Move Over, Silicon Valley
Friday Jan 26th, 2018Share
Toronto’s tech sector hasn’t supplanted Silicon Valley, but it is aggressively jockeying for position, and to some, it’s only a matter of time before Canada’s largest city seriously challenges the American hub for supremacy.
To put Toronto’s emergence as a tech hub into perspective, 22,500 jobs in the sector were added between 2015 and 2016—more than in New York and San Francisco combined, according to numbers compiled by CBRE. Twenty percent of all office space demand in Toronto comes from the tech sector.
In the years between 2011 and 2016, 51,300 tech jobs were created in Toronto. While the city is the fourth-largest tech talent market on the continent, it’s the second-cheapest city for tech firms to operate in.
Alphabet, Google’s parent company, announced the development of a smart city along Toronto’s waterfront, and incubators like Ryerson DMZ, OneEleven, MaRS and Thomson Reuters either have offices or are building them in the city.
“Contextually, Toronto is one of the most talked about cities in the world right now when it comes to being an employment market for technology companies,” said David Cairns, CBRE’s associate vice president, office leasing.
“One of the other things I’m finding to be really interesting is that we’re starting to see a lot of ‘scale-up companies’ – the next iteration of start-up companies, which are very well-funded and sophisticated.”
Cairns says that, as the companies mature, they’re flocking to office space in the Financial District.
“They may have situated themselves in Downtown West or Liberty Village, but now they’re realizing they need to be centrally located,” he said. “We’re seeing as these companies grow up, they’re starting to think the way large organizations do to attract the best talent, and from a real estate perspective that means access, so that’s the core of the city.”
Another reason Toronto has become competitive in the tech world is Canada’s open immigration policies and exchange rates American companies find favourable. Even the city’s real estate, while expensive, is competitively priced on a global scale.
“Our employment and real estate costs are quite a bit less than a lot of other major North American cities,” said Cairns. “I don’t want to diminish how much it costs to live here, but for U.S.-based companies, when they consider the exchange rates, the cost to employ an engineer might cost only two-thirds as much here in Canada than in Silicon Valley.”
Rick Declute, owner of Union Realty, says that in addition to downtown, tech companies will likely headquarter in the east end near Quayside, the Alphabet smart city, because although Toronto is habitually mentioned in the same breath as New York, L.A., London and San Francisco, its commercial real estate is comparatively affordable, especially in the east end.
“When you deal with commercial sector buyers, or lease agents, they’ll be looking in multiple places and they will look to prices in these cities as reference points,” he said. “There is a lot affordable commercial space once you get into southwest Scarborough, but especially with something like Quayside, commercial space in the east end will have more pressure on it and make it more in demand.”