The changing business of ports:

Speaker 1 [00:06] Have you noticed more or less activity at the ports since COVID?

Speaker 2 [00:11] Well, of course, there's more containers there, but not enough activity to make them go away where they need to be.

Speaker 4 [00:23] You see them come in. Um, you see them come. They come. Big ones. This one's from yesterday.

Speaker 5 [00:29] More. More activity, definitely.

Speaker 6 [00:33] It seems like there's been a recent uptick in port activity, especially trucks coming out of the port. And there's certainly a lot more boats sitting out in the harbor.

Mariam Sobh [00:42] Welcome to Changing Places, brought to you by Avison Young. In Changing Places, we explore our continuing and complex relationships with the built world around us. I'm your host, Miriam Sobh. If you've turned on your TV or looked at your phone over the course of the last two years, chances are you've seen, heard, and read about the supply chain. And one aspect of the supply chain that's been at the forefront of every conversation is the role of ports. Quite simply, ports are one of the engines of our economy. The first port of call for goods coming into or out of a country. They're often stacked with car-go containers which loom high above the ship, carrying untold goods. Everything from toaster ovens to hair ties, sweaters, canned tuna, cars, and microchips. And yet, if those goods can't get off of their ships, they can't get onto a truck or into a warehouse, a shopping mall or into your hands. Without a fully functioning port, the entire economy of our market-driven society ceases to function. In September 2021, the Port of Vancouver reported that cargo volumes reached more than 76 million metric tons, up seven percent from 2020 mid-year and five percent above the previous record set in 2019. According to an October 2021 briefing from the White House, the Biden administration noted that 40 percent of all containers enter the United States through the Ports of Los Angeles and Long Beach. Since the pan-demic, both ports have been operating on a 24/7 basis to keep up with demand. Meantime, Reuters re-cently reported that the global shipping crisis may continue into 2023. That's a long time to wait for a can of tuna. The port sector is fascinating once you get to know the ins and outs, and I'm hoping to really understand how we got here to where we are today continuing to utilize one of the oldest sectors and hubs of commerce with my guests Michael Farrell, Principal of Industrial at Avison Young, and Dan Smith, Commercial Real Estate Specialist at Vancouver Fraser Port Authority. And throughout this epi-sode, we'll also hear from Erik Stromberg, Executive Director of Center for Advances in Port Manage-ment at Lamar University, who will give us additional insight. I can't wait to get their take on ports, their current moment in the worldwide conversation, the issues they're facing now and into the future, and the changes to ports that may not only affect the supply chain, but our lives, too. Before we begin today's show, be sure to follow Changing Places and be sure to tell your friends about us. While you're at it, give a rating and a review, too. We'd love to hear from you. Michael Farrell, welcome to Changing Places. Michael, I think it's safe to say that ports as well as industrial land, they're having a pretty big moment right now. And with all of the renewed attention on ports, good and bad, I'm curious to know what you're seeing right now with ports, especially the Port of Vancouver.

Michael Farrell [03:23] Yeah, we're Canada's port, and I think it's one way they like to brand themselves. So for the Port of Vancouver, they've got two - they got a mandate to help grow the Canadian economy and manage trade. And for Canada, that's huge because we export massive amounts of natural resources, like pot-ash and coal and wheat and lumber and manufactured goods and so on. But I think maybe more what we're talking about today is container ports and supply chains. So, I think the Port of Metro Vancouver recognized some time ago, at least as long as I've been in the business, which is 17 years, that they are going to start running out of land. So they've focused in on trying to make their ports more efficient in the near and medium term, and then to expand them in the long term.

Mariam Sobh [04:05] So if ports run out of land, are ports still able to expand? I don't know much about ports. I'm assuming you need some land to attach to at some point.

Michael Farrell [04:15] Yeah, ports in Canada are owned by the federal government and then they leased the land out to opera-tors or tenants that are going to use them. In order to operate a port, you need to be able to have some tidewater that a ship can come up to. And then you need to have transportation links to carry those goods in and out, which are typically roads and rails. So the opportunities where you have deepwater ports that are either natural or could potentially be constructed are relatively limited. And so you have Port Metro Vancouver, which has multiple courts around the Metro Vancouver region. And then you also have a separate port authority called a Prince Rupert Port, which is about halfway up our coast that also has afforded those infrastructures and natural port attributes.

Mariam Sobh [04:57] If there isn't enough land or there isn't enough space, let's say even for ports, I don't know, maybe I'm not asking a question that makes sense here. But I'm just thinking in my head, if you run out of land or port space, what happens?

Michael Farrell [05:10] I think in Vancouver, specifically, it's a land use decision. So around some of the ports there are actually built reclaimed land in the ocean. But I think the main constraint there is opposition from multiple different parties and whether it can be done safely, sustainably, and environmentally-friendly way. And the Port of Metro Vancouver has been pursuing a project called Delta Port T3 for, I think, over 10 years, and trying to do just that. Vancouver's ports that are immediately adjacent to the downtown core of the city and are surrounded by residential uses, I think that's where you have difficulty expanding. And they've actually just expanded one of those ports by, again, reclaiming some land in the ocean.

Mariam Sobh [05:49] That sounds really cool to reclaim land in the ocean. I don't know why, that just sounds really fascinat-ing. And so do they build structures in the water?

Michael Farrell [05:56] Yeah, filling it out with like big rocks and aggregate material. There might be some like strengthening of it with piling and so on like that. But yeah, that's exactly the type of process you're talking about. And I think maybe the other thing that you're getting at is like there is the- there's the actual port facilities that handle like loading and unloading of containers or other materials. But then there's like the off-port sup-port, which is, you know, as far as handling goods that come in and out of containers, is instrumental in making sure that they work properly. And so what we're seeing in our region is the building up of inland port infrastructure. And in LA Long Beach, that's known as kind of like the Inland Empire. But here, we're skipping all the way across the Rocky Mountains to Calgary because, really, that's the place where there's plentiful land and there's direct railings and road links to that.

Mariam Sobh [06:40] A few words from Erik Stromberg.

Erik Stromberg [06:43] The ports are stressed right now. Port managers do tend to deal with these kind of emergencies. But this may be on a scale of its own. The ports generally are in good shape. But the ports, remember, are just a node in the supply chain.

Michael Farrell [07:50] Because, really, that's the place where there's plentiful land and there's direct railings and road links to that.

Mariam Sobh [07:07] Michael, do you think we'll see more ports being built to decrease reliance on the Ports of Vancouver, LA and Long Beach?

Michael Farrell [07:13] I'd say no. I think what's what's more likely is you'll see more of these port entities trying to expand on what they have and make what they have being more efficient.

Mariam Sobh [07:21] What would stop someone from building a new port in North America, aside from having some ports al-ready there and maybe the expense? Is there anything else that would prevent it from taking place?

Michael Farrell [07:32] I, you know, I think that there would be a lot of opposition to it. I think nimbyism is strong. I think people see ports as big, heavy infrastructure and industry. And I think people in a lot of instances are opposed to pretty much any type of development, but maybe even more specifically that type.

Mariam Sobh [07:49] Again, Erik Stromberg.

Speaker 6 [07:49] I would not welcome that. I think it would really increase the noise level and the amount of trucks coming in and out. And it's already pretty noisy here. As a resident, we kind of want to keep it quiet, like like it is this morning.

Erik Stromberg [07:51] Fourty percent of import containers go through the ports, LA, and Long Beach. We don't have a national port system. There's no federal port authority. Ports were initiated with local capital and labor to respond to the needs of that locality. The cities typically grew up around the ports. Infrastructure then grew up around that port. It's very difficult for a port to move forward with its expansion and examples abound where the local community pushback has prevented the expansion or even operation of a port.

Michael Farrell [08:33] I think people see ports as big, heavy infrastructure and industry. And I think people in a lot of instances are opposed to pretty much any type of development, but maybe even more specifically that type.

Mariam Sobh [08:44] Would you say, is the federal government standing in the way of any of these developments? Or is it more the constituents?

Michael Farrell [08:49] I think that- I mean, the federal government owns the ports here, right? And so, in one hand, they're saying, well, the ports are there to support the citizens of Canada. The port Metro Vancouver isn't just about the people in Vancouver, it's about exporting materials from the rest of the country and bringing in materials to the rest of the country that we need. So I think that they have to walk that fine line of how hard do we push development? And how do we make sure we take into account the needs of the entire country? And the ports mandate is to do just that.

Mariam Sobh [09:17] That makes me wonder, too, are there ways that they're finding creative solutions, maybe just off of what you said earlier, some of the ways that they're trying to manage not having enough space? So, so I wonder, what are you seeing from stakeholders in the sector? Are folks pushing for better facilities, newer spaces, you know, what's, what's happening in that area?

Michael Farrell [09:36] In Delta Port's case, the port is putting forward an expansion called T3, and the operator is putting a separate, more incremental, smaller expansion, right. So everyone's looking to expand. And I think from an efficiency standpoint, it's good to see those incremental improvements, right? Because if we can do those to save doing these big disruptive projects, then that's probably better to make what we have more efficient. But I don't think it's solving the kind of, like, 15- to 20-year timeline problem.

Mariam Sobh [10:02] Do you think it will ever go back to normal and adjust to the situation that we are facing now, this new reality? Or do you see ports adapting, changing, evolving to deal with what's going on?

Michael Farrell [10:13] I think they'll absolutely adapt. And I think that's their nature. So in our region, we saw like a one in 100 year rain event hit our city. It actually missed the core of the city and hit the mountains really hard and dumped a month's worth of rain in 24 hours, and knocked out both railings and four highways. So, we can't actually get any materials out of the port of Metro Vancouver right now. So I think that those, may-be not disruptions that are the same level as the pandemic that we just had, but more things like this I think is what we can expect to happen. So yeah, all things being equal, the supply chain would get back to normal. But what other things are coming down the pipe that we're not expecting or that we haven't anticipated or we can't anticipate?

Mariam Sobh [10:54] Is there any sort of, just curious for myself, is there any sort of technology that can be used to predict this stuff, if it's going to happen or not?

Michael Farrell [11:02] I think the fact of the matter is governments aren't going to be prepar- aren't going to do it unless their hand is forced. The British Columbia government had been kind of warned about the potential of an event like this and had done nothing. Interesting you bring up technology. Again, not an area that I'm an expert in. Maersk, which is the largest shipping company in the world, is spearheading a system that will use blockchain to track container movements. So it's like one of those systems that works very well. But because of its foundation, and because it's so knit together with all these different parties, it's hard for change to happen. But I think that's one incident where you know, one of the leaders is trying to make a change based more on technology that would make things more efficient.

Mariam Sobh [11:41] What would you say to folks that are not on board with some of the development that might be happen-ing?

Michael Farrell [11:47] I think it's really interesting. The Port of Metro Vancouver, the marketing they're doing. They're doing things like a program where any ship that's in their port and hooked up to BC's power grid, which is hy-dro electric and very clean, as opposed to sitting at the port and burning bunker fuel. So that lowers GHG emissions. There's a voluntary program for all ships to turn down their screws or their props at a certain stage outside of Vancouver Island so it's less disruptive to marine life and killer whales, and so on. There's always like a community-related component to that where they're improving a park or im-proving access to the foreshore, improving bike or pedestrian access around their infrastructure. So I think that that's the ports making the effort to give other community benefits and educate people about what they're doing. I think it's up to people to consume that and question it and find other sources of in-formation till they have the full story.

Mariam Sobh [12:37] Thank you so much, Michael, for your time.

Erik Stromberg [12:40] What's happening now brings appropriate attention to the role of ports and the way freight moves from origin to destination. The average consumer will say, 'Ports? Why do I need to worry about ports? I get everything I need at Walmart.' This will, I think, reveal how stuff gets at Walmart. And all the actors are engaged in this very complex supply chain that travels the world over to get the stuff that we need here as well as get our products out to the world.

Speaker 7 [13:21] I have seen ships from San Pedro Harbor clear into the South Bay. Container ships literally parked in threes. I've never, ever seen freighters, containerships ever out of just this port area in my life. You know, obviously, these shortages are ridiculous. So yeah, it's busy. Yeah, but are things just sitting there and not moving? Absolutely. Absolutely.

Mariam Sobh [13:49] When was the last time you drove down near a port? Is there one in your area? If you live in a coastal city, it's likely the port and large container ships in the harbor are constant presence. Or maybe you live inland and you imagine ports whenever you see a train full of grain depart for the coast. Whatever your perceived relationship to ports, you may not realize just how connected they are to our daily lives. Stay tuned for the next part of my conversation about ports and the vital role they play in our lives. But first, a quick reminder. Changing Places is a podcast brought to you by Avison Young. It's a show that contin-ues to explore and question our complex relationship with the built world around us. I'm your host, Miri-am Sobh. I hope you're liking the show so far. If so, please share us with your friends. We are about to meet Dan Smith, Commercial Real Estate Specialist at Vancouver Fraser Port Authority. But first-

Speaker 1 [14:41] Do you think it matters that industrial land be preserved near the ports? Or would you rather see more condos?

Speaker 2 [14:49] We don't need more condos.

Speaker 1 [14:51] Why is that?

Speaker 2 [14:53] There- I can tell you five places right now where the street's blocked off where they're building condos. So obviously, they have enough land to build condos other places.

Speaker 8 [15:02] I don't know if it's good idea.

Speaker 9 [15:03] Industrial versus condos, huh? When it comes to this area, it's so com- so many people here already. So many condos, so many cars, there's no parking.

Speaker 5 [15:14] Oh, I kind of prefer the public land actually. I think it's important to preserve the waterfront and keep it public. So everyone can access it.

Speaker 6 [15:25] Kind of feel like I would rather see more condos down there. There's a lot of empty warehouses right now. They're kind of abandoned. I don't think we really need that much warehouse space.

Speaker 2 [15:36] I think I'd rather see industrial land.

Speaker 1 [15:40] Why is that?

Speaker 2 [15:42] It provides jobs.

Mariam Sobh [15:45] Dan Smith is a commercial real estate specialist with over a decade of experience in the sector. Dan, welcome to Changing Places. Dan, many people are talking about supply chains in ships waiting to come into a port. What is it like on the ground at one of the busiest ports in the world and the busiest in Canada, the Port of Vancouver? What is it like, from your point of view, working on the ground there?

Dan Smith [16:06] Yeah, I mean, that's a great point. That's something that we're keeping in mind, you know, every single day at our ports. Our port's perhaps unique, but maybe not unique at all, in the sense that, you know, Metro Vancouver itself has an incredible shortage of land of all types, you know, port land, industrial land, office space, and residential land. Back to the industrial and the port sectors, what we're finding is this, we don't have enough space, physical space, that's being intensely used, you know, sufficiently to allow us to do what we want to do as Canadians all across this country. You know, part of our mandate as the Port of Vancouver is that the Vancouver Fraser Port Authority is that, you know, we're a federal agency, we're responsible for managing these lands, but also for helping Canada fulfill its trade objec-tives. And having weakness in any link of the supply chain, of course, hurts that. And that's what we're faced with, you know, almost every, every moment of every day.

Mariam Sobh [17:04] A few words from Erik Stromberg.

Erik Stromberg [17:07] The problem with it today is increasingly that ports are on the waterfront in these are attractive places. And there's a lot of folks that are moving to the water. And that encroachment impedes the critical, what we call first mile-last mile, to and from the port gate itself. So there's an interesting dynamic of the port trying to work with its neighbors, its community neighbors, while it moves cargo, often hundreds of miles away from the local community. So they don't really necessarily see the advantage of that. They do see trucks on their highways that bother them because it adds to congestion. So it's a very interesting dy-namic, the port and its relationship to its surrounding communities.

Dan Smith [17:53] In any link of the supply chain, of course, hurts that. And that's what we're faced with, you know, almost every, every moment of every day.

Mariam Sobh [18:00] What does it mean for your industry with this lack of land? Is there still enough space out at the port to keep expanding?

Dan Smith [18:06] The short answer is no, we don't have enough land. We truly do need more of it. We need both both more land, you know, at the actual port itself, what we would call, you know, a terminal or like on-dock, for example. And we also need land away from the ports nearby, but off-dock in order to facilitate logis-tics and the transfer of goods. I mean, a lot of what we're doing from the port, of course, you know, we're loading and unloading on vessels that travel all around the world. But we also have to get those goods to the Port of Vancouver, and then again, back across Canada away as we import.

Mariam Sobh [18:38] As more and more goods are ordered online, they'll have to go through the distribution network, which is being pushed to the breaking point. With everything you've seen, even if online shopping does relax a little, will a recovery or even a little break give ports a time to reset? Or is this just the way things are go-ing to be from now on?

Dan Smith [18:57] I really think that we're just gonna continue on this trend. I mean, it is an evolving world where the popu-lation of Canada and the population of North America and the population around the globe is increasing. And as such, the the need to to to move goods and to have you know, markets opened up for importers and exporters is going to continue so having to think on a very long term horizon for five and 10 and, you know, 25 years and beyond down the road. So we're always thinking- always, always, always thinking how can we continue to improve our capacity, our efficiency, implement technology, and the human capital behind that and you know, in order to be as strong a contributor to the economy as we can be.

Mariam Sobh [19:36] Do you think that COVID highlighted your industry, made people realize just how vital ports are for busi-ness and daily life?

Dan Smith [19:44] Yeah, I mean, absolutely. I mean, you know, it just changed the way civilization in our society, how we were consuming goods, what we were doing, how we were living and working. I mean, a lot of people have been shopping way more on Amazon and myself included. You really need to go and buy a pair of running shoes, if you're just going to buy the same ones that you know, you know, maybe that's easier. And that, of course, does put more pressure on the supply chain because if those goods are being shipped more rapidly, and being shipped right to your door, and in more of a just-in-time kind of way, then it is changing, you know, how we consume as a society.

Erik Stromberg [20:17] I think the port owners and operators understand even more now the need to better coordinate with all their partners in the supply chain. But I think this has brought attention and focus on the vulnerabilities at ports, the terminal itself. So as the port management works with local government and with its supply chain partners, understanding where those investments need to be made, and where the efficiencies need to be enhanced, that's going to come out on the other side of the pandemic.

Mariam Sobh [20:52] That was Erik Stromberg.

Dan Smith [20:56] And in more of a just-in-time kind of way, then it is changing, you know, how we consume as a society.

Mariam Sobh [21:03] Kind of on the flip side of of what I was just asking you about, I think COVID, it highlighted a lot of things that could be improved in many different areas. Did you find that there were some things that you be-came more aware of, for ports and warehouses to operate with with the supply chain and all that or things that you could do better?

Dan Smith [21:21] I mean, I think COVID has exacerbated a lot of these issues for us. But you know, taking a more re-gional view in Metro Vancouver, just, you know, again, of all of the industrial and port land constraints that we have, we've been faced with incredibly low industrial vacancy for a very long time here in Metro Vancouver. And it's, it's not going to change anytime soon. The demand just far outpaces the ability to deliver supply and our capacity to deliver supply because we are truly running out of land. Avison Young said in their most recent report, they had, you know, sub-one percent vacancy in, for industrial land. So, you know, that just highlights the crunch that we have here. But being under one percent, it's not good for our economy. It's a weakness in our supply chain.

Erik Stromberg [22:12] I think one of the potential outcomes of this crisis, Mariam, is looking at opportunities to nearshore manu-facturing processes. And nearshoring may include with our NAFTA partners in Canada and Mexico, where we could move production closer so it doesn't have to go through ports.

Dan Smith [22:32] Being under one percent, it's not good for our economy. It's a weakness in our supply chain.

Mariam Sobh [22:35] If you were to optimize or make some initiatives to the ports to make them more efficient, what are some of the things that you would do? Or are there things underway right now that you could share with us?

Dan Smith [22:46] We're doing a couple of of port expansions right now that we're in the process of. So, we're expanding capacity in one of our downtown terminals center, but with a 15 percent increase in the footprint, we're actually going to increase the capacity of that particular terminal by 65 percent. We need to continue to deliver projects like that because the demand for shipping through our port is still very, very strong. And it's going to continue, you know, as Canada's largest port and has the largest port, of course, on the west coast of Canada.

Mariam Sobh [23:16] Dan, I'm curious to know, have there been any conversations about building a new port in British Co-lumbia or even expanding and building out into the sea?

Dan Smith [23:25] Yeah, I mean, right now we're, we're going through a very large process, and these processes take, you know, years and decades. But that would be specifically for us to expand our Roberts Bank termi-nal. We are undergoing processes where we are looking to expand capacity and one of the ways is to reclaim land and to to expand our Roberts Bank terminal. As far as other ports on the West Coast, I mean, there there is Prince Rupert and there's some other smaller ports. I mean, some of those ports are just set up to do different things than what the Port of Vancouver or Fraser Port Authority does. So we're, we're definitely kind of the premier, the biggest port in the west coast of Vancouver or west coast of Canada. And so we're looking to increase our capacity. And we're very concerned with making sure that we do it the right way, but also, you know, in a timely way that delivers that infrastructure in that ca-pacity to to our markets and the markets around the world when we need it, rather than trying to play catch up all the time.

Mariam Sobh [24:20] You mentioned concerns about the environment and just making sure that things stay as beautiful as they are. From your perspective, what things can be done to keep not only the stakeholders in the port, but the residents nearby happy, or at least understanding about the needs of the port and how it actually affects their daily life?

Dan Smith [24:35] That's a phenomenal question. And I think that it's one that is front of mind for many people in the port on a daily or an hourly basis, if not more frequently. But you know, having stakeholder engagement with the communities, of course, is very important. We do a lot of short sea shipping out of the port, and, you know, we serve rural communities that otherwise would have, you know, no access to goods, and it would be very challenging to get consumer products out there for them, including fuel and medical sup-plies and food and etc., right? I can say our environmental group is absolutely fantastic. I mean, we are a regulator and we make sure that we manage how we do things for our waterways and the adjacent lands that the port has jurisdiction over. And our environmental group is always looking to make sure that we are doing things in the absolute safest, cleanest, most environmentally responsible way possi-ble.

Mariam Sobh [25:24] Again, Erik Stromberg.

Erik Stromberg [25:27] We run ports like businesses, and it makes for a very interesting set of requirements for a port leader. Cities grew up around their ports. The community too often sees the negative impact of the port opera-tion and not the positive. So ports always have to tend to the needs of their communities, in one way or another. We see this through wetlands restorations, through public amenities that the ports creates. It's a balance that some of the major container gateways struggle with on a daily basis.

Dan Smith [26:03] The absolute safest, cleanest, most environmentally responsible way possible.

Mariam Sobh [26:08] Well, Dan, before we wrap up here, since you're an insider and you're on the ground and you see things that are going on, is there anything that we may not know that's going to be coming up in the next few years? Any trends or interesting developments?

Dan Smith [26:20] Yeah, I mean, the next few years is a relatively short horizon, but relatively long. And what we're experi-encing right now on a, you know, day-to-day, a week-to-week basis is that we've just had some incredi-ble weather patterns that have caused flooding and the loss of infrastructure, including some, some rail lines that are of course, very important for the shipping of goods, you know, across our great country. So I think that we're extremely happy and pleased with the amount of, you know, contribution from all of our stakeholders to kind of rebuild some of those damaged supply lines. It's been a very challenging couple of, couple of weeks, and also, you know, a longer horizon.

Mariam Sobh [26:59] Thank you so much, Dan, it's been a pleasure to talk to you. I'd like to thank Michael Farrell, Dan Smith and Erik Stromberg for taking the time to guide us through the evolving present and exciting future of ports. I'm Miriam Sobh. In our next episode, we're saying goodbye to the supply chain and hello to ho-telss. We'll take a look into the present and future of the hotel industry. It's a rapidly changing sector. And I think you might be surprised at some of the innovations that have already launched. Don't miss it. I'm Miriam Sobh and this is Changing Places, brought to you by Avison Young. Thanks for listening. See places changing and evolving in your neighborhood? Share your evolving spaces with us on social me-dia using the hashtag #changingplacespodcast. I'm Miriam Sobh and this is Changing Places. Changing Places is brought to you by Avison Young. Our producer is Andrew Pemberton-Fowler. Our sound en-gineer is Patrick Emile. Our production assistant is Gabriella Mrozowski. Additional production support is provided by JAR audio.