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Canada’s smaller cities carve out slices of technology pie

It’s no surprise Toronto remains Canada’s top technology market, but some smaller cities are maki...

IMAGE: CBRE's Paul Morassutti. (Courtesy CBRE)

CBRE Canada vice-chairman Paul Morassutti. (Courtesy CBRE)

It’s no surprise Toronto remains Canada’s top technology market, but some smaller cities are making inroads in the field according to CBRE’s new Scoring Canadian Tech Talent Report.

“Some of the larger players out there who are just desperate to find really good, young tech talent are beginning to realize that there’s an untapped pool of talent in smaller markets right across the country,” CBRE Canada vice-chairman Paul Morassutti told RENX.

The gross domestic product of Canada’s high-tech sector outpaced the overall economy three-fold from 2013 to 2018. Several American companies have chosen to expand in Canada in recent years due to our deep talent pool, university output and cost-competitiveness.

Toronto added 80,100 tech jobs between 2013 and 2018, for growth of 54 per cent, far outpacing the nation’s other leading tech centres. There were 161,700 tech jobs added nationally during that period.

Ottawa, Vancouver, Waterloo Region and Montreal round out the top five in CBRE’s report, which ranked 20 markets using 13 metrics, including availability of talent, quality of labour and gross operating costs.

Technology super-clusters help

Victoria climbed three spots to No. 7 and Oshawa rose two spots to No. 12, as they made the largest year-over-year improvements.

Morassutti said Victoria has benefited from the federal government’s super-cluster initiative.

The program identifies areas of the country for specialization and provides funding to foster collaboration between startups, large companies, academic institutions and not-for-profit organizations.

Victoria and 11th-ranked Halifax have both become hubs for ocean sciences technology, while clean tech is big in sixth-ranked Calgary.

There’s a heavy focus on artificial intelligence in Toronto, Edmonton and Montreal, with the latter also having a history in gaming and digital media along with eighth-ranked Quebec City.

Vancouver has been known as a provider of software services.

Oshawa isn’t far from Toronto and, while General Motors has made headlines over the past year for laying off assembly-line workers at manufacturing plants, it’s been hiring coders and engineers for local autonomous vehicle research.

Hamilton at No. 9 and Guelph at No. 13 recorded the fastest tech job growth among mid-sized and small tech talent markets.

Morassutti said both cities benefited by their proximity to a Silicon Valley North corridor between Toronto and Waterloo Region.

They also offer greater availability of office space compared to downtown Toronto, operational cost savings and untapped talent pools. Hamilton has also created an area of specialization in autonomous vehicles.

“There certainly are markets and regions that have carved out niches for themselves, which have allowed them to differentiate themselves in the market,” said Morassutti.

High tech concentration in Ottawa

Ottawa has a 9.9 per cent concentration of tech workers, nearly double the Canadian average of 5.3 per cent and only slightly behind San Francisco’s North America-leading 10 per cent.

The Ottawa suburb of Kanata has Canada’s largest tech business park, Kanata North Technology Park, which enhances its concentration.

The neighbouring Nepean area is also home to the first integrated test track for autonomous vehicles in North America. The multi-million-dollar L5 Ottawa contains 16 kilometres of private roads, buildings, signals and test areas.

It opened in May and helped attract a significant nearby research and development office facility constructed for Ford.

While professional, scientific and technical services industries generally account for the largest number of tech employees, Ottawa goes against the grain since the majority of its tech workers are in the public administration sector owing to the city’s status as Canada’s capital.

Waterloo Region and Quebec City, which represent a combined 5.8 per cent of the Canadian tech landscape, have tech concentrations comparable to those of Toronto and Montreal.

Education is a factor

Montreal has three of Canada’s Top 10 university computer science programs and produces the highest volume of tech graduates, followed by Toronto, Vancouver, Waterloo Region and Ottawa.

Tenth-ranked Edmonton and Halifax each produce more than 1,000 tech grads annually.

Morassutti said post-secondary institutions in some smaller markets are producing plenty of tech talent. Some graduates choose to stay “where there’s a burgeoning tech ecosystem, and don’t feel that they have to necessarily move to Toronto or Vancouver.”

Morassutti referenced a conversation with a Halifax tech executive who said his city has benefited from not having direct flights from San Francisco. That allows it to be under the radar of some large American companies who might otherwise try to poach the city’s talent.

The largest Canadian venture capital deal this year was the $515-million recapitalization of 17th ranked St. John’s, N.L.-based Verafin, a leader in the financial crime management software industry.

“That is an example of just how diverse the tech industry in Canada has become and how widespread it has become,” said Morassutti.

Comparing costs

While Toronto and Vancouver are considered the most expensive office markets in Canada, the CBRE report showed Calgary, Edmonton and Ottawa have the highest combined rent and wage costs, at more than $40 million per year, based on a company having 500 employees occupying 75,000 square feet.

“In Edmonton and Calgary’s case, I think the elevated wages that are paid to tech workers, and even rent costs, are a bit of a legacy factor left over from the energy boom,” said Morassutti, who added the large public sector presence in Ottawa impacts wages across all sectors.

Canadian tech markets overall are significantly less expensive than those in the United States.

While Calgary is the most expensive Canadian centre at $45.7 million (using the CBRE 500 employees occupying 75,000 square feet criteria), the priciest American market is the San Francisco Bay Area at $77.4 million.

The most affordable Canadian markets were 20th-ranked Moncton, Quebec City and 14th-ranked London, where CARFAX Canada recently closed on 48,555 square feet. Montreal is the most cost-competitive of Canada’s large tech centres.

Co-working space isn’t going away

Both tech startups and larger companies that don’t have a firm handle on what their office needs might be in the future are looking to co-working and flex space sites to avoid signing long-term leases and the upfront costs of tenant inducements.

Co-working sites represent 1.6 per cent of the office space in Canada, according to Morassutti.

Canadian-founded flexible real estate company iQ Offices secured a 17-year lease in Ottawa’s parliamentary district this year.

“We think the business model will continue to evolve but, in general, co-working and flex and agile space isn’t going away,” he said.

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