Sustained $10B+ Military Spending Signals Ongoing Market Opportunities for Hawaii Businesses

The State of Hawaiʻi released its inaugural Military in Hawaiʻi Economic Impact Factbook, revealing that military spending in the state reached an estimated $10.2 billion in 2023. This figure constitutes approximately 9.2% of Hawaiʻi’s Gross Domestic Product (GDP), highlighting the sustained and substantial economic contribution of the U.S. military to the islands.

This report consolidates defense economic data, providing a clearer picture of current spending patterns and their associated economic activities. The consistent flow of federal funds into the state, through salaries, procurement, construction, and base operations, underpins a significant segment of Hawaiʻi's economic landscape.

Who's Affected

• Investors: The military's consistent presence and expenditure offer a degree of economic stability and predictability for investments tied to sectors that directly or indirectly support defense activities. This includes real estate markets in areas proximate to major bases and businesses involved in critical supply chains or services. For investors looking at the Hawaiian economy, understanding the scale of military spending provides a baseline for sector performance, particularly in infrastructure, hospitality serving military families, and specialized contracting.

• Entrepreneurs & Startups: While direct defense contracting can be complex, the sustained military presence creates opportunities for ancillary businesses. Startups that can provide innovative solutions in logistics, technology support, specialized maintenance, or even services catering to the military community (e.g., healthcare, education, niche retail) may find a receptive market. The $10.2 billion figure suggests a robust ecosystem that can absorb new entrants if they can demonstrate value and compliance.

• Small Business Operators: For existing small businesses, this level of spending translates to a consistent customer base and a steady demand for goods and services. Restaurants, retail stores, and service providers located near military installations or whose supply chains are indirectly supported by defense spending likely experience a reliable customer flow. The report underscores the importance of these sectors to the overall economic health of communities across Hawaiʻi.

• Real Estate Owners: The presence of a large military personnel population directly influences housing demand, both rental and for-sale. Properties near bases like Joint Base Pearl Harbor-Hickam, Schofield Barracks, and Marine Corps Base Hawaii are expected to maintain strong occupancy rates. Furthermore, commercial real estate may see sustained demand from businesses serving the military and related industries, potentially impacting lease rates and property values in these areas.

Second-Order Effects

• Consistent military spending → sustained demand for housing → increased property values and rental rates for Real Estate Owners.
• High military presence & spending → local labor market competition → upward pressure on wages for Small Business Operators and Entrepreneurs.
• Inflow of federal funds → supports local construction and service sectors → creates demand for specialized equipment and supplies, potentially benefiting Investors in targeted industries.

What to Do

This report confirms a baseline of significant economic activity driven by the military in Hawaiʻi, amounting to over $10 billion annually. While the spending is historic, its continuation suggests ongoing opportunities. The impact is diffuse, affecting various sectors but most directly those with proximity to bases or involvement in defense supply chains.

Investors: Monitor defense department budget allocations and Hawaiʻi-specific contract awards. Look for opportunities in real estate adjacent to military installations and in logistics or service companies that can demonstrate a track record with government contracts.

Entrepreneurs & Startups: Research federal contracting opportunities databases (e.g., SAM.gov) to identify unmet needs or areas where innovation can be applied to defense requirements. Consider developing services that support the local military community or defense contractors, such as cybersecurity, specialized IT support, or advanced logistics solutions.

Small Business Operators: Assess your customer base: how much relies on military personnel, families, or defense-contracted employees? If significant, ensure your operations are robust and competitive. Explore partnerships with larger defense contractors for subcontracting opportunities if aligned with your core business.

Real Estate Owners: Continue to factor military relocation and base activity into your leasing and property management strategies. Properties catering to military families, especially those with flexible lease terms or proximity to bases, are likely to remain strong assets. Be aware of potential infrastructure demands as bases continue operations.

Action: WATCH the State of Hawaiʻi Military and Community Relations Office reports and federal procurement announcements. Monitor local base expansion plans or military readiness initiatives. Be prepared to act if specific contract opportunities or facility expansions are announced that align with your business capabilities, particularly within the next 12-18 months.