Microsoft is a major tech occupier of office property in downtown Vancouver
The study by real estate services firm CBRE Group speculates on tech companies’ post-pandemic plans for their office space
B.C. fares well in a new report ranking Canadian cities for their competitive advantage and appeal to tech companies and workers.
In the 2020 edition of Scoring Canadian Tech Talent, a study by real estate services firm CBRE Group, Vancouver and Victoria finish third and seventh, respectively, out of 20 cities. The ranking looks at three main factors: talent availability, quality of labour and cost competitiveness. CBRE also sheds light on what tech companies might do with their office space in a post-COVID world.
Canada is home to almost 900,000 tech talent workers who account for 5.9 percent of the labour force, the report notes. Members of this relatively small group, who work in core high-tech as well as non-tech sectors such as manufacturing, government and health care, have an outsize impact on the real estate market and the broader economy.
There are a couple of dynamics at play, says Jason Kiselbach, Vancouver-based senior vice-president and managing director with CBRE. “The more tech workers you have in a city, the more demand you’re going to have for office space to accommodate those jobs, and also demand for more housing.” Many of those employees are highly mobile, so they tend to rent, creating demand for higher-end apartments near their workplaces in the downtown core, Kiselbach explains.
“And I think you see a net benefit, anywhere that tech offices open up, for surrounding retail,” adds CBRE’s market leader for B.C. “So it creates a bit of an ecosystem, and all those things are a good boost to the local economy.”
It comes down to livability
The top three score drivers for Vancouver, which takes the No. 3 spot after Toronto and Ottawa, were quality of labour, size of the tech labour pool, and number of tech and tech-related degrees. For the purposes of the report, Vancouver mostly means downtown, plus a few businesses along the Broadway corridor and in Burnaby, Kiselbach says.
Vancouver, which earns an A+ for quality of labour, ranks second after Toronto for volume of tech jobs added, with 27,500 from 2014-19. Proportionally, that was the third-best performance in the country, at 47.9 percent. The primary industries for Vancouver’s 84,900 tech workers: software development and digital media and gaming.
“I think it comes down to livability and people wanting to locate here,” Kiselbach says. “So if you are highly skilled and you can dictate where you work and your salary and things like that, you’re going to go where you want to be. And I think that just works in our favour.”
Compared to other cities, though, Vancouver falls in the middle of the pack for a typical tech firm’s wage and rent obligations. The annual average: $39.8 million, versus $82.3 million for the San Francisco Bay Area and $45.4 million for Calgary, the costliest Canadian city. In Vancouver, the top 5 percent of software developers earn a 51-percent premium over the $93,000 average wage, putting them at $140,000. The premium for that group in first-place Ottawa is $160,000—71.1 percent more than the local average.
Kiselbach attributes that partly to people’s willingness to settle for lower pay to live and work in Vancouver. “But it’ll be interesting to watch as more of those larger companies locate here,” he says. “Will that drive wages up?”
For Victoria, the top three score drivers of its seventh-place showing were tech concentration, educational attainment and tech quality to cost. The provincial capital and its 10,500 tech employees—who tend to work in software development, advanced manufacturing and ocean science—get an A for quality of labour. For the average annual cost of running a tech firm, Victoria ranks No. 5 in Canada, at $40.5 million.
CBRE has seen smaller cities expand their tech sectors over the past couple of years, Kiselbach explains. Guelph, Ontario, finishes No. 1 proportionally for job growth, gaining 65.5 percent from 2014-19. “As the bigger cities get more competitive, more costly, some of these companies that are more nimble can look at a place like Victoria or Guelph,” Kiselbach says.
When it comes to attracting workers, Vancouver and Victoria’s high housing prices don’t do them any favours. Measured against the national average of 100, the two cities stand at 123 percent and 114 percent, respectively, for cost of living, according to the survey.
Tech will return to the office
As an infographic in the report highlights, Amazon.com dominates among tech occupiers of downtown Vancouver real estate. Although he won’t name them, Kiselbach says some of the other companies shown are taking steps to grow their footprints. “So if Amazon stays stagnant in the amount of space that they have, you’ll see some others grow relative to it.”
Kiselbach also reckons that when Amazon opens its vast new downtown Vancouver headquarters in a couple of years, the e-commerce giant will generate plenty of local spinoffs by training software engineers and other workers. “So that’s really creating, I think, a snowball effect of good labour that can join other companies and start their own.”
The CBRE report weighs in on the question of what tech companies in Vancouver and other Canadian cities plan to do with their office property as COVID unfolds. “Early on in the pandemic, there were all these headlines around tech’s going to go work from home forever or work remote,” Kiselbach says. “But in the meantime now, you’re seeing some of the larger tech tenants actually take more space, even in other cities like New York or Seattle.”
Whether or not the big tech players make a permanent move to some form of remote work, CBRE doubts those well-capitalized companies will abandon the traditional office. Over the summer, Kiselbach observes, tech firms subleasing their office space was a hot topic. But as he point out, most such offerings have been smaller than 5,000 square feet, and none of the big names has put its property on the market for sublease.
“That leads me to believe that there’s not this paradigm shift happening like a lot of people thought,” Kiselbach says. “They’re thinking long-term, and they’re thinking more about how do we maybe redesign that space that we have to make it a little bit more hygienic or safe. But it seems to us that the tech industry will be returning to the office.”