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.

The Jordan Co., along with partner Ben Carter Properties from Atlanta, was successful in persuading a number of big-box retailers, including Barnes & Noble, Bed, Bath & Beyond and Kohl's to take a chance on the market by highlighting the area's population and retail sales per household, Shulman says.

Schulman notes, annual household retail sales in Columbus, Ga., are more than $60,000. That's almost double the state average of $32,000 per household. It's also larger than Atlanta where the figure is $42,000.

Overall, since 2000, the Columbus metro area has added two million square feet of retail space, including Columbus Park Crossing, which was developed by the Jordan Co. and Ben Carter Properties and consists of more than one million square feet.

“We were severely underserved, but the initial phases of Columbus Park Crossing served a lot of the pent-up demand,” Shulman says. “But it's still challenging to get retailers to come here. Retailers love to hear about new growth, but they are basing their decisions on historical performance.”

Varying impact

However, development in every market is not successful. Columbia, S.C., is home to Fort Jackson, a military training facility for the U.S. Army where more than 70,000 soldiers train annually. Those soldiers have little impact on Edens & Avant's nearby properties, Trenholm Plaza and the Shoppes at Wood Hill, says Edens & Avant's vice president of retail, Tina Marshall. That's because soldiers at Fort Jackson only stay at the base for a few days at a time, so they are unlikely to bring family to live there.

The people employed at Fort Jackson and live in Columbia shop the centers, Marshall says, but the base has no more effect than any other employer.

That's not the case in Fayetteville, N.C., where the economy is driven primarily by Fort Bragg and Pope Air Force Base. Together, they account for 60,000 of the town's population of 175,000 and generate $6.6 billion to the local economy, according to the Fayetteville-Cumberland County Chamber of Commerce.

By 2012, Fort Bragg is anticipating as many as 40,000 military and support personnel relocating to Fayetteville as a result of BRAC. Many of the new residents will be coming from Fort McPherson in Conley, Ga., and a large percentage of them will be military officers and high-ranking DOD civilians, says Patrick Murray, a retail broker with Real Estate Investment Team in Fayetteville.

Military green

While military personnel aren't ranked among the highest paid Americans, salaries for officers can be competitive with the private sector, and soldiers' salaries, which are lower, are usually supplemented by bonuses and special pay for a range of activities.

Fayetteville, N.C.-based C&S Commercial Properties commissioned a study of military personnel incomes and found an E2 soldier's (a level above newly enlisted) base pay is $18,000 and $38,000 when bonuses are included.

Military personnel receive housing allowances and the government provides their health care, which can leave more money for discretionary spending. C&S broker Brian Armstrong says soldiers and their families have more disposable income than civilian families. Unlike the typical family, they're not spending 30 percent of their income on housing, so they can spend more money keeping up-to-date on the latest in fashion and electronics and go out to dinner three or four times a week.

“On paper, Fayetteville is not as appealing to retailers as other markets, but once they get here their stores usually post phenomenal sales,” Armstrong says.

Yet, many retailers are reluctant to open stores in military markets, unsure of their potential and concerned about deployments. “Military markets are a little bit like tourist markets — they don't easily show household income and density — and retailers have a hard time getting their arms around the market,” says Marshall. “You really have to dig into the market to understand the true impact of the military.”

CBL & Associates' Ward noted its success at luring some higher-end retailers such as Pac Sun and Aéropostale into the Fayetteville market. However, Ward acknowledged, it wasn't easy. “It's an education process. Some of them [retailers] feel that their customer isn't there — that the incomes aren't there — but once you explain that most of the income is disposable, it's a convincing argument,” he says.

For more than a quarter of a century, soldiers stationed at Fort Bragg in Fayetteville, N.C., have been able to buy home furnishings from Freedom Stores Inc. The Fayetteville, N.C.-based furniture and electronics retailer focuses on military markets, opening stores only near army bases and naval stations. There are 10 Freedom Stores in military markets such as Hinesville, Ga., and Newport News, Va.

A former soldier stationed at Fort Bragg, Bill Porter, opened Max Muscle last month to tap into the large market of military personnel stationed in Fayetteville. “There are a lot of benefits to being in military markets because most of them are underserved and military personnel have a high disposable income,” says Leonard Melley Jr., president and CEO of Freedom Stores.

“The downside is that sales can really take a hit during lengthy and large deployments,” he says.

Dark side of deployment

While many industry experts emphasize the upside of military markets, they do have a downside: the drain on the local economy and retail sales when soldiers are deployed for tours that can exceed a year.

Military markets with more diverse economies, such as the Hampton Roads region in Virginia, can better weather deployments than those that are dominated by the military like Fayetteville and Columbus, notes Glickman.

CBL hedges by forecasting sales budgets based on Fort Bragg's deployment schedules. Ward cites a sharp decline in sales when troops are off base for 15 months or more. The windfall, he says, is when they return — there's a huge surge of income back into the market.

“It's like Christmas when they come back from deployment,” says Ward. “If you can demonstrate your commitment and support to the military and the military community, it pays off tremendously.”