When Freight Never Sleeps: Power, Autonomy, and the New Map of the West | Durable Value Ep. 87
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Joe Muratore: Matt LeDucq, welcome to the Durable Value podcast. Thanks for being on today. Matt is, uh, been a friend of mine for a few years. He's a, an extremely interesting guy. He's the CEO of Forum Mobility. They sit at the intersection of where, uh, vehicles are moving from combustion to electricity, specifically trucks and, uh, charging depots.
And so he- he's gonna talk about that he sits in the middle of real estate and, uh, and trucks and, uh, electrified trucking. So Matt, maybe can you introduce yourself? And, um, thanks for being on.
Matt LeDucq: Yeah, Joe, uh, good to see you. Thanks for having me. This is, uh... Appreciate this. This is, like, a, a really interesting topic because, um, like you said, we, uh...
our business is to build high-power charging and ultimately convert traditional Class 8, you know, big rig trucks, uh, to electric. Um, but like you said, it's a spot where real estate, power, transportation, logistics all come together, and it's something that is pretty inevitable, and, and I could talk more about that now.
But it's also something that's just kind of illuminated, like, power is really important, and power is really confusing. Um, and it's something that as, you know, one of our investors, our largest shareholder, CBRE, um, I talk to their LPs and I talk to, uh, a lot of their real estate teams as, uh, they, like- Real estate does not truly understand power.
And I'll say conversely, power people like me are winging it on real estate. And the reality is, like both of them are gonna come together to create kind of a next generation of core assets that are really, really important, right? And, and the, uh, the wins and losses are going to be, um, based on your ability to understand both of those things simultaneously.
Um, and it's, uh, you know, we've been at this for five years. We've got millions of miles on our fleet of electric trucks. We serve for traditionally port trucking called drayage. Um, but that's, that's gonna kinda move out, like, and that's gonna become, uh, something that's gonna move from ports to further inland, and it's, um, it's been a really interesting ride, like when you combine technology, policy, real estate, markets.
So it's good to be here. It's a fascinating topic. Uh, I'm looking forward to learning a lot from you as well, um, and excited to talk about it. I
Joe Muratore: have this idea that the West is quietly reshaping underneath us and will become obvious quickly, as technology often does. It, it, it moves quietly at the edges, and then it moves all at once.
Think of, I don't know, AI or, or whatever, but it's like not a big deal, and then it's a really big deal. Uh, I think power is one of those things that's, uh, and the grid is one of those things we're hearing about more and more. It's a little bit confusing. I think it's mostly a real estate audience and an ins- an institutional real estate audience that's listening to this.
What are we missing? What are you seeing, and how can we bring our two viewpoints together to, uh, s- see it from, see potentially the same thing from two different directions?
Matt LeDucq: The grid is a complicated thing, and not many people understand it. I mean, I've been, I've been, I've built billions and billions of dollars of, of grid-connected generation and load for decades, and it still confuses me in certain markets, in certain places.
It's, it's a, it's a complicated thing, but- It's a really important thing, and I think the, you know, like I said, like, at the beginning, like, the, the understanding of the grid and how it works is really important. And, like, a fundamental part of understanding the grid is understanding utilities. And the way utilities work is a really, really important thing to understand, and I will say most people that I meet, like, outside of if you deal in electrons every day, don't understand how that, that, the utilities actually work.
Um, and I think that's, like, fundamental to this because the reshaping, like, you're gonna have two things replaced by electrons in the future. You're gonna have fuel, and that's a big deal. Like, we burn billions and billions of gallons of fuel moving goods around, and those will, in large part, be replaced by electrons over a certain time horizon.
And you're gonna have people, as robotics become a bigger and bigger thing. So when you think about the replacement of all the fuel and labor with an electron, you must understand how that electron is delivered to you, and that is just simply delivered through the utility.
Joe Muratore: As we get further in this podcast, we're gonna talk about, uh, picking winners and losers, but he- help us understand that more.
Like, where is, uh, how is cost driving this, and how is availability of power driving this? And how, what is that doing for trucking and movement, and where will things be shifting?
Matt LeDucq: Yeah, it's, you know, the price of power is- Really, really important, right? And obviously, you know, you and I are in California, and outside of Hawaii, like w-we have some of the most difficult rates to manage ever.
Like, it is a, a grid that is getting more expensive. And I think fundamentally, like to understand the grid, like, and to go back to my point about understanding utility, like to break it down as simply as possible, like utilities make money one way, like one single way. They install infrastructure, and they get a regulated rate of return on that infrastructure, period.
They do not buy power for five cents and sell it for seven cents. They don't-- That, that's not how it works. And so when utilities want to upgrade, they need to go through what's called a rate case cycle. Um, and that cycle is when they say, "I need to build billions of dollars of transmission and distribution.
Here is why it's good for the state. Um, here is why it's good for the ratepayers." And a commission ultimately approves that. If you're an investor-owned utility, like a PG&E or a Southern California Edison, it's a public utilities commission. If you are a municipal utility, like a SMUD or an LADWP or Salt River Project in Arizona, it is a board elected by that municipal agency.
In either case, right, you have to say, "This is what I want to build." Somebody has to say, "Yes." You have to justify that investment, then you are going to then amortize in what's called rate base that investment, uh, across the ratepayers. The catch is that takes four to eight years, and so our grid is needing to evolve very, very quickly, and the regulatory mechanisms that allow that to happen, happen very, very slowly.
Fundamentally, like that understanding that utilities are not terribly proactive and nor are they set up to be proactive is both an opportunity and a problem we have to address. Because, you know, I think when people hear a lot about AI and the grid and all this stuff like I was asked, uh, on a panel, "Will, will AI break the grid?"
Was the, the, the theme of the panel. And I was like, "No, well, it's not gonna break the grid." It, it could very well, and it is already breaking the regulatory processes that manage the grid. Um, and so that kind of fundamental like utilities have to do these things in a very specific order, generates a pretty big lag in what we need to have, um, and what we got now.
And that, and that kind of time mismatch is, like I said, it's an opportunity and an issue that we have to address.
Joe Muratore: So let's bridge that with Like what we're trying to accomplish here or what the world is trying to accomplish. The world is, uh, economically trying to get freight from one spot to another to serve a population in the l- you know, the, the lowest cost possible.
That involves, uh, warehousing and warehouse workers, uh, and robots increasingly. But, um, you know, there, there's this, uh, intersection of power costs, uh, demand for freight, uh, getting the freight there, the stops along the way. Like, how do we make sense of the... H- how do we get past this complexity to see the world in a different way?
And what are the hidden pushes and pulls that are, that are changing things? Yeah, I think- And, and how dramatically and how quickly?
Matt LeDucq: This isn't a science project, right? This is, this is stuff that exists, right? Like this is... I mean, if you go into other countries like China, for example, 30% of the trucks sold this year are going to be electric.
That was 10% a year ago. Like Europe, South Amer- like th- this is, this is a, a, a really, really established technology at this point. And the core of the technology, like if you, if you go to a manufacturing facility and you see an electric tractor like we use built or an electric vehicle, you realize that it is a battery and a motor and a chassis.
You are dealing with about one tenth the amount of parts in a electric vehicle than you are dealing with in a combustion vehicle, and you have the core product, the battery, dropping precipitously in price every year. And it is a fundamentally cheaper, better way to make a vehicle. It is like, you know, as folks like Tesla like to talk about first principles, like it is a really simple contraption.
Um, and like I said, like even though we have these rates in California, like I talked about a minute ago, that are really challenging- We could still beat the hell out of the cost of diesel with an electron. And everything that is going into that is getting cheaper and cheaper. Um, and then when you look at the utilities that I also talked about at the beginning, not all utilities are created equal.
I will say like SMUD, Sacramento Municipal Utility District, is dramatically, up to fifty percent in some cases, cheaper than the PG&E rates. So as we think about this theme of like, you know, we have a fundamentally more efficient asset that is going to be cheaper, cleaner, if that's your thing, like the whole thing, like to move goods around and you need to fuel that, like not all utilities are created equal.
Not all grids are created, or, or utilities are created equal. NV Energy in Nevada is also less than half the cost of California utilities. So like, as we think about this replacement of people and fuel with electrons, like you have an asset that is getting cheaper and cheaper and more and more efficient, and you can then pair that.
Like, you know, if you were gonna fill up your car, would you fill it up at the station that's selling it for five bucks a gallon or two fifty a gallon? That's very similar to the way a developer like us thinks about where to site a facility.
Joe Muratore: So is this a bonanza or a problem for municipal utilities or, or
Matt LeDucq: large
Joe Muratore: utilities?
I
Matt LeDucq: think it's, I mean, it, it's, I mean, there's two ways. Like, like with-- you, you can argue with more electrons being pulled out of infrastructure, it should be good, right? Like Ca- Texas is going through a dramatic amount of load growth, and the price of power is going down. In other places, you have large load growth and the price of power goes up, right?
And that's a nuance of the, of the regulatory, but like it is an opportunity for the utilities to deliver things more cost effectively, get more out of their infrastructure, uh, and become a bigger and bigger deal. Like I'll just say like the grid is not very efficient and all this technology, all these batteries that can move things around that are in cars, like it will become dramatically more efficient because today it is- A pretty static system, and it will become highly dynamic in the future
Joe Muratore: So a lot of what we're trying to do is see the future today- Yeah
so we can act in advance, and usually that means the three-year future, maybe the five to seven-year future, and maybe the, you know, what, what, what... Like, if we, you know, did a Back to the Future or something and showed up in 2050 and, uh, here we were, like, how would the, the world look different? I know on our investing side, some things we think about is that the world is, uh, reorienting towards affordability.
Also, in the West s- uh, I've heard the stat that 71% of population growth is Hispanic. Uh, it tends to be that this is a more mobile population, that affordability is key, that they're moving where jobs are, that there tends to be three generations in house- in households, uh, and also two or three income earners.
How does, uh, a- affordability mix with, uh, power mix with population movement? Um, how d- how does this come together? I guess this is a question for both of us, but, uh, I'll s- I'll send it your way first.
Matt LeDucq: Let's think about, like, the Inland Empire, right? Like, the Inland Empire of California, Ontario, Fontana, San Bernardino, like- Like God knows how many square feet of warehousing is there.
Like, it's in- it's incredible. And- It's 700
Joe Muratore: million or a large amount ...
Matt LeDucq: yeah, it's, it's, it, it's, it's biblical in, in its size. And, like, it's there for a reason, right? It, it, it was close enough to a port, a seaport. It's close enough to a, the rail port in San Bernardino. It's close enough to a population center, uh, so that those warehouses can have people that work in them, like right there.
Like, it, it, it all worked in like this paradigm that we've been in for the last several decades. Fast-forward that, like, right? And, and think about, let's just think about on a pure power perspective, like Southern California Edison is quite expensive when you compare it to the Salt River Project in Arizona.
Is that mass going to move where electrons are half the cost or even less in a lot of cases, and that extra couple hours of freight movement is a non-issue for a host of reasons. And I think that, like, you have these masses of warehousing and associated housing, like likely you would know that better than I, that, like collect because this is the thing that happens, right?
Like, this is the thing that has to happen now. This is where the people that work there, this is the people that, where they drive the trucks. They gotta be there. Well, that's gonna change a lot, right? That's gonna change inevitably. And does that change those kind of centers to a place like a Reno now, as we see is, is booming, like in, in a lot of ways in the western Phoenix area and the Las Vegases of the world, and, like that distance is no longer going to be an issue because again, like you're going to have replacement of fuel and people with electrons over a long horizon, right?
Like this is like a 10, 20-year thing. But it's, it's gonna change kind of those masses of, of activity and they're gonna distribute them or refocus them. Um, and that's gonna be the, the challenge to address.
Joe Muratore: Well, there's also development costs and, you know, existing infrastructure and existing costs. Uh- Yeah
the question is: Where are things developed? Qui- You know, this is also a matter of, uh, has Inland Empire industrial real estate, ha-have those prices peaked? Have they reached, uh, what they will, and the utility of that area is going to drop by 10 or 15% over the next five years as, as other areas grow by 10 or 15%?
Uh, those are- Those are concerns to think about. What we can talk about is, uh, the demand. I, I mean, one stat I hear is, uh, as trucks become automated, not just electrified, but automated, which the technology already exists, we're just waiting for regulatory framework and insurance, trucks can travel 23 hours a day instead of 11 hours a day.
Also, there's a, I think I heard an 80,000, uh, person trucker, truck driver shortage in the US. Um, people are expensive. People have needs that robots don't have. What, how does the cost per mile change? You know, w- what is an inland port, and how do these become more important?
Matt LeDucq: To, to, like, wrap your head around the gravity of what, like, autonomous will do to transportation, it's like, it's a fun thing to do.
Like, it's a fun thing to sit down and have a beer and just, like, talk to somebody and, like, and, and just kinda play this whole thing out. Because to your exact point, like, there's something called deadhead miles in trucking, right? You don't want to have your trucker driving an hour without a load on it because you're paying that driver 30, 40 bucks an hour with burden, 50, 60 bucks an hour.
They got their rules that they can't be in the truck for X amount of time before they gotta take a break so they don't plow into the car in front of them when they fall asleep. Like, there's all this stuff You take that out, like it changes everything, right? You have that truck working continuously. You also have infrastructure being used continuously.
And that's a pretty simple thing to think about when like autonomy, like our, our infrastructure today is really set by work hours. Like our facilities are busy, you know, in the very early mornings and in the very late evenings because that's when people are done with their day and they can come plug in.
And so therefore our, our assets are utilized at a relatively modest clip, like low double digits, twenty percent utilization of the asset. With automation, that goes to sixty, seventy percent. That drives the cost per mile down even further. And so if we are already beating diesel by twenty or thirty percent with electrons, we'll beat it by fifty or sixty percent, and that truck will be going twice as far.
And if it needs to move fifty or sixty miles and that's two hours, well, that's thirty dollars in deadhead costs instead of a hundred and thirty dollars in deadhead costs, like in the world of trucking. And so what does this do, right? What does this do when like everything is automated, and the robots that unload it are automated, and the trucks that bring it there are automated, and the port appointment systems are automated?
Like it really becomes this like incredibly flexible system where, yeah, you could charge at ten o'clock 'cause that's when the power is the cheapest, and it's not like gonna disrupt a daily activity. It's just like that's, that's just gonna be the cheapest way to do it. And it just, it turns into this like very malleable, dynamic world that is pretty fascinating.
It's like, and it's ul- it's ultimately good. Like it's, it's ultimately going to make everything cheaper and, and cleaner and faster, right? Like it's, it's going to be a, a net benefit as it kinda gets out. And like you said, none of this stuff is like a crazy science experiment. It all exists. If you go to downtown San Francisco, you see the Waymos ripping around.
Phoenix has got 'em. Like this, this is not anything besides a regulatory framework that needs to get addressed, which, and I think the big hindrance to it is that it'd be like, what are we gonna do with all these jobs that we could potentially replace? And that is like a real legit concern for affordability, jobs, working-class folks.
But like the reality of this progress is like it's here, it's now. It's like it's gonna roll out, and it's going to have a net like phenomenal change in like cost And just where everything is
Joe Muratore: I was in San Francisco two weeks ago and I saw this thing called a Zook and it's a, it is a box, like a shoe box on wheels with no steering wheel.
It's got two, you know, padded park benches inside. It pulls up. I mean, it is totally out of the future. At least the Waymo looks, you know, it's a Jaguar. This is not, this is a shoe box with wheels that moves with no driver and no steering wheel and no nothing. It pulls up. It's like bus style doors open sideways.
You go in and it takes you to where you are going. And in San Francisco where you can't get a parking space and parking is expensive and owning a car, owning a car is who knows, $1,000 a month by the time you pay parking and car payment or, or more, you know, and now it's 20 bucks everywhere you want to go.
You can sure take a lot of rides in San Francisco to, and be less than your car without the, uh, risk of maintenance and depreciation and, you know, just the difficulty of owning a car. So, um, that is a sidebar, but my mind was
Matt LeDucq: blown. It is. Well, it's not, I mean, it's a, it's a sidebar and it's like, it's the same thing, right?
Like, I mean, I, you know, your kids are older than mine, Joe. Like my kids are five and seven. Like, I don't think they're gonna drive. Like they might, like, but I don't think they're gonna drive. Um- And I don't know what, like, and then so you think that that, that just to me is fascinating 'cause, you know, the day I got my driver's license was, like, the day of freedom in my life and, like, I just, just thinking about the world they're, they're gonna end up in.
But then, like, you think about what this, like, a similar thing that we're talking about with industrial and, like, and, and as I think about, like, what are we gonna do with all these garages? Like, what are we gonna do with, again, I think L- LA is, you know, 30% or 40% of the developed property in LA is parking, right?
Like, it is, you know, it's another shade of what I do on the, on the heavy duty side, but it is, like, it's going to be a really fascinating thing for when my five-year-old son is then a 20-year-old young man, and is he going to park a car in front of his house anymore? I don't think so. And when you look at the
Joe Muratore: cost- I know San Francisco's a much happier place without, without many cars 'cause-
Matt LeDucq: Yeah
Joe Muratore: whenever I try to park there, it takes, like, an hour, and it's horrible. So, uh, i- if, if there's a bunch of Zoox running around and people are going in and out, uh, as they need to 'cause they call them on their phones, life gets a lot better in San Francisco- Oh, yeah ... and probably everywhere.
Matt LeDucq: You, you take one of the Waymos around and it's, you know, if you take it for a few miles, it's 10 bucks, right?
And that's today. Like, that's, that's, that's in the, uh, the early innings of this and, like, it's gonna get cheaper, right? I mean, we, unfortunately, we pay a lot more on batteries, for batteries in this country than we do in other countries, like, uh, for a host of reasons, like some good, some bad. Like, but those batteries are gonna get really cheap, and those Zoox cars are basically, like you said, that, that is a very stripped down version of a, like, the Jaguars are a more traditional, has a bunch of bells and whistles.
Like, the future of this stuff is, like, it's gonna get cheaper and cheaper. We're gonna have all this parking, all this garage, you know, converting. Yeah, and then to your point, like, when you're talking about what this means in, like, cost and affordability, it's like, well, all of a sudden- SMUD starts looking pretty amazing to me, right?
'Cause it's a lot cheaper than the PG&E, and if I'm really replacing, you know, not only, like, all these fuel costs, but, like, these robots that are taking over people's jobs, like, it's, it just starts being, like, a, a fascinating, like, game to play out and see how it all look, you know, when my kids are 25, 30 years old, 20 years from now.
Joe Muratore: Back to the, uh, have a beer and play it out qu- you know, idea. I'll, I'll throw this one out, and then I'll add a question to it at the end, which is, like, what does the actual cost per mile change, like, in cents from, you know, today with, uh, combustion engines and, and drivers to, uh, autonomous and, uh, electrified?
But, but the, uh, the thought experiment is this, um, y- supply and demand become closer as, as AI figures out how to get raw materials onto boats or, or rather into, into factories, then onto boats, then into ports, then onto trucks, then into, you know, warehouses, then into last mile and vans and just truck.
Like, it's not that much of a math equation to go from minerals to, you know, whatever to, uh, A- Amazon at my door or Tesla at my door or Maersk or... I, I don't know who the, uh, you know, who, who the overlord is here that, that brings it all together and, and, and probably that's hard to do. But, uh, w- the more robots, the, the easier it is to make it work with less bureaucracy and more of a click of a button that maybe you're not even clicking anymore because AI clicked it for you.
But-
Matt LeDucq: Well, there's a reason- I think- ... why Amazon's invested in us. There's a reason why Amazon's a big investor in Zoox, right? Like, this is all, like, to your point about how, where does this go? I mean, like, when we model out the i- impact of higher utilization on infrastructure 50% cheaper than it is today, and it's already in the money.
Like it, it gets-- it just continues to get more affordable the higher you push up the utilization. And there's also some stuff around, like you can be a little bit more dynamic with when you're operating, again, because you're not on this like eight, 10-hour, 12-hour shift cycle that is driven by people. Um, it's a, it's a really fascinating thing to play out and, and think about.
But it is-- the net-net of this is that it gets a lot cheaper. And like, again, like going back to like this sounds like an ex- a science experiment to some, but like, you know, I was at the Port of Rotterdam. Like, uh, if you go to a port in Shanghai or if you go to Busan or one of these ports, like I was, I was in a port last year in Rotterdam, and not a single human being touched anything from the time that ship pulled into port until the pin was put in at the truck.
So crane took container off, dropped it onto what's called a bomb truck. Bomb truck took it to a yard. Another crane picked it up, put it in a pull pile. Another crane put it on the back of a truck. Zero humans, not a single person on that port. And that is like, you know, eventually going to be, you know, that ship is going to be loaded without people touching it.
It is going to be unloaded, and then these goods are gonna be moved. They are going to be taken to a warehouse. They are going to be transloaded or broken down, and then they are going to be put into the either regional delivery or the last mile delivery that we get at our house all the time with Amazon and like it's going to appear.
And there's nothing that we need to invent today to make that happen without it actually having a person touch it I don't wanna say this like, the people part of this is really important too, right? Like, what are we gonna do with all these jobs? What are we gonna do with all these people? I, and I don't have a good answer for that.
I just, I, I know that what can be done today is already in parts and pieces to employed all over the place, right? Um, and it's only gonna come together more and more, and it's good, right? Like, from a, from a cost perspective. I think it's gonna be a challenge on the job side.
Joe Muratore: Quickly to get it out there, I, I think I heard the stat that it's, like, 60 cents a mile for trucks to move now, and like you said, you're 20% utility.
If you go to 60% utility, and you're autonomous, and you're electrified, and there's enough grid to support, so let's move a few, five years forward. First off, what is a fully burdened cost now considering utility of the trucks, and, and what is a fully burdened cost, you know, in a not too distant future?
Matt LeDucq: Yeah. Like a, uh, you are looking at about 15 to 20% cheaper, um, on heavy duty trucking, specifically within the port system, like, on, on electric with modest utilization. It's only, it's only going to get better. The grid is only going to get more dynamic, and that is a longer conversation about how that happens.
But I'll just say, like, there are a lot of surplus electrons that we don't use, and then there are electrons that we desperately need for a few hours out of the year. Like- There are a lot of ways that are going to make this more cost effective. The cost of batteries, the cost of trucks, the increase in utilization, the ability to site these in utilities with fundamentally lower economic costs, like I said at the beginning, so you just kind of get a button right off the top.
Like, it keeps getting cheaper. Um, and it'll do the normal thing that new technologies do, which is, you know, make great advancement, setback, great ad- but on the net, like when, you know, as we talk about this, like ten, 15, 20 years from now, like this will be a very, very cost-effective way to do things.
Joe Muratore: So help me-- help us see the future here.
It's, you know, 20- it's the end of 2025. Had to think about that. It's 2030. How is the world different? And then it's 2035, how is... Not how's the world different, how's the Western US different? In 2030, 2035, and then 2050. And, and, uh, start with the idea of being a little bold in your prediction. Uh, we, we could back it up after that, but we're here to see the big shifts.
Matt LeDucq: I'll use a baseball analogy, right? So, like if we're really, I mean, we're really in the first inning of, of kind of a, a switch to electrons, like whether that be AI, whether that be robotics or transportation, like first or second inning here. Like, and by 2030 we're in the third or fourth inning. What does that, what does that really mean by then?
I think this like fascinating political debate about whether or not this is a, a politically aligned technology is put to bed, right? It is like, I think people, uh, stop associating a technology with policy makers and they see, you know, at this point that like, this is just a fundamentally cheaper way. And what that means is that there is a Substantial, like 20X amount more vehicles and automation on this grid.
And by then you're going to see something turn into a speculative asset class, into like a more core asset class by then. It'll be a much more stabilized industry, much less policy dependent, and that is going to infuse a boatload of capital into it that is, in a current environment, more risk adverse, and it's going to stimulate a bunch of new investment, and that new investment is going to be based on a new model, right?
It is going to be based on a model of not what we have today, but what it will now, like, not theoretically look like, but is inevitably going to look like. And so you have a substantial 10, 20X amount of vehicles and that, and that is now centering in places like West Phoenix. That is centering in places like Reno.
That is centering, you know, de- you know, here you are going to have things in Modesto Irrigation District that are more attractive than down the road in PG&E and SMUD, and, and you're going to have things gravitating because now this is going from a few percent in an idea to, like, a really core part of the OPEX of how a business runs.
And the things that were tertiary considerations of today will be primary considerations in 2030.
Joe Muratore: Our company invests in secondary and tertiary markets in the West, and we're looking for, uh- Cities that have tailwinds that show them as winners five years from today that are, are not fully, uh, understood currently.
Uh, and, and so this... So part of the interest for us is, okay, where, where is the grid moving that adds tailwinds to our thesis or shows cautionary spots that might help us make different decisions? Also, as a secondary and tertiary markets company, we are, uh, a little biased towards primary markets, so, uh...
Or biased against primaries or larger markets. So, so take that into account. But, um, for fun here, let's try and pick some winners and losers. And, um, some winners that come to mind are, uh, the west side of Phoenix, Las Vegas, Reno, Fresno, Salt Lake City, Albuquerque, Bakersfield, Spokane, St. George, and Pueblo.
The idea that... Pueblo, Colorado, also Colorado Springs. But the idea that these are, uh, sort of inland cities that benefit from additional, uh, distance, they benefit from affordability, and they benefit from quality of life. Uh, some losers: LA Basin, Bay Area, San Diego, Seattle core, Portland, both for political reasons and, uh, proximity reasons and affordability reasons.
Tell me, tell me where I'm wrong or tell me where I'm right.
Matt LeDucq: As a just strictly power guy, right, like I, I think of, um... The reality is, is the municipal power, and, like this is a, a tough one because I, I do, I do believe in the power of a free market. But, like, municipal power just tends to be b- like, universally cheaper.
Like Colorado Springs, I've done a lot of work for the municipal utility there. It's a very, very well-run municipal utility. It's very cost-effective. Sacramento, I've said that a few times, like Salt River Project in Phoenix. Like, when I think about, you know, s- the names on that list, my brain in power, I think about who is the utility that serves that city.
Um, you think about a lot of other things. Uh, but like, when I think of Bakersfield, I think like, "Yeah, Bakersfield is great. It's also PG&E." When I think of Fresno, I think, yeah, Fresno is a good... You know, there is a huge need in that area for a lot of things and, like, the growth and, like, you know. To your point, like, think about how, how much more distributed we can be now as employees, like, versus even five years ago pre-COVID and, like, how that and Zoom changed everything.
Like, we see the ability to kind of be anywhere, and that's gonna be more and more. And then that, now you're gonna take, like, the actual transportation and, and labor side of that out It's, it's going to continue to change dramatically. I think of places like Sacramento, who has a fundamentally good cost.
Municipal utilities, to my, my point that I was getting at, are historically always cheaper. That's on the average, and there are always exceptions, but they tend to be more cost-effective. And the more and more of your business that is counting on that input, which is the cost of power, the more and more you're going to gravitate towards places that kinda have that nexus of affordable real estate, like you said, buildability.
Like I, I'm always looking at there are places we both know that we want to permit things, and there are places we would never want to permit things. Like, and I would, I would start going that through your list and thinking of places like a Sacramento. I think that NV Energy in Nevada has Really good rates.
Like you said, West Phoenix, that is a, that is a spot where your and my list would overlap because I see what SRP has done. Um, they have a, you know, they have a good advantage on the rates. Like, they are 15, 20% cheaper per my AI search on the, uh, that versus APS, which is the investor-owned utility, um, in Arizona.
So to me, like, I think that your list is largely accurate. Like, when you think about core Seattle, you have Seattle City Light, which is actually pretty cost-effective, um, versus Puget Sound Energy. You go out past the Cascades into Ellensburg and those places, you get into some municipal utilities with remarkably good structures, and the distance from a major city center is going to be less and less important for a zillion reasons.
And so that's, like, that's where I, I, I think, you know, Salt Lake, great. Pueblo has its own municipal utility. Colorado Springs has its own municipal utility. And it's not just, like, only municipal utilities. I just... When I think of building assets, I think of, like, where are, where is there a fundamental advantage?
And in my world, right, it is how can I deliver the cheapest cost per mile, um, out of it? And so I think your list is- How much is
Joe Muratore: proximity though too? I mean, uh, it's gotta be on the way to somewhere or between a few somewheres to, uh, drive the economy. I, it, it's great if it's cheap, but if it goes to nowhere, then who cares?
Matt LeDucq: Yeah. And I think, like, you know, when I think of, uh, Reno, when I think of Sacramento, when I think of SRP and I think of, uh, a lot of these places, like, I'm like, ah, there's, there's a nexus of people, things have gotta go that way anyways, um, and, like, the fundamentals of the price per square foot, the buildability, the cost of labor, the cost of power.
That all, that all hangs together in a really advantageous way. I
Joe Muratore: think of Las Vegas, which could be a hub that can serve Phoenix, it can serve, uh, LA Basin. It could even serve the Bay Area, and to the extent you have automated electrified trucking at a, a low cost per mile, uh, it might be... A- and, and frankly in projected- Uh, industrial rent growth, Las Vegas has the highest in the Western US and among the highest in the country over the next five years.
And probably some of that reflects, uh, the centrality of Las Vegas and the ability to serve a, a mega region i- in a way that it couldn't before. But I also look at Fresno and compare it to Reno, and I think, well, I mean, Reno's still kind of in the middle of nowhere, and, uh, Fresno's surrounded by 41 million people, so it's, uh, sort of a cheaper...
And also industrial real estate in Fresno's about half the cost of Reno and about two-thirds of Sacramento. So it's, uh, i- it's a mix of, uh, cost and, uh, and location. These are all, you know, at play, but-
Matt LeDucq: You know, when you and I talked a few days ago, like, I think it would be fascinating to get our analysts with your analysts because, like, to your point, like, if Fresno is just half the cost of industrial real estate, like, at some point, that is just more important, right, than my myopic perspective of what is an electron cost, because that's, that's the world I live in and it's-- Yeah, seeing where these Venn di- Like, th- there's a Venn diagram that you have, and there's a Venn diagram I have.
Like, they're overlapping more and more each year, right? And- I'm
Joe Muratore: trying to bring yours into mine so that I, you know, like I'm leaving this, and I'm like, "Where's the PG&E map?" Like, avoid the map. But you know, that's probably, uh, overstating it. Uh, but believe me, I'm gonna be very familiar with the PG&E map after this.
Matt LeDucq: Yeah. And it's, it, it, it's, it's gonna be like, uh, it's gonna be really interesting. Like, your point about Vegas is like, I did not appreciate how many hundreds of thousands of containers go straight from the Port of Long Beach in LA. I mean, 35% of our country's cargo comes into that port complex. A lot of it goes to Vegas, um, already, right?
Like, and it's gonna g- be more and more each year, right? Especially when you take into, like you said, like both of our, both of our Venn diagrams and, like, what Vegas represents, like, that seems like it has some inevitable outcome to it to me, 'cause they're already going that way in droves. They're already going to Phoenix, and to me, they're only gonna go more there because it's fundamentally better, it sounds like, for you and me to have those markets, like the aperture of our markets now open up into that space.
So, like we're working on a project right now in Vegas as we speak, um, to be able to extend our network out that way because we're getting pulled there already today, um, by both the shippers and the, the trucking companies.
Joe Muratore: Well, Matt, we're 43 minutes into our podcast, so to those, uh, listening, uh, thank you and, um, we appreciate it.
This has been a, certainly a commitment on, on your part. Uh, let's leave with a, Matt, final thought and I'll have a final thought. What's the big aha? What, what's the thing you're taking from this conversation that you didn't start the conversation with and that, uh, from your lens, you might hope a listener might leave with?
And then I'll do the same.
Matt LeDucq: Yeah. I think the thing that I'm, I'm, I'm taking away is that the world is... I mean, and th- and this is kinda like everybody, uh, says this a lot, but like my, running my business without considerations of your business is not gonna behoove me, right? Like, the amazing thing about the advancement of what we're all doing and, and how integrated everything is, is that we're gonna have to be experts on more and more.
I'm gonna have to understand real estate in a much better than my kindergarten level way than I do now, right? And conversely, you're gonna have to understand power, and there's a lot more than that. Like, and I think that, like, as things evolve, like our levels of expertise are just gonna have to get bigger and bigger in order to be able to adapt, right?
Like, we cannot be one-trick ponies anymore. Um, I cannot just be the power guy, um, and you just can't be the real estate guy. And like, and I think about like what that means, and it's just, it's exciting, and it's daunting because we're just gonna have to know a lot, like where fiber is, where power is, like, where future development is.
Like, w- what is going to change? And then it's just gonna make... You know, we're gonna have to be smarter, Joe, like in ways that we hadn't considered, um, because I think we get pulled into our- Our silos, and that ain't gonna be good enough, right? That's not gonna be good enough 10 years from now. Like, we're gonna have to be more dynamic people and all, and capital's gonna have to be more dynamic, too.
Um, and that's exciting.
Joe Muratore: There's knowers and there's doers. There's economists and there's people on the ground, and we, both of us sit in an interesting intersection where we're investing hundreds of millions of dollars on behalf of, uh, other people, and w- we are living, uh, at the intersection of knowing and doing.
And, um, I don't know quite where I'm going with that other than to say I, I totally agree that we have to be smarter, and I, I, I think we have to lean into our boots on the ground as well. I mean, we're actively buying in Colorado and the Central Valley, and we're seeing what, what real estate prices really are, and now I'm gonna start layering in what the cost of electrons are.
What I, what I do know, too, is I- the future, I tend to see the future as hostile, and that, uh, there is change coming and, and that it should be taken as more hostile than not, and more disruptive than not. And when I hear what I'm hearing today, m- my takeaway is, like, you know, you better get to the simplicity on the other side of that complexity fast.
You better get to, you know, 50% native speaker, you know, like almost immediately so that you're not blindsided, so that a new western grid doesn't emerge and you're busy on your real estate island thinking you're smart. And, um, so I'm thankful for today's talk, and, uh, I'm thankful that we're friends. Uh, and I, I look forward to what's next.
So thanks, Matt, and, uh, thank you listeners, and we'll talk to you soon.
Matt LeDucq: Thanks, Joe. Glad to be here.
Welcome to the Durable Value Podcast! Host Joe interviews Matt LeDucq, CEO of Forum Mobility, about the electrification of trucking, the evolving power grid, and the impact on real estate and logistics. Dive into technology, policy, and the future of industrial development in the Western US.
Timestamps:
00:00 – Introduction & Matt’s background
02:00 – The intersection of real estate, power, and logistics
06:40 – How utilities work and why it matters
12:00 – The economics of electrified trucking
17:30 – Global trends: Electric trucks and battery costs
22:00 – Warehousing, population movement, and affordability
27:00 – Automation, autonomous vehicles, and the future of work
33:00 – Urban mobility and the future of car ownership
38:00 – Regional winners and losers in the Western US
44:00 – Analyst perspectives: Real estate vs. power costs
49:00 – The future of logistics and location strategy
52:00 – Final thoughts & takeaways