Six Southern States Are Contributing More to GDP Than the Northeast

There’s been a clear movement of people and companies from the North and Midwest to the South, as CRE professionals have been aware. The trend has been strengthening for years, even before the pandemic. And now there’s evidence that beyond people and companies, money has significantly moved with them, creating a shift in balance.

Economic activity in the Northeast — which includes Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont, according to the Census Bureau — had long been the biggest contributor to GDP. But that’s changing, as Bloomberg noted.

In the past, the Northeast has put more into the economy than the collected southern states of Florida, Texas, Georgia, North Carolina, South Carolina, and Tennessee. That’s been shifting since long before the pandemic.

The Northeast in 2009 contributed 24.3% to GDP while that collection of southern states offered 21.6%. By 2016, the split was 23.8% versus 22.3%. In 2019, it was 23.4% versus 22.7%.

Then the lines crossed, as in 2021 the Northeast represented 22.7% and that collection of southern states was at 23.2%. The trend continued through 2022, ending with 22.4% versus 23.8%.

GlobeSt.com, using data from the U.S. Bureau of Economic Analysis, continued the calculations. Out of a total GDC of $26,529,774,000,000, the Northeast was responsible for $244,106,000,000 in Q1 2023, or 19.87%. Those six southern states hit $270,969,000,000, or 23.64% of total GDP.

The comparisons aren’t exactly apples to apples because the southern states don’t form a continuous group but require the addition of Texas from the Southwest. Then again, taking the entire Southeast, a group of 12 states, the GDP contribution is 21.8% in the first quarter of 2023.

The point remains that significant amounts of economic power have apparently shifted from the Northeast to the South.

A good portion of that is driven by companies moving in part to gain incentive packages to relocate, like the $100 million combination of cash and tax incentives that Dun & Bradstreet took to move to Florida, according to the Bloomberg report.

The incentives game is a challenging one for state and local governments. It often involves companies providing incentives that they might not even need to offer if a company is already planning a move. The packages can have negative effects on local economies and governments, especially when companies don’t hold up their ends of the bargains, particularly when it comes to creating jobs.

But for commercial real estate experts, there is profit to be made in leasing and building to satisfy the companies and the consumers that follow them.