Canada's tech talent hubs are riding a wave of nationwide job growth since 2014

Five-year gains buttress tech talent hubs

Canada boasts large and mid-sized markets with strong fundamentals
Thursday, November 19, 2020

Nearly 900,000 workers in technology sector positions comprise about 5.6 per cent of the Canadian labour force and are making their presence felt in the real estate markets of large and mid-sized cities alike. CBRE’s newly released 2020 overview of tech talent hubs charts a positive five-year trajectory and points to some heartening fundamentals for this period of economic flux.

“This year has been an especially challenging one. Canadians can take some comfort knowing that our tech-friendly cities are positioned to thrive,” maintains Paul Morassutti, vice chairman of CBRE Canada.

That follows 22.5 per cent nationwide job growth in tech-related fields in the 2014 – 2019 period. This year’s top-five ranked tech talent markets — Toronto, Ottawa, Vancouver, Waterloo Region and Montreal — have captured a large share of increased employment, but neighbouring cities are also posting spinoff gains, as are some other urban centres in the prairie provinces and Atlantic Canada. However, three of the 20 surveyed cities — Winnipeg, Regina and St. John’s — experienced tech job loss between 2014 and 2019, with St. John’s suffering the most dramatic 18.1 per cent decline.

With the backdrop of a global pandemic, CBRE reports that 40 per cent of major tech firms based in downtown Vancouver, Toronto and Montreal are expanding their office footprint, while just 7 per cent are putting space back on the market. Even so, about two-thirds of Canada’s tech workforce is dispersed throughout various economic sectors rather than embedded in firms where tech is the core business.

“A software developer might work for a logistics company, a health care company, or a real estate brokerage firm,” the report notes. “Today, every company is a tech company when it comes to hiring and innovation.”

Rankings are derived from 13 variously weighted metrics related to how employers and employees view the market, including factors nurturing and enticing the talent pool and costs of doing business and living in the region. This is distilled into a score on a scale of 100.

Toronto earns the overall top spot with 87.6 points and, with two exceptions, is highly placed for all metrics among the 20 cities ranked as Canadian tech talent hubs. On the downside, only Vancouver burdens residents with higher real estate costs and almost every other market, except Calgary, Ottawa and Edmonton underprices Toronto on total occupancy costs, which include commercial rent, taxes and utilities.

Scores for the other top-five cities are: Ottawa, 76.4; Vancouver, 72.8; Waterloo, 69.9; and Montreal, 67.3. In the next three spots, Calgary, Victoria and Halifax post results ranging from 59.5 to 52.6. From there, scores drop below 50 with 19th- and 20th-ranked Windsor and Moncton sitting below 20.

Cost factors to sway employers and prospective employees

Yet, several of the lower-ranked markets also boast favourable ratings for metrics that could sway employers and prospective employees in their direction. Guelph, Hamilton, London and Oshawa are tagged as markets that have benefitted from proximity to Toronto and Waterloo, placing them as an affordable base for start-ups and other companies seeking lower-cost environments that are still logistically in the range of major concentrations of skilled labour and other tech companies.

For example, Guelph, ranked 12th with a score of 40.6, has enjoyed the highest percentage increase in tech related jobs, with 65.5 per cent growth from 2014 to 2019. Tech jobs now account for nearly 6 per cent of the city’s total labour force — a higher percentage than in Calgary — while employers see the second lowest operating costs of the 20 tech talent hubs.

“These areas may benefit further as young talent considers leaving major markets in the wake of the pandemic and businesses embrace more remote work,” Morassutti projects.

Among the top five markets, housing and living costs are pegged above the Canadian average in Toronto, Vancouver and Ottawa; on par with the average in Waterloo; and slightly below the average in Montreal. The benchmark housing price ranges from $1.04 million in Vancouver to $408,000 in Montreal.

For employers, Toronto is deemed the 4th costliest market in which to operate with combined labour and rent costs averaging to $40.8 million annually. Comparably sized companies would be costlier to operate in Calgary, Ottawa and Edmonton. However, there is a relatively small gap among many of the cities. Montreal presents the most affordable scenario in the top five, with combined labour and occupancy costs averaging $39.4 million, slotting it as the 12th costliest market in the group of 20.

A total of nine cities register average annual operating costs between $40.8 million and $39.4 million. Relative bargains in eight other cities range from $38 million in Winnipeg to $33.1 million in Moncton. In contrast, the report points to the higher annual operating costs in leading tech industry markets in the United States — estimated at an average of CAD $82.3 million in the San Francisco Bay area, CAD $70.7 million in New York City and CAD $67.7 million in Seattle, for comparably sized companies.

“From the North American perspective, the skilled pool of Canadian tech workers paid in discounted Canadian dollars is a significant draw for companies contemplating where to expand operations. With several cities presenting excellent or very high quality labour at a less prohibitive cost, Canadian cities often come out ahead in this respect,” it observes.

Sources and lures for a skilled workforce

Looking at the sources of and lures for that skilled labour, universities play a key role in producing required tech talent while city lifestyle and amenities influence where tech graduates may choose to settle. Both employers and prospective employees also tend to gravitate to markets with a sufficient concentration of tech sector firms to provide competitive opportunities for career mobility and talent recruitment. In turn, that confluence of labour and capital typically fuels still more growth.

Toronto’s tech talent pool, estimated at 250,000 workers, is considerably deeper than any other Canadian market. The next largest tech workforces are found in Montreal (141,600), Vancouver (84,900) and Ottawa (76,200).

Ottawa has added significantly fewer new positions to that complement, at 1,100 jobs or 1.5 per cent employment growth, in the past five year than has been recorded in the other three cities. They all saw tens of thousands of new jobs, with growth rates ranging from 19.3 per cent in Montreal to 47.9 per cent in Vancouver. However, tech workers account for a larger share of overall employment in Ottawa, at 11.3 per cent, than any other city. Ottawa tech employees also enjoy best-paid status with a sector-wide average wage of $93,000 annually and the top five per cent of salaries averaging $160,000 annually.

Although it’s ranked 4th overall, Waterloo Region is categorized as a mid-sized tech market due to its smaller workforce of 22,400. That number reflects a 51.6 per cent gain in tech jobs over the five years from 2014 to 2019. Employers can expect lower real estate costs with annual gross rent for a 75,000-square-foot space in Waterloo Region pegged at roughly $1.85 million versus upwards of $2.5 million in the other four top-five tech talent hubs.

Waterloo Region’s tech workforce is additionally deemed to be of “exceptional quality” — status also conferred to Toronto and Vancouver. Six other cities — Ottawa, Calgary, Victoria, Edmonton, London and Guelph — are defined as providing a “very high quality” tech pool.

Yet, neither of those designations is tied to a measure of workers’ brilliance. Rather, the descriptors are based on the ease of obtaining tech workers, which is a measure of the yearly number of graduates with technical degrees, and the costs incurred for high-level employees, which is a measure of the gap between average tech wages in the market versus the top five per cent of salaries.

“From a value perspective, Edmonton and Toronto rank very well, with high quality talent at slightly discounted rates. Also scoring well on this quality versus. cost scale are Calgary, Victoria and Guelph,” the report states.

Four of the top-five cities are home to the Canada’s top four institutions for computer science education, as cited in the Maclean’s magazine annual ratings: University of Toronto, University of British Columbia, University of Waterloo and University of Montreal. Elsewhere, several other Canadian universities produce annual complements of well trained graduates, while job candidates also steadily arrive from outside the country.

“Thankfully for Canada’s tech landscape, our accommodative immigration policies have meant that good, high and very high concentrations of quality tech talent are available across the country. This is true even in the moderate and lower-cost markets, providing employers with a breadth of options,” the report observes.

“Tech drives everything so it’s great to see our major markets do well, but it is also encouraging to see tech talent pools growing in smaller cities. The more areas that are plugged into and benefit from the economy of tomorrow, the better,” Morassutti concurs.

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