Canada Offsets Expensive Real Estate With Low Paid, But High-Quality Tech Labor

The mystery of how Canada attracts so many big tech companies was revealed in a commercial real estate analysis. The country scored 5 spots on CBRE‘s 2020 list of Top 50 Tech Hubs. High-quality labor is one of the key reasons real estate prices haven’t been a drag. The other is Canadian tech workers make less than even much lower US tech employees. This more than offsets the high real estate prices, with labor taking the cost hit. 

Canada Is Home To 5 of The Top 50 Tech Markets

Canadian cities took five of the top 50 spots on the CBRE tech scorecard. Toronto came in fourth when it comes to overall appeal for tech firms and talent. The only cities to rank ahead were San Francisco, Washington DC, and Seattle — in that order. 

Not far behind is Vancouver, taking the 12th spot for overall score. Ottawa’s overall rank wasn’t far behind, at #14. Rounding out the rest of Canadian cities in the top 50 were Montreal (16), and Calgary (34). 

It Costs A Lot Less To Hire Canadian Tech Workers 

Canadian tech employees are some of the highest quality and have the lowest pay. Five cities in Canada ranked in the Top 50, all with labor quality scores of “high” or “very high.” Those cities took the bottom 5 spots for pay, making them an extreme value. Much lower quality engineers in Baltimore and Hartford make almost 2x Montreal.

Tech Talent Quality vs. Cost Analysis

Average annual salary for software engineer (US$).

Source: U.S. Bureau of Labor Statistics, April 2019, Canada Statistics April 2019, U.S. News & World Report, CBRE Labor Analytics, CBRE Research, 2020.

Canada’s Low Wages More Than Make Up For Expensive Office Space

Running a large tech firm is significantly cheaper in Canada than in the US, just not the office space. Using a sample cost sheet for a 75,000 sqft office with 500 employees, Canada took the bottom spots for total costs. Despite this, the rents were actually some of the highest of the tech hubs. 

Vancouver and Toronto showed the biggest gap. Vancouver’s office space was the third most expensive of the top 50 markets. However, the city’s expensive office space averages out with low wages, to make it the 49th most expensive out of the 50 cities. Or the second most affordable… for employers. 

Toronto office space similarly was one of the most expensive of the markets. The study estimates office space is the 12th most expensive. However, it’s the third-cheapest when you consider the total cost. 

Canadian tech hubs are high quality and low cost to operate, which explains the inflow of big tech. Real estate prices are some of the highest on the list, but offset by the low wages. Great for tech firms, but not so much for the labor. Sounds like trouble if the employees realize they can move… or work from home. 

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  • TY 3 years ago

    Canada also has more generous nexus rules, so they have to pay fewer taxes here. Win-win.

    • Whiskey Foxtrot 3 years ago

      Wait, we get lower pay and get to pay more in taxes? This is a total win!

  • Gerry 3 years ago

    On the upside, the housing is more expensive. Wait…

  • GTA Landlord 3 years ago

    Normally countries build huge demand for labor, wages soar, and then real estate follows.

    Canada is trying to do it in reverse. Come here, the property is expensive but the jobs don’t pay very much. It’s like they’re hoping to attract people into precarious situations, and hope they invent industry out of pure necessity.

    Canada is cheating on its homework, and it’s going to fail the test.

  • James Ling 3 years ago

    Yeah I’ll just stick to our combined 320 family income of two tech employees here in KW thanks. In tech it *really* depends on quality as I’ve hired people for 60-70k in Toronto/KW but also for 170-250k.

    Of course it’s cheaper here than SF because the salaries need to offset the housing costs… and if you think Toronto is even a fraction of Palo Alto, Mountainview, etc you need to do more research.

    • Baio 3 years ago

      Toronto average engineering wage: $90k
      Toronto average home price: $1,097,565

      Multiple: 12.19x

      SF average engineering wage: $160k
      San Francisco $1.42 million

      Multiple: 8.87x

      • James Ling 3 years ago

        You posted that without using net? You do realize that using adjusted tax brackets for income, sales, and property that the SF multiple is *higher* than Toronto right?

        • Oops 3 years ago

          In SF you have to deal with the bulk of the windfall from IPO or buy-out cashouts of the decade (of which there are multiple billions worth). So its just not just the relatively well-paid engineers bidding for homes. In some sense this is isn’t fair compared to toronto, which has significantly less of this kind of wealth.

          I wouldn’t doubt SF being more expensive but they have justification for it — large tech monopolies, rich VCs. Toronto being in the same dimension is just odd. That’s what makes toronto so weird, the low pay with ridiculous housing inflation. Even if you look at which countries experienced the greatest housing inflation since the crisis, we are near or at the top depending on how you look at it. This is not organically driven a la Silicon Valley.

  • Tom Wolfe 3 years ago

    The headline refers to office real estate, not residential real estate. Companies don’t need offices anymore, especially tech companies. But the lowest paid tech workers need to live somewhere. Better bump up the bandwidth under bridges and culverts ‘cause that’s where all the tech workers will be living.

  • StupidCanadians 3 years ago

    Look at my name, and take it in!!

  • D.D Levitwitz 3 years ago

    Why setup offices in Toronto/Van when the talent will just migrate to the US and they’ll be easily accepted? All Canadians majoring in the tech sector are moving down south. There’s no point in staying here if you’re smort.

    • Canaduh 3 years ago

      Anecdotally this is absolutely true. Very few peers intend to stay here long term. Many have been moving on a year over year basis to FAANGMULA companies in the US or overseas where the cost of living is much lower. The ones that are staying are doing so for networking only and to build up as much career capital as they can only to make the switch. This includes peers in analyst to senior director roles in reputable organizations. Your mileage may vary.

  • Ashley 3 years ago

    It’s interesting that these US big tech don’t open large scale development and R&D shops in Canada. All they have are sales office for client proximity and minimal staff to support those clients locally.
    BTW high cost of living in Canada, esp. due to housing, is becoming a problem. We couldn’t fill a position because developers in Toronto are asking management level salaries. Developers with 8 yrs total experience are asking $130k+ with T&Cs attached to it, 4 yrs back such profiles would go for $85k-95k.
    Understandably, if cost of living continues to go high and salaries don’t, quality of life will continue to go down in Toronto.

    • Ian Brown 3 years ago

      They do have research and dev shops in Toronto, Vancouver, and Waterloo. Amazon Alexa’s team is partially in Canada.

      • Ashley 3 years ago

        They all do have presence but very small footprint, e.g. MS has ~2000 employees in Canada with ~1200 dev jobs which is 1% of MS employee base. They do need presence for client proximity and support. Salaries paid in Canada are also lower than those paid for same position in US for a metro city.
        Canada tends to claim attracting high skilled talent but for some reason fails to attract business investment.

  • Erik 3 years ago

    Money laundering…. Speculation…. Foreign buyers… Accidental millionaires using HELOC loans…. Govt collusion…. Pretty much end of story

  • straw walker 3 years ago

    Low wages are directly attributed to mass immigration.
    High house prices and high density living are both directly attributed to mass immigration.

  • Holton 3 years ago

    Guys, can anyone give me one example of where they printed tons of money and real estate prices went down after?

    2008 was a real estate crash then printed a lot of money.

    Money printing always lead to higher prices.

    • Ian Brown 3 years ago

      US home prices fell until 2012, so you gave your own example.

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