Dan Holmes, president of brokerage services for Colliers Canada. (Courtesy Colliers)

Walmart’s recent announcement it will create a new global tech hub in Toronto is another indicator of both retail’s increasing reliance on technology and the Greater Toronto Area’s growing importance in the sector.

Walmart Global Tech is the fastest growing corporate team at the company and employs more than 20,000 globally. That number grew by 26 per cent during the past fiscal year.

In 2022 the business vertical is focused on hiring cyber-security professionals, architects, developers, software engineers, data scientists, data engineers, technical program managers and product managers.

Several hundred of those jobs will be created in Toronto, beginning with 45 full-time employees — primarily software developers, product managers and technical program managers.

These new hires will work virtually in the near term and eventually transition to hybrid work as the company identifies physical space for routine collaboration, personal development, networking and culture building.

Walmart already has a strong presence in Toronto, which it says is home to 26 per cent of Canada’s tech workforce, while its post-secondary institutions annually produce 25,000 graduates from science, technology, engineering and mathematics-related programs.

Walmart Canada’s growth initiatives

The company announced in July 2020 plans to invest $3.5 billion over five years to generate significant growth and make the online and in-store shopping experience simpler, faster and more convenient for customers.

It is investing $118 million to build a 430,000-square-foot, high-tech sortable fulfillment centre in Rocky View County, Alta., just outside of Calgary, that’s expected to open in September.

Walmart Canada announced at the same time a 300,000-square-foot distribution centre in Surrey, scheduled to open this year, and a 550,000-square-foot distribution centre in Vaughan, Ont. that’s slated to open in 2024.

It also installed new automated systems in an existing distribution centre in Cornwall, Ont. to manage apparel, health and beauty, and other small general merchandise.

Other initiatives included: renovating more than 150 stores over three years and accelerating digitization; expanding the “Walmart Pickup” offering to approximately 270 stores; piloting micro-fulfillment centres and investing in new technology; and improvements to both fulfillment and distribution centres to increase speed and trackability.

Walmart Canada operates 408 stores in Canada, including 152 in Ontario, and has more than 3,800 employees at 11 distribution sites.

Distribution strategies are changing

Dan Holmes, Colliers’ president of brokerage services in Canada, told RENX companies like Walmart have moved from a distribution system focused on having warehouses stocking store shelves to one that will service both traditional retail and the growing number of e-commerce consumers.

“That’s going to require incredible technology to power the Walmarts, Costcos and Amazons of the world to be able to not over-supply their shelving, but make sure that they have just enough to keep consumers happy,” said Holmes. “Some big-box stores are now being converted into warehouse space for e-commerce.

“As e-commerce continues to play such a significant role in how consumers are shopping, they no longer need it to be on the shelves for you and I to walk into the store. They need to have it on the shelves in the right geographic areas so they can get it to (online) consumers within a couple of days.

“That can’t always come from somewhere in the U.S. to get to your door the next morning. They’re converting retail space in these big-box stores to actual warehouse just-in-time space. That’s a relatively new trend.”

If Walmart wanted to open a new distribution centre, it would have to secure land, build a facility and stock it with products, which is a two-year process. That’s why Holmes said it’s looking for other more immediate options.

“In talking to multiple experts, we feel that the global supply chain issues are going to take years to totally sort out. It will be sorted out by leveraging different technologies, opening more just-in-time warehousing and having more logistical space available.”

Why tech companies like Toronto

Toronto’s large population, universities, skilled talent base and high immigration numbers make it a draw for tech-based firms.

Holmes said it’s important companies with major corporate footprints in Toronto aren’t just employing sales and marketing people, but also engineers, coders and other technological experts.

“That takes us to a whole new level. It makes us more of a Silicon Valley-type of tech hub, where the spinoff from individuals working at a large tech firm of engineers come up with a great idea, then they spin off and start their own company.

“That happens quite regularly. Then we really start seeing some of the new tech merge with the old tech and we truly become a more diverse tech hub.”

Meta — the parent company of Facebook, Instagram, WhatsApp and other tech-based subsidiaries — has taken a considerable amount of space in Toronto and is also expected to hire up to 2,500 engineers, coders and other tech-focused employees over the next few years.

“It’s not about the square footage,” said Holmes. “It’s about who’s filling the square footage that makes it so important for our tech ecosystem.”

IBM also recently opened a major new 63,000-square-foot downtown technology hub at the 16 York Street tower, where it’s consolidating operations from four of its previous smaller offices.

Providing space for tech firms

While Toronto-based tech companies used to largely occupy brick-and-beam spaces with infrastructure upgrades to accommodate their needs, they’re now moving into more traditional office buildings due to necessity and several other factors:

– public transit access;

– developers and landlords being more creative in building out and marketing spaces; and

– an increased overall acceptance of being in the financial core.

Though tech firms are among the most active occupiers of Toronto office space, Holmes noted there hasn’t been a significant decrease in occupancy by finance, insurance and real estate companies during the pandemic.

“As occupiers determine their own return-to-office strategies and what they’re looking for in their existing or new spaces, the desire for an increased amount of services and amenities is absolutely at the forefront of all of our conversations,” said Holmes.

These include bicycle racks, shower facilities, gyms, restaurants, collaboration spaces and access to public transit, although ridership still remains below pre-pandemic levels.