Mar 16, 2017, 5:54 PM
In the first half of 2016, the Canadian tech sector reached an all-time high, employing over 503,000 people across Canada (roughly 2.8% of total employment).
Though Canada’s tech sector is relatively small compared to other industries, its expansion is impressive. Tech has grown 13.5% since 2006 and is outpacing the Finance and Insurance (11.1%) and Real Estate Rental and Leasing sectors (5.1%).
Employment is rebounding from dot-com setback
Canadian tech employment growth was swift in the years leading up to the dot-com era (growing nearly 13% annually from 1994 - 2000), but after 2001, growth tapered to just 0.7% annually for the next decade and a half.
Now, growth is picking back up, reaching 3.1% annually and spread across both large firms and small to mid-size startups.
Where employment is strong
Tech employment in Canada varies dramatically depending on where you look.
Not surprisingly, Kitchener-Cambridge-Waterloo (K-C-W), Toronto and Vancouver take the lead for tech employment. All have a strong mix of young startups and well-established, U.S.- or global-based firms. But the smaller, less diversified markets like Calgary fall below the national average (2.8%).
K-C-W in particular has become an important tech hub in Canada—despite only employing around 17,000 people. It’s home to global players like Google, SAP and Electronic Arts as well as home-grown companies such as BlackBerry and Open Text.
BlackBerry growth has slowed with recent challenges, but fortunately its former talent have spun off several new startups in the area.
Venture capital on the rise
2016 was a record year for venture capital investments in Canada. The first half of the year recorded 168 deals worth a total of $1.05 billion—58% higher than the same time a year ago.
One thing’s for sure: It’s a good time to be a startup in Canada even with only modest growth in the overall economy.
It seems that fears of falling investments around 2014-2015 were exaggerated, as funding continues to increase in the majority of Canadian tech markets—Calgary and Ottawa aside.
Key deals closed in 2016
Tech drives expansionary leasing
Oil-producing markets are still grappling with fluctuating oil prices, but fortunately, tech sector growth is fueling their need for real estate.
Across Canada, tech companies were behind 14.7% of leasing activity in 2016 for blocks 20,000 square feet or greater.
The U.S. immigration situation is also fueling expansion, as U.S. companies look to Canada for talent they're losing in the states.
The most resilient markets have been Toronto and Vancouver, both outperforming the overall Canadian market with healthy fundamentals and expansionary leasing. Each boasts relatively diverse office markets with a healthy mix of tenants across sectors. In Toronto, tech companies were responsible for 11.8% of large block leasing, and were behind 34.4% in Vancouver in 2016.
One big win for the tech sector in Toronto: Of leases greater than 20,000 square feet, 43.5% were growing and only 8.7% reduced their footprint in 2016.
The largest deal? Shopify signed a 100,000 square foot lease at Allied’s King Portland Centre, which should be complete in 2019.
The U.S. immigration situation is also fueling expansion into Canada. U.S. companies are looking north for opportunities to find talent they're losing in the states.
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Research: Thomas Forr | Editor: Lillian Veley