Toronto is North America’s fastest growing tech market, outpacing New York and San Francisco combined, according to CBRE’s fifth annual Scoring Tech Talent Report.
The report, which ranks 50 U.S. and Canadian markets according to their ability to attract and grow tech talent, also shows Toronto is the second-cheapest place to operate a tech firm. Even Oklahoma City, the cheapest U.S. market at US$33.9 million, is more expensive than Toronto where a 500-person tech firm costs US$25.9 million.
“Not only are we a cheaper market to operate in, Toronto also provides international firms access to both the city’s high-quality talent pool and Canada’s immigration policies that allow them to recruit and bring over the best talent from around the world,” says Werner Dietl, executive vice-president and GTA regional managing director of CBRE Canada, who adds the city is a great melting pot for workers coming from abroad.
Where is tech talent coming from?
As the fourth largest tech talent market on the continent, the more than 212,000 tech workers in Toronto are a mix of domestic and international talent. This number has increased 32 per cent over the past five years and is mainly coming from regional universities like the University of Waterloo and the University of Toronto.
Both universities have recently accelerated their computer and information science programs, which have boosted the tech labour force in the past year.
“When you consider we’ve added more tech jobs from 2015 to 2016 than New York and the San Francisco Bay area combined, it shows just how vibrant Toronto’s tech industry has become,” says Dietl. “Tech companies now comprise over 20 per cent of all current office space demand in the city.”
Artificial Intelligence (AI) is helping to drive this job increase. The industry is quickly establishing Toronto as a global leader in technology and pulling in students from local schools. The University of Toronto, for example, recently helped launch the Vector Institute, which aims to be the world-leading centre for AI research and is currently collaborating with Ontario’s academic institutions and companies to drive national commercialization of AI technologies.
This academia-industry-government initiative is located in the MaRS Discovery District, which takes up a whole city block near the university.
Top regional universities are also producing alumni who are vastly contributing to the start-up pipeline and starting competitive companies like Markham-based Real Matters, a global provider of financial services for the mortgage and insurance industries and Pivotal Software in the financial district, which draws on local leadership in mobile application development.
The Toronto-Waterloo Region Corridor in general, a hub of high-growth tech companies, has close to 5,200 startups, with a strong support network of universities, incubators and accelerators, and is actively finding ways to become a top global supercluster.
How is the tech market impacting commercial real estate?
Downtown Toronto experienced the lowest vacancy rates ever during Q2 2017, dropping from 4.6 per cent in Q1 to 3.8 per cent.
“Vacancies are going down and rental rates are rising,” notes Deitl. “We’re also seeing an effect in suburban markets as tenants there are looking at either setting up a satellite operation downtown or growing where they are in Markham, Richmond Hill or Mississauga—other markets high-tech folks tend to migrate into.”
Being on the frontlines of commercial real estate every day, Deitl finds more high tech companies calling him up, looking for space, a demand that has doubled over the past five years. Tech companies are absorbing this space, but other complementary companies—consulting firms, private equity firms—are growing as well.
“Tech growth has a multiplier effect on economic growth, which in turn impacts commercial real estate,” he says. “When you think of a traditional sector like banking, when banks grow, complementary companies servicing them don’t automatically grow as well. But tech tends to have that multiplier effect, and that’s why it’s so interesting to look at.”
As for the type of space these firms are looking for, he says the live-work concept and renovated-converted space like that seen in King West is still “near-and-dear to their hearts.”
“That type of space will continue to attract tech companies; however, we’ve seen some bigger companies shift into the core, like Google and Amazon. Tenants will look at both, but what is really important to them is attracting and retaining the best talent.”
What are tech firms looking for as they grow? According to Dietl, space needs be an attractor, but wellness and green initiatives are on the mind of many companies.
Based on what he is seeing, he imagines that Toronto may move up the tech talent scorecard in the coming years admist a flourishing incubator community. Just this past year, the city moved up six spots from 12th to 6th place.
“Toronto has great access to labour, we’re affordable on a North American scale, we also have this almost magnetic attraction for a number of high tech firms because we really are starting to develop some very high caliber talent, we have amazing immigration policies compared to other countries and we have government funding.”