Major Canadian cities continue to grow in importance as technology hubs, and a few smaller markets are emerging to join them, according to CBRE’s 2019 Scoring Tech Talent report which ranks the top 50 markets in North America.
“It’s a combination of factors, including high educational attainment, overall size of the tech markets and tech labour concentration, which is the measure of how ‘tech’ a market is,” CBRE Canada vice-chairman Paul Morassutti told RENX. “A sizeable concentration of highly skilled tech workers offers an environment conducive to collaboration and innovation and leads to tightly integrated ecosystems.
“Another big factor is that Canada has attractive immigration policies that make it easier to hire foreign skilled workers, versus the immigration rhetoric coming out of the U.S., which, quite frankly, is to Canada’s benefit.”
Finally, Canada is more cost-effective.
“Relative to the U.S., cost is also a factor as the cost of operating in any major Canadian city is substantially lower than virtually all the American markets and gives Canadian cities excellent value for cost rankings,” said Morassutti .
CBRE’s scorecard uses 13 unique metrics, including tech talent supply, growth, concentration, cost, completed tech degrees, industry outlook for technology job growth, and market outlook for office and apartment rent cost growth.
Toronto third-ranked market for tech talent
Toronto ranked as North America’s fourth-best market for tech talent for the past two years, but rose one spot this year — leaving it behind only the San Francisco Bay area and Seattle.
Toronto’s pool of tech talent also grew at the fastest pace of all 50 markets measured, adding 80,100 technology jobs in the past five years — a 54 per cent increase. Toronto has nearly equalled the number of tech jobs created in the San Francisco Bay area since 2013.
“It is hard to imagine that we will surpass the homes of Silicon Valley and Facebook, Google, Apple, Amazon, et cetera,” said Morassutti. “However, when you factor in the concentration of AI (artificial intelligence) talent in Toronto — and 2018 was considered a breakout year for AI — it is certainly possible that we could move up further.”
Toronto’s biggest tech lease this year is Shopify taking 434,000 square feet at The Well, which is under development. Index Exchange also signed a deal for 200,000 square feet at The Well.
Microsoft signed a lease for 132,000 square feet at CIBC Square, which is also still being developed.
Vancouver had greatest improvement
Vancouver’s ranking rose by 13 spots to achieve the greatest year-over-year improvement of any North American market, and it now sits at number 12. The city registered 42.6 per cent growth in tech jobs over the past five years.
“Vancouver has a skilled workforce that wants to live there, availability of jobs, and the two biggest expenses for operating a tech firm — wages and rent — are significantly lower in Vancouver compared to other cities,” said Morassutti.
“Vancouver also benefits from the pool of tech-centric graduates coming from the B.C. Institute of Technology and University of British Columbia, and its proximity to established tech strongholds like Seattle and San Francisco.”
While Vancouver is smaller than many other technology hubs, Morassutti believes it has enough going for it that its momentum should continue to build.
The biggest tech lease signed this year in Vancouver is Amazon taking 416,000 square feet as part of the Canada Post building redevelopment at 349 W. Georgia St. Kabam took 105,000 square feet at 753 Seymour St.
Montreal ranks right behind Vancouver
Montreal and its booming economy ranked right behind Vancouver in 13th place, buoyed by the fact it’s the most cost-effective major market in Canada for tech talent. The city has a strong foundation in areas such as software development and virtual gaming.
“Montreal is attracting international companies while also experiencing significant growth among the local firms as they seek to hire and expand,” said Morassutti.
Google is taking 100,000 square feet at 425 Viger St. W. GSoft is leasing 81,000 square feet at 1751 Richardson St. Unity Technologies announced it’s creating an additional 450 jobs for its new AI lab, resulting in the leasing of an additional 50,000 square feet in the same building as GSoft.
Cinesite, a visual effects and feature animation studio, also plans to increase its Montreal workforce by 300 employees by mid-2020.
Technology labour concentration in Ottawa
Ottawa ranked 19th on the list and, with 9.9 per cent of its total employment represented by the tech sector, is the second most concentrated tech city. The average concentration rate of the top 50 markets was 4.8 per cent, while Toronto’s was 8.3 per cent by comparison.
“Consistent growth is the number one reason Ottawa is ranked so highly for tech labour concentration,” said Morassutti. “Ottawa has a highly educated workforce and we’ve got numerous post-secondary education facilities that produce a steady pipeline of tech talent.
“Tech now occupies more space in downtown Ottawa than the legal and accounting sectors combined, and is second only to the federal government. Opportunity created this, and now the pump is primed. The tech community recognizes the value of Ottawa and the sector keeps growing, and that’s why we’re running out of office space.”
The office vacancy rate in the city dropped to seven per cent at the end of the second quarter, according to CBRE, a decline of 500 basis points from the previous quarter. In the central business district, it’s down to 6.7 per cent. Two new office buildings under development, which will add more than a quarter-million square feet of space, are almost fully pre-leased.
Skyworks Solutions signed a lease for 50,000 square feet at 1135 Innovation Dr. SurveyMonkeyis taking 47,600 square feet at 200 Laurier Ave.
Canada’s tech “opportunity markets”
Tech growth can also impact the residential real estate market, as high rents and housing prices are causing headaches even for well-paid tech workers in such hotbeds as San Francisco, Seattle and New York City.
Toronto and Vancouver are the only two Canadian cities where that’s a risk, according to Morassutti, who noted “opportunity markets” including Waterloo Region, Hamilton, Winnipeg, Quebec City and Calgary are also emerging.
Hamilton had a 52.1 per cent gain in its technology jobs sector during the past five years, while Waterloo Region had 40.4 per cent growth.
Waterloo Region and Hamilton benefit from proximity to Toronto, world-class university networks and cost-effectiveness. Morassutti said Waterloo’s startup culture, which emerged following the decline of Research In Motion (now BlackBerry), is also driving tech growth.
“Hamilton and Waterloo Region are not in the tech talent ranking because the list doesn’t include smaller markets that have below 50,000 tech workers. But Waterloo would absolutely crack the top 50 were they to be included.
“Waterloo was just behind Vancouver in our ‘Canada Scoring Tech Talent 2018’ report, coming in at number five. And Hamilton was number nine, besting Edmonton, Victoria and Winnipeg.”