Toronto is making waves. Not because of rising condo prices, and not because of our affiliation with Drake. We are making waves because we’re one of the best places for tech companies to set up shop. How could this be, given that we are an expensive city? And what does this mean for Toronto’s already “overheated” real estate market?
An impressive list of tech giants – Google, Microsoft, Uber, Intel, Pinterest, Instacart, Shopify, Nvidia, LG, Samsung, Thales, Ecobee and Etsy – all call Toronto home. And with this impressive list comes jobs, people and money. Specifically, over 82,100 highly skilled and highly paid jobs since 2012 (a big leap compared to New York, which added only 27,000 tech jobs in the same time period and the iconic Silicon Valley, which added 77,800). It also means millions of dollars in investment. Shopify, for example, is pumping $500 million into a Toronto mixed-use development, The Well, and Google’s Sidewalk Labs has pledged millions to transform our currently inhabitable east-end waterfront.
The CBRE study, Scoring Tech Talent in North America 2018, looks to several proven critical factors that attract start-ups to a particular city. These factors are the cost of talent (wages), population concentration of millennials, educational attainment in the tech sector, residential and commercial rental rates and the cost of living.
Digging into CBRE’s data reveals that Toronto is still in its infancy in terms of becoming an internationally significant city. I draw this conclusion because we added more tech jobs to our roster than any other North American city despite the fact that our talent is not the least expensive, we have fewer millennials and we don’t have the biggest educational hubs in North America. The reason why we “won” the tech job competition is because we have some of the cheapest real estate in relation to the quality of lifestyle and tech candidates.
For example, the average cost for a tech company to plant its roots in Toronto is $30 million. Compare this with San Francisco’s Bay Area, which costs $59 million; New York, where it costs $55 million; Seattle, where it costs $52 million; and Austin, where it costs $45 million. We’re less expensive than the secondary markets such as Kansas City ($38 million), Detroit ($40 million) and Jacksonville ($37 million). We even beat out Vancouver, where it’s cheaper to hire tech teams, but more expensive to rent. It’s clear: Toronto’s real estate has yet to catch up to its job market, its culinary scene and the amenities available to its inhabitants.
Why does this matter?
Shopify’s $500-million investment in Toronto translates into hundreds of highly paid highly skilled new jobs. These jobs then translate into more people qualifying for mortgages. And more qualified buyers translates into more demand for the type of real estate millennials want – two-bedroom condos in the downtown core. This translates into a tightening of supply and heightening of prices. This means: buy well-positioned condos that are close to where Shopify and Google are setting up shop.
Another boon to our real estate market is that many of these tech giants are also investing in our real estate. Sidewalk Labs’ partnership with our government to turn parts of Toronto into an intelligent real estate platform (think: heated sidewalks, underground plumbing systems that don’t require road closures to repair and Orwellian-type tracking of your preferences, habits and health). Such investment signals clear confidence in Toronto’s real estate market, which will, in turn, encourage more future investment. Toronto has a lot of room to grow. While it may be a bumpy ride, we’re certainly riding to the top.