Base of Opportunity
Oct 1, 2008 12:00 PM, By Jennifer Popovec
As the U.S. military continues its long-term engagements in Afghanistan and Iraq, the nation's military bases are abuzz with activity. Soldiers are constantly in training, being deployed or returning from deployment. They often bring family with them. In some cases they live on base and in others they live nearby.
It is in this context that some developers have taken up the duty of serving military personnel, contractors and families by operating centers that cater to that unique audience. In the Southeast United States, where a disproportionate number of military bases are clustered, this effort is especially intense.
“The military economy in this country is fairly well recession proof, and that's a positive thing for retailers and owners,” says Ed Glickman, COO of Pennsylvania REIT (PREIT), which owns and operates Patrick Henry Mall in Newport News, Va. “The soldiers and their families create a very stable economic base.”
And it's not just the people on base that are part of a mall's consumer base in a military market. Spending is multiplied by all the people in the community who service the military base and rely upon it for jobs, adds Glickman. “If there's a thriving military base, you have a lot of ancillary spending and employment so the base creates a multilayered economy.”
In Virginia's Hampton Roads region, where Patrick Henry Mall is located, nearly 320,000 of the 1.6 million residents are employed by the U.S. military. The area, encompassing the cities of Virginia Beach, Norfolk, and Chesapeake, is home to four military installations: Langley Air Force Base, Norfolk Naval Base, Oceana Naval Air Station, and Fort Eustis/Fort Story.
Military personnel pour $11 billion into the Hampton Roads economy, according to Glickman. That does not include contractors and ancillary services.
Just last month, U.S. military contractor Northrop Grumman Corp. announced it was awarded a $5.1 billion contract. The Los Angeles-based defense contractor will build the U.S. Navy's next-generation aircraft carrier in the Hampton Roads region. The project is expected to employ 4,500 people over the next eight years.
That can translate into tidy profits for mall operators. In Fayetteville, N.C., near Fort Bragg, CBL & Associates Properties, Inc. operates Cross Creek Mall, which is among the Chattanooga, Tenn.-based REIT's top performers, says Jim Ward, senior director of sponsorships and former manager at Cross Creek Mall. Sales at the 1.2-million-square-foot regional mall are said to be $490 per square foot, according to an industry expert. Meanwhile, PREIT's Jacksonville Mall, a 476,000-square-foot center near Camp Lejeune in Jacksonville, N.C., rakes in $474 per square foot — the second highest sales, as of June 30, for properties within the Philadelphia-based REIT's portfolio.
Holding down the fort
How big can the economic impact of a military base be? In Columbus, Ga., sits Fort Benning — one of the largest training installations in the world. Nearly 110,000 soldiers trained at the base last year. That makes it a significant driver for the local economy. It accounts for more than $100 million in salaries each month in the area, according to Stella Shulman, executive vice president of the Jordan Co., a Columbus, Ga.-based retail developer and owner with about one million square feet of retail space in its hometown, including the 400-acre Columbus Park Crossing.
But it soon will be an even bigger economic driver. The Department of Defense's (DOD) Base Realignment and Closure (BRAC) program that is rolling out over the next several years will result in the expansion of some military bases in the Southeast.
For example, contracts worth $250 million are related to Fort Benning, Shulman says. Fort Benning has been targeted for a $2.5 billion expansion under BRAC, and it is expected to bring an additional 30,000 people to Columbus and create 10,000 new households.
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