The COVID-19 pandemic hit the Southeast Region hard — and the delta and omicron variants that followed hit these states even harder. With lower vaccination rates and higher per-capita deaths than much of the rest of the nation, as well as ongoing labor shortages and supply chain issues, many Southeastern states struggled in 2021.
But recent economic data shows that these states (Arkansas, Louisiana, Tennessee, Mississippi, Alabama, Georgia and Kentucky) are on the mend and a few of them are already outperforming their pre-pandemic growth. As the region continues to rebound from the economic effects of the pandemic, disparate rates of gross domestic product (GDP) growth have emerged from state to state. While Georgia and Tennessee outperformed the annualized U.S. GDP growth rate of 2.3% in third-quarter 2021, Alabama and Kentucky saw modest growth of 1.3% and 1%, respectively.
Mississippi and Arkansas, meanwhile, each saw growth of less than 1%, while Louisiana’s GDP shrunk by 2.4% during these 12 months as already-slow job growth was further thwarted by Hurricane Ida this past September. Despite the hurricane’s impact, Louisiana gained 3,400 jobs in Q3 2021, a marked improvement from the 1,000 jobs lost between the first and second quarters of last year.
Georgia and Tennessee each had strong employment gains in 2021, which helped their economies to rebound. Georgia — and Atlanta, specifically — saw major growth as a tech hub in 2021, with new offices opened or announced by Alphabet, Microsoft, Apple, Visa, Airbnb and more. Atlanta also saw record investments into multifamily properties.
Tennessee became the No. 2 most-popular state for companies moving out of California, trailing only Texas. Kaiser Aluminum, Oracle and Mitsubishi announced 2022 office openings in Tennessee. In total, 25 companies moved their headquarters from California to Tennessee between 2018 and mid-2021.
Alabama saw its export numbers rise by 22% to $20.9 billion in 2021, which surpassed pre-pandemic levels, a promising economic marker for the state. Kentucky recovered 76% of jobs lost during the pandemic, although worker shortages continue to post challenges for many of the state’s major industries.
The pandemic’s impact in Mississippi was significant, but 2021 saw real recovery after a difficult 2020. In the most recent economic outlook report from the state’s University Research Center, economists predicted a 4.1% GDP increase for the state in 2021, despite a slow third quarter. Strong economic performance is expected this year for sectors such as agriculture, forestry, fishing and hunting; mining; leisure and hospitality; information; and education.
Arkansas’ unemployment rate fell to a record-low 3.1% in December 2021, but the state had fewer people employed than in December 2020. The labor force, or the number people eligible to work in Arkansas, decreased by 26,205 in 2021. Still affected by childcare issues related to the pandemic, 14% of Arkansas mothers with kids under 6 years old quit their jobs in 2021. While economic growth was dampened in early 2022 by the omicron variant, the Arkansas Department of Finance and Administration expects to see growth resume across the state’s industries by midyear. ●
Atlanta’s office market had a strong year as plummeting unemployment rates and robust demand led to historically high rental rates. Although vacancy rates climbed throughout 2021, they remained relatively stable in the fourth quarter, according to a Cushman & Wakefield report. With employment totals returning to pre-pandemic levels and a smattering of recent announcements from companies that selected Atlanta for new office locations, the metro area may see a decrease in vacancy rates throughout 2022.
The average asking rent climbed to $29.54 in Q4 2021, a 4.6% year-over-year increase that set a new record for the metro area. Some 7.4 million square feet of office space was leased in 2021. About one-third of this total was leased in Q4 alone, which saw six new deals of 100,000 square feet or larger.
The metro area also saw nearly 48,000 square feet of positive net absorption, the third quarter in a row with a net occupancy gain. Office construction also was strong in Atlanta, with nearly 3.4 million square feet delivered in 2021, another new record for the metro. More than 80% of this new space was preleased, Cushman & Wakefield reported.
Focus: Forest industry
The Southeast Region’s timber and forest-products industry thrived in 2021 with “near insatiable demand” causing timber prices to surge to a 14-year high, according to Forest2Market, a forest industry news service. New-home construction and remodeling projects have kept regional production strong and should bolster demand for Southern lumber through 2022.
Doubled tariffs on Canadian wood imports will temper demand for outsourced wood and keep local demand high. Significant investments into the Southeast forest industry have increased its production capacity as new mills have been constructed and old ones have been overhauled. Louisiana alone saw half a billion dollars of sawmill investments in 2021.
While demand and prices have been strong, supply chain issues have impacted every sector of the forest industry. This includes trucking and other labor shortages, price increases for raw material costs, and shipping delays for inbound and outbound products.
What the locals say
“We had a record-breaking year. Due to the pandemic and its aftereffects, we are seeing an uptick in the net-leased area with creditworthy tenants. … The Baton Rouge market, specifically, is desirable for several reasons. We’re the capital city of Louisiana, we have a flagship university in LSU with over 35,000 students, and a major healthcare and petrochemical industry. Therefore, all property sectors benefit, leading to demand for apartments, retail, medical office and industrial. Most recently, the movie industry is picking back up here in the Hollywood of the South. This is great news for several sectors of our economy, including hotels.”
Ken Jacobsmeyer
Retail and net-lease specialist
Marcus & Millichap
3 Cities to Watch
Memphis
Founded in 1819, Tennessee’s second-largest city has a metro area that stretches into Arkansas and Mississippi, making it home to some 1.3 million people. Known as the birthplace of the blues, the city thrives as a hub for manufacturing, logistics and trade. Major employers in Memphis include FedEx (which was founded in the city and is still headquartered there), ServiceMaster, International Paper, AutoZone, First Horizon National Corp. and St. Jude Children’s Research Hospital.
Savannah
Savannah is alive with Southern charm and is the heart of Georgia’s third-largest metro area, which has more than 400,000 residents. This coastal city is a tourism, aerospace and maritime hub that is anchored by the country’s fourth-busiest and fastest-growing port. The city experienced an economic boom in 2021 as tourism returned and employment rose past its pre-pandemic peak. Major employers include Gulfstream Aerospace, construction equipment manufacturer JCB and Mitsubishi Power.
Jackson
Mississippi’s capital city, founded in 1821, is the state’s largest and boasts a metro-area population of about 595,000 people. Named for Gen. Andrew Jackson, who went on to serve as U.S. president, the city has a history with both the Confederacy and the Civil Rights movement. As of November 2021, local and state governments employed 54,500 people in Jackson. Other major employers include Nissan, Cal-Maine Foods, petroleum refiner Ergon and the University of Mississippi Medical Center.
Sources: Axios, Britannica.com, Business View Magazine, CNBC, Cushman & Wakefield, Forest2Market, Georgia Southern University, Hoover Institution, Kentucky Chamber of Commerce, Mississippi Institutions of Higher Learning, State of Alabama, Talk Business & Politics, The New York Times, The Wall Street Journal, University of Louisiana at Lafayette, We Are Memphis, WKRN-TV, World Trade Center Savannah, Zippia
