigger need to diversify beyond resources. While West Virginia’s manufacturing sector is small compared to neighboring states, it is growing. Last year Procter & Gamble announced a $500 million investment in a one million-square-foot facility on a 458-acre site Martinsburg.

Danish Insulation manufacturer ROXUL also announced a $150 million manufacturing plant in the city of Ranson, which will place production near major population centers in the Northeast, Mid-Atlantic and Mid-Western U.S. “We’re paying the penalty for not diversifying and need not make that mistake again,” Thrasher says. “We definitely have some initiatives that we are moving forward with to diversify our economy.”