Atop the Complexe de Gaspé in the Mile End neighbourhood sits Ubisoft Montréal’s newest workspace. The video game developer’s worldwide brand logo is rendered as a set of four illuminated geometric archways over each of the two interior staircases. Photo by Frank Desgagnes
“Technological evolution continually influences the way we live and how we work.” This thought process guides a new research project by CBRE Limited that explores the growth of the tech industry, including its impact on real estate and prominence in different cities across Canada.
Titled the 2016 Scoring Tech Talent Report, the document focuses on established companies with more than 1,500 employees, analyzing “labour market conditions for highly-skilled tech workers” and ranking 10 Canadian cities “according to their competitive advantages and appeal to tech talent workers and tech employees.” Ultimately, the report aims to provide insight into the industry, helping tech-savvy Canadians pinpoint the most desirable cities to set up shop.
“The number of tech jobs has soared in Canada in the past five years, with nine out the 10 top Canadian markets recording growth. Of those nine, eight recorded double digit growth rates. The tech sector is becoming ever more critical by the day to the Canadian office market, with technology firms accounting for 16.1 per cent of all major office lease deals in Canada last year. This percentage increases markedly in our larger urban areas, for example tech accounted for 43 per cent of all leases in Ottawa last year, and it’s a trend we only see growing in the years to come,” says Raymond Wong, Head of Research at CBRE Canada.
Twinwall polycarbonate partitions brighten private meeting rooms with filtered coloured light. Photo by Frank Desgagnes
According to Statistics Canada, the term “tech talent” refers to highly-skilled, sought-after employees working in technological fields. As of 2016, “more than 715,000 tech innovators at established companies across Canada are working on technological advances”— 28.7 per cent are computer programmers, software engineers and web developers, while 21.7 per cent are information systems analysts and consultants. Other talented techs include user support technicians (12.1 per cent); electrical and electronics engineers (10.2 per cent); computer network technicians (9.7 per cent); computer and information systems managers (8.5 per cent); database analysts and data administrators (4.1 per cent); mechanical engineering technologists and technicians (2.9 per cent); and information systems testing technicians (2.1 per cent).
These tech talent workers account for 4.7 per cent of the country’s total workforce; and although these employees are concentrated in the high-tech industry, they are considered to be a driving force of innovation in a variety of companies across the economy itself.
In its report, CBRE states that “the rise in technology enabled mobility and the need to pursue talent wherever it is located has encouraged technology companies to spread to markets across Canada.” Indeed, tech occupations are growing tremendously and developing rapidly in numerous cities: but some are more advanced than others. Using 13 metrics to pinpoint four indicators of success—Employment, Education, Tech Industry Outlook and Real Estate—CBRE determined the Top 10 most desirable cities for tech workers and companies based on their competitive advantages. The result lists Toronto as the top tech talent market with a score of 83.94 out of 100, followed by Vancouver (67.25), Ottawa (61.26), Montréal (58.80) Calgary (50.37), Halifax (34.19), Edmonton (34.06), Waterloo (32.52), Winnipeg (16.88), and London (12.99). Here’s why.
CBRE notes that “demand for tech talent across all industries is growing,” and in large cities like Toronto and Vancouver, the economy can accommodate a deep pool of talent. From 2010-15, Toronto saw a 35.6 per cent growth in its tech occupations alone, compared to 50.1 per cent in Vancouver. Clearly, companies and employees see opportunities in these big cities and are drawn to them as a result.
However smaller markets are just as capable of attracting talent. In fact, both Waterloo and Winnipeg beat out the big cities from 2010-15, reporting 74.4 per cent and 58.5 per cent growth in tech occupations, respectively. The affordable business and living costs in these smaller cities make them desirable in comparison, and has led to competitive advantages in the long run.
Though employment in tech occupations is growing everywhere, CBRE notes that highly-skilled tech talent workers seem to be concentrated in Toronto, Montréal and Ottawa alone. More specifically, “Toronto’s tech employment base contains 25 per cent of Canada’s tech talent,”followed by Montréal with 16 per cent concentration, and Ottawa with nine. Reasons for concentration are varied and relative to competitive advantages (including real estate costs and wages, as described below). However, it is clear that these cities contain “a sizeable concentration of highly-skilled workers,” resulting in prosperous tech environments “conducive to innovation.”
Similar to employment, education affects the concentration of tech talent in Canadian cities and helps to determine ranking in the tech talent report. According to CBRE, high educational attainment —defined by the achievement of a minimum university degree —is a visible aspect in the top tech talent markets. Specifically, “all 10 of the largest markets have an educational attainment rate above the Canadian average of 28 per cent.” Simply put, highly educated individuals are desirable in all fields, and in Canada’s tech markets, “demand for these skilled employees is very strong.” Thus, educational attainment rates contribute to the overall ranking of cities in CBRE’s report.
Of the Top 10 cities, Ottawa leads with more than 40 per cent of the working population having received a university degree. Following close behind, Toronto, Halifax, Vancouver, Calgary and Montréal have all reported attainment above 30 per cent.
Tech Industry Outlook
In terms of outlook for the continued growth of the tech industry, CBRE looks to millennials and start-up cities as a guide. Millennials are increasingly attracted to tech-centered jobs, and have “exhibited a preference for living in cities rather than suburbs”— two factors which have contributed significantly to the labour pool of talent in the Top 10 cities nationwide. Many tech companies tend to cluster around universities, ensuring a consistent flow of talent, especially in cities with a high educational attainment rate. According to CBRE, “tech companies use these clusters to collaborate and compete with one another, thereby accelerating the innovation process in the market.”
Start-up cities are similarly good indicators of the future of the industry. CBRE claims that “while there is much to be gained from analyzing larger tech-companies, as they have the ability to move markets and provide a representative sample of what tech tenants require, it is also important to recognize the next generation of tech talent.” Simply put, vibrant startup companies have a strong ability to attract talent, and can easily grow to become tomorrow’s tech giants.
As mentioned above, tech talent accounts for only 4.7 per cent of the country’s total workforce; and yet, this small group greatly affects commercial real estate in Canada. “Employment growth in tech occupations has a multiplier effect that positively impacts economic growth, which has an immense impact on commercial real estate in that market,” says the report. High-tech companies accounted for 16.1 per cent of all significant office leases in 2015 —equivalent to two million square feet of space —resulting from the addition of almost 140,000 new tech jobs over the past five calendar years. Ultimately, rising rents and declining vacancies are reported across the board.
Of the 10 cities reviewed, Vancouver has the most expensive office rents on average, followed closely by Calgary and Toronto. Yet competition is strong is all cities, as companies continue to cluster and seek unique spaces to transform into creative hubs.
Tech talent has also proved influential on the residential real estate market. CBRE notes that “these highly skilled and educated workers command on average 45 per cent more than non-tech salaries in Canada”; and thus, tech employees can afford to live in five of the 10 cities that contain costs of living above the national average. Employee wages are the greatest cost to tech companies, followed closely by real estate costs themselves.
A crucial consideration of the project was how to maintain confidentiality of the work while remaining open for collaboration. Photo by Frank Desgagnes
CBRE’s final scorecard concludes that Toronto is the market leader in terms of industry outlook and tech talent, and thus places it in the number one spot of Top 10 cities. However, the report uses the salary of 500 employees and a fictional 75,000-sq.-ft. office lease to shine light on the realistic cost of operations across the board. “What’s interesting to note is that the markets with the highest rates of tech jobs growth, Waterloo, Winnipeg and Halifax are all in the bottom half of our rankings of overall cost to operate. It’s clear that firms are targeting cities which provide a cheaper access to labour, but also provide educational attainment levels which are markedly higher than the national basis,” says Wong.
Employee wages are by far the greatest cost within tech talent markets. These highly skilled and educated workers command, on average, 45 per cent more than average non-tech workers in Canada. Calgary, surprisingly, came out as the most expensive tech market for employers. This was driven by higher wages, at an average of $83,000 for tech workers, as salaries remain elevated following a strong energy market performance. This was approximately $3,500 higher
than the next expensive market, Ottawa. With increasing office vacancy and further energy market job losses, the overall cost in Calgary is expected to decline in the coming years.
Amenities at Ubisoft include a large gathering space at the main entrance, a plant-filled meditation room with a view for contemplation, open-air brainstorm areas covered in (Walltalker) magnetic whiteboards and of course, the prerequisite video game lounges. Photo by Frank Desgagnes
CBRE concludes that cities like Toronto and Vancouver, though highest on the desirability scale, sit somewhere in between smaller markets like Ottawa and London in terms of overall cost. “Despite the higher cost of real estate in Toronto and Vancouver, this is dwarfed by the cost of wages. So lower salaries than other Canadian cities still make these large tech centres an affordable option for many companies. When you add in that in these two cities over a third of the labour pool is university educated, and they already provide established tech networks and communities, its little wonder that many international firms are looking to set up shop there. Compared to the top 50 most expensive North American tech markets, Toronto and Vancouver are 49th and 50th in the rankings, assisted by a low Canadian dollar. This makes these two cities a relative bargain for U.S. tech firms looking to expand further north,” says Wong.