What’s behind Toronto's banner year of success and its hugely lucrative final quarter? We took a closer look at why this city has been "feeling the love."
Like the tip of the CN Tower, it appears the sky’s the limit for the growth of Toronto’s red-hot tech ecosystem.
After a banner 2018 in Canada’s biggest city, a new report from CBRE Group has found that Toronto has overtaken Washington, D.C., and now ranks No. 3 in North America for tech talent, behind only San Francisco and Seattle. The study looked at a wide range of factors before placing T.O. near the top, including the market’s depth, vitality, attractiveness, and the amount of opportunity available for employers and highly skilled tech talent alike.
For those in the city who are witnessing its breakneck growth, the ranking wasn’t a surprise.
“We hear about tech more and more, but in a thriving city like Toronto, the impact of tech companies and the growing influence of tech talent cannot be overstated,” said CBRE Canada Vice Chairman Paul Morassutti.
Here are a few things we learned about Toronto’s continued tech boom.
Toronto’s Rate of Growth is Unmatched
Toronto grew at the fastest rate of all 50 markets studied over the past five years, increasing its talent pool by 80,100 workers – or a staggering 54 percent.
To put that in perspective, no other city with such a large market of tech employees even came close to matching Toronto’s growth rate. Of the cities with tech talent pools of more than 75,000 employees, the next highest growth rate was San Francisco (which grew by 33.4 percent), followed by Denver (30.9 percent) and Atlanta (29.1 percent).
CBRE’s report also shows that Toronto’s tech sector is powering its overall economy more so than most places. Overall, 8.3 percent of Toronto’s overall job market is dominated by tech, behind only San Francisco (10 percent) and Ottawa (9.9 percent).
It now appears inevitable that Toronto will pass Washington, D.C., as the third-largest tech talent market in North America. Washington, which saw its tech market grow by only 2.2 percent over the period studied, has 253,660 tech workers now, compared to Toronto’s 228,500.
At this point, there’s no longer any doubt about Toronto’s position as a worldwide leader in tech.
“Toronto, San Francisco, and Seattle are comfortably mentioned in the same sentence and are attracting the best in the industry,” Morassutti said.
Toronto is Still Dependent on Talent From Outside the City
Toronto is a leader in another area: “brain gain.”
Brain gain – or, at the other end of the spectrum, brain drain – compares the number of tech jobs available locally to the number of people graduating from local tech-based educational programs.
CBRE’s study found that while Toronto was the top tech talent job creator alongside the Bay Area with more than 80,000 new jobs added over the period of study, the city produced only 22,466 tech degrees over a similar period.
That translates to a “brain gain” disparity of 57,634, comparable only to the Bay Area (54,691). No other region had a brain gain that was close – Seattle was next at 15,467, followed by Charlotte at 12,185 and Vancouver at 11,160 (Washington, D.C., led the “brain drain” side of the equation after producing 49,060 tech graduates for only 5,520 new jobs).
This suggests that talented workers are moving to the city to take advantage of opportunities. We also know that the people coming to Toronto tend to be young and perhaps still in the early stages of their career. Twentysomethings made up 8.3 percent of the growth in Toronto’s population change between 2012 and 2017, well above the U.S. average of 2.5 percent and ahead of the Bay Area (5.2 percent), Washington (2.2 percent) and New York, which actually saw its younger population shrink by 0.9 percent.
Costs Are Still Low
There’s no doubt that for cost-conscious companies, Toronto – and Canada more broadly – is the place to be.
Estimated one-year costs by market – including rent and wages – totaled $30,562,702 in Toronto, cheaper than all cities canvassed except Vancouver ($29,789,176) and Montreal ($28,591,358). Of course, the currency disparity is a big part of that, but it’s hard to ignore how profound the difference in overhead is compared to other top markets like the Bay Area ($59,720,973), New York ($55,261,762), and Washington ($51,690,786).
And yet, the quality of talent in Toronto is also very high – in fact, Toronto and Vancouver led the way in labor quality compared to cost in CBRE’s analysis.
No wonder so many companies are flocking to Toronto.
Microsoft recently turned heads with the announcement of a $570 million investment in its Canadian operations headlined by a new 140,000-square-foot headquarters on Bay Street – not to mention plans to grow its local workforce by 500 employees. Shopify, meanwhile, unveiled a $500 million investment to double its Toronto footprint to more than 500,000 square feet, and Uber announced a $200 million investment to expand its self-driving lab, build an engineering lab, and hire 500 more people.
Other companies that have drastically increased their presence in Toronto or that plan to do so in the future include Ubisoft Toronto, Instacart, Pinterest, and Intel.
Average monthly apartment rent in Toronto was $1,069, which paled in comparison to New York ($4,120), the Bay Area ($2,856), and Los Angeles ($2,239). The average rent-to-wage ratio in those cities also favored Toronto, where workers spent 20 percent of their wages on rent compared to 43.6 percent in New York, 26.4 percent in San Francisco, and 25.8 percent in L.A.
There’s even more good news for workers and job-seekers in Toronto: wages are on the rise. CBRE’s report found that average wages for tech workers grew by 9.7 percent over to $81,828, far more than non-tech occupations, which saw wages rise only 5.9 percent to $57,212.
Toronto’s Tech Talent has a Diverse Educational Background
Of Toronto’s tech talent pool, 36.7 percent hold a bachelor’s degree or higher. That number is much lower than other tech hubs like Seattle (62.6 percent), Washington (57.3 percent), and San Francisco (49.3 percent).
It’s encouraging news for job-seekers looking to begin a career in tech – and perhaps an indication that Toronto’s companies, like tech giants Apple, Google and IBM, are placing more of an emphasis on skill, culture fit, and a commitment to continuing education, rather than hiring based on rigid educational requirements.
Toronto is Lifting up Nearby Tech Markets
The old adage “a rising tide lifts all boats” sure seems to apply in southern Ontario. CBRE’s report also ranked the top 25 markets expected to grow exponentially in the coming years – and two of the top three are within an hour’s drive from T.O.
After leader Tucson, Ariz., the next top emerging market in the study was Hamilton – which has transformed itself from a city associated with steel to a home for world-class industrial research and development facilities – after its tech market grew by 52 percent over the past five years to a total of 18,100 workers.
Next was the Waterloo region, which grew by 40 percent and now employs 20,500 in its burgeoning tech market. Waterloo was also a leader among emerging markets for wage growth – tech workers there saw their salaries rise by 24 percent over the five years studied, second only to Tucson among up-and-coming markets.