Why Businesses Choose the American South

Why Businesses Choose the American South

Business is trending South. Be it headquarters, expansion, or manufacturing, there are many companies that are shifting their business to the South. Large companies like Toyota, GE Aerospace, Koch Industries, and others are making major investments in SEDC member states due to “growing population and workforce, pro-business climate (tax and regulatory policies are reasonable), available sites,” according to Christopher Lloyd, the director of infrastructure and economic development at McGuireWoods Consulting. Couple that with the strategic location the South provides logistically and it’s easy to see why businesses are increasingly finding their way southward.

The South’s cost advantages and workforce are two of the largest contributing factors that really drive it forward as a business-friendly environment. Ann Rybka of Atlas Insight went as far as to call the South a “natural next step” for companies, citing lower real estate costs, lower taxes, and access to a “large and often less regulated labor market.” There is also the idea of upskilling, which Rybka and Global Location’s Tess Fay pointed to as a key point of interest for companies.

Many communities are engaged in workforce education, something Rybka claimed is the backbone of the community. She also highly encouraged communities that want to attract more business to invest in and train their workforce, including K-12 education, and “provide opportunities for upskilling.”

All these factors contribute to a variety of industries finding a new home in the South. Industries like automotive, defense, aerospace, energy, food and beverage, corporate office, and distribution have moved southward, as evidenced by the presence of companies like GE Aerospace and Tyson Foods.

The South has attracted a considerable amount of manufacturing investment, with 55% of the manufacturing projects that have been announced in the last decade taking place in SEDC states, according to Fay.

One issue that concerns many investors is power. Do these Southern communities have the capability to sustain the large battery or EV plants that are coming to their area?

“The economic development community is in an unprecedented time of scarcity, spanning from real estate to power to EDO capacity,” Fay said. “The states that are overcoming this scarcity will remain the most attractive to companies.”

This is not just a Southern problem. The scarcity of power and energy is a nationwide issue.

“Load demand was essentially flat for the past two to three decades, so we didn’t invest in new generation and transmission capacity,” Lloyd explained. “Combine that with taking dispatchable base load power generation offline to meet climate targets, and we set ourselves up for a crunch.”

The power/energy problem is, however, one that some Southern states are beginning to address. Alabama has been an excellent example of how SEDC states can move to overcome this issue. Its Alabama SEEDS grant program has poured $50 million in two years to “support the acquisition and development of industrial properties across the state,” improving industrial sites to ready them for large-scale industrial operations that require reliable and affordable energy, according to Fay. She also cited Alabama as a “leader” in terms of developing young economic professionals.

Lloyd pointed out South Carolina’s recently enacted Energy Security Act as part of the power solution as well. This wide-ranging energy legislation is the result of bipartisan efforts to holistically address the unprecedented economic growth and corresponding energy generation needs of the state through measures including ratemaking provisions, integrated resource planning, facilitation of new power generation, expanded policy support for advanced nuclear resources, energy efficiency initiatives, new economic development rate design framework, and refinements to the existing regulatory process and state energy policy.