Carver: The group quickly developed an international focus because our clients in the US wanted something that encompassed complete Point-A-to-Point-B activity, from where a product is made to delivery to the consumer. We're large in China and emerging in India. We're in South America and working in Panama on a port-related project. We're planning to become more active in Europe. We're based in Los Angeles because that puts us on the doorstep of the largest harbor complex in the world. The challenges that face our industry, at least in the US, start here in Los Angeles and emanate through other ports. Most of the trends shaping activity around the ports start here.

IPJ: What are the major issues facing US ports?

Carver: We have two types of ports in the US. There's Los Angeles-Long Beach and there's everybody else. LA/LB together comprise about 16.5 million TEUs (20-foot equivalent units) annually. To put that in perspective, the next closest port has about three million. So there are very different challenges facing LA/LB compared to other ports. LA/LB is trying to maintain what they have. Every other port is working to increase capacity to prepare for the onslaught of goods coming from overseas. For LA/LB, the biggest issue is of an environmental nature. The port commissions in the two cities have mandated they address the environmental impact of any future growth.

IPJ: Given the distinction between LA/LB and other ports, what are the issues?

Carver: There are three components of ports. One is the port itself. The second is the connectivity to get the cargo where it needs to go--basically, the road and rail systems. The third component is land to handle the cargo once it's left the port. The challenges vary from port to port around one of those three elements. There are inefficiencies or lack of infrastructure at the port, or issues with connectivity or a shortage of land for development of additional facilities. The issue with LA/LB is connectivity. The port has no issues with capacity. There's very little land nearby, but there's lots of it inland. What's lacking is a rail system to carry cargo away from the port. Houston, in contrast, has an abundance of land and strong connectivity, but the port needs to add more cranes and berths to ramp up capacity. Then, in Charleston, SC, you have strong container terminals but no land for throughput. Each port has one area that needs improvement.

IPJ: What do the ports need to do?

Carver: Looking at Los Angeles, the port community seems to realize it has to be part of the solution to the huge traffic problem that's developed. The port did something revolutionary in this regard. It did what manufacturers do when they reach capacity. It opened a second shift. And it's been highly successful. Shippers are encouraged to come during off-peak hours, when highways are quieter, because the cost to load and unload is lower than during peak hours. The port takes the additional money that's brought in during peak hours to pay for transportation improvements. Other ports need to be equally creative and look at new ways of doing things.

IPJ: What can real estate developers and investors do?

Carver: Better understand how port systems feed their facilities and take a higher altitude view. Developers need to understand how cargo moves from the port to their projects and then beyond. They need to build new models of how to fit into the distribution system. They need to provide product that meets the changing needs of shippers, maybe larger staging areas for container storage. Developers used to maximize site coverage, maybe covering 48% of a site with buildings. Now we may need lower coverage of 39% to 40%. They need to develop an economic model that considers this difference. Smart developers are beginning to understand logistics issues like drayage, which is the cost of trucking cargo to the distribution facility. They're beginning to learn more about outbound costs the customer has taking goods from the distribution facility. They have to understand the customer more than they have in the past.

IPJ: How can your group help?

Carver: In years past, ports weren't concerned with what happened outside their gates. Meanwhile, the real estate community had always focused on building without really understanding how cargo got into buildings or where it went once it left. We bring the port, real estate and transportation stake-holders together to study the whole movement of cargo so we can position buildings in the right place, then explain to users why this location is best. It's no longer enough to build a bunch of buildings and price them right. You have to understand the business of your customers so you can sell the business rationale for coming to a particular location. There's a lot more complexity than there was four or five years ago. It's hard for a generalist in real estate to grasp all that, whereas we live and breathe the supply chain.