Ottawa second to Toronto as best tech talent market in Canada: report

CBRE Ottawa managing director says the conversation in Ottawa is shifting from government to tech
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Ottawa is the second-best tech city in the country, according to a report by a national real estate firm released today, but the capital’s tech sector’s strengths and shortcomings reveal significant gaps in the city’s quest to become a recognized technology hub.

Toronto is the top tech talent market in Canada, with Ottawa placing second just above Vancouver. That’s according to CBRE’s annual ranking of Canadian tech hubs on the basis of factors such as talent, cost competitiveness and educational attainment.

The CBRE report says Ottawa moved up to the No. 2 spot from third in 2016 primarily because of its concentration of tech workers and new employees over the past year.

The city has the highest concentration of tech employment in the country, with 10.9 per cent of workers employed in the field.

Ottawa gained 6,300 new tech workers in the past five years, but growth has recently been slowing: New labour pool additions have decreased 8.7 per cent between 2014 and 2016. That’s largely due to a sudden dip between 2014 and 2015. By comparison, Waterloo’s tech talent pool has grown 53.7 per cent over the same period.

Ottawa ranked No.1 in educated workforce, with 45 per cent of the working population holding a bachelor’s degree or higher, compared with 39 and 37 per cent in Toronto and Vancouver, respectively.

But there’s more to the question of talent than education. Ottawa’s tech labour quality is ranked merely “good” by CBRE’s metrics, which factor in where workers received their degrees and how much industry experience those employees have under their belts.

“Good” is the lowest a city can achieve on these rankings, though Ottawa does inch ahead of five other cities in the same ranking. Waterloo’s labour quality is rated “exceptional,” and Toronto and Vancouver rank “very high.”

CBRE Ottawa managing director Shawn Hamilton tells Techopia that the “good” ranking isn’t a knock on the city’s quality of talent, but that it likely reflects a younger workforce with a gap in seasoned workers. In the long term, he says, these demographics will bode well for the city’s tech workforce as it matures with time.

Tech on the tongue

The CBRE report acknowledges Ottawa as the country’s “capital of SaaS,” referencing Kanata-based accelerator L-Spark’s presence as a contributing factor. Investments by large firms such as Shopify and Ford – which said earlier this year it was planning to hire hundreds of employees and spend $338 million to create an Ottawa Research and Engineering Centre for autonomous vehicles – are other positive trends identified in the report.

Hamilton says the conversations in Ottawa are changing. He tells Techopia that for the past 25 years, the Ottawa Real Estate Forum has revolved largely around addressing the needs of government, but this past year was dominated by tech talk.

“To me, it really represented a turning point where in the public eye the conversation was moving away from government to that of technology, with hope in growth for the future.”

Why the conversation is changing now likely has to do with ebbs and flows of the two sectors. Hamilton says the federal government was entering a shrinking cycle a few years ago that left a vacuum in downtown real estate that technology stepped up to fill.

Shopify has led this charge, he adds. When the firm announced last March that it would lease an additional 325,000 square feet of space on Laurier Avenue, Hamilton says he observed a general spike in real estate activity in the area.

“(A few years earlier), office leasing people in the downtown core were lonelier than the Maytag repairman. Now, all of a sudden, there’s a lot of activity,” he says.

Hamilton can’t say for sure that Shopify caused the stir, but he does believe the e-commerce giant is part of a trend of tech companies increasingly clustering in the downtown core, just as Nortel and its predecessors gave way to a flood of telecom activity in Kanata decades ago.

The CBRE report refers to this phenomenon as “high-tech clustering,” ranking Ottawa fifth in the category.

The report ranks Ottawa in the top three for high-tech concentration, with 3.9 per cent of the city’s labour force employed in the field. "High tech" typically refers to more advanced fields such as software development.

But hiring momentum appears to have slowed in recent years. According to Statistics Canada data, the number of locally employed high-tech workers has expanded and contracted, but remains essentially at the same level as five years ago. Toronto, on the other hand, has added 34,400 net jobs.

Hamilton says this may not be a bad sign for Ottawa. The already high concentration of tech employment in Ottawa leaves little room for expansion, while large but less saturated markets such as Waterloo and Toronto continue to expand.

Affordable real estate, expensive talent

Ottawa ranked third when considering cost competitiveness, behind both Vancouver and Toronto. That may come as a surprise, considering all that’s been made of the two cities’ soaring real estate costs over the past few years and Ottawa’s relatively affordable market.

But CBRE says there’s more to cost competitiveness than having low building costs.

“Real estate costs, including monthly rent and additional fees, are often not a barrier to choosing a market,” the report reads.

Indeed, on average, real estate accounts for only six per cent of technology companies’ expenses. The real dent in a company’s budget comes from employee wages – and salaries in Ottawa are relatively high.

Even after factoring in affordable real estate costs, the yearly cost for the average tech firm operating in Ottawa is among the highest in Canada, alongside Calgary and Edmonton.

Toronto, Vancouver and Waterloo each come next, but the aforementioned highly rated labour force alongside relatively lower average wages could make these markets more attractive for tech firms.

“Toronto and Vancouver might not have the cost burden that Ottawa might have. That would’ve added to their competitiveness,” says Hamilton.

This narrative runs counter to some of the major points in Ottawa-Gatineau’s bid for Amazon HQ2. The city was presented as a low-cost alternative to Vancouver and Toronto’s real estate prices.

Overall, CBRE’s findings present Ottawa as an employee's market and put little stock in real estate prices to sway a firm’s decision one way or another.

Those bummed out by the silver medal can take solace in that it’s just one organization’s opinion (backed up by a rigorous research methodology). Other reports, such as the one done by Expert Market in March, have given Ottawa top honours.