Could it be that the leading industry in B.C. – real estate – is putting the squeeze on the industry that ought to be the leader – high tech?
The happy budget numbers from the last provincial budget were heavily dependent on the inflow of real estate money into the province, and all the economy activity it stimulated, mostly in Metro Vancouver and Victoria. But stunning growth in the tech industry in the Okanagan hints at collateral damage from that boom.
On the eve of the upcoming #BCTECH summit (March 14-15), the high-tech industry has a lot to crow about. The tech sector is the third largest in the province, trailing only real estate and construction in its speed of growth. It employs more people in B.C. than the mining, oil and gas and forestry sectors combined. It’s growing at twice the rate of the real estate-dependent provincial economy, doubling its size in the last decade to 101,700 employees, with annual revenue of $26.3 billion. People working in the industry earn an average of $83,000. That’s 75% higher than the average wage in B.C. and higher than the Canadian technology-sector average.
Andrew Harries, co-founder of Sierra Wireless, founder of Zeugma Systems and now the Tom Foord Professor of Practice in Entrepreneurship and Innovation at the Beedie School of Business at Simon Fraser University, sees software, interactive media, electronics, telecoms, clean technology and the life sciences as the future: “highly mobile ideas, people and products, where new value can be created from our minds, and opportunity is limited only by ingenuity, not what lies on or beneath the ground.
“These are the ultimate clean jobs. Tech products are immune to resource and property booms and busts and can be exported almost without limit anywhere in the world. If the U.S. government wiped out NAFTA altogether, our software could still be sold in the U.S. without restriction.”
But B.C.’s real estate tsunami ominously parallels slowing growth in high tech, which is weighed down by the size of the industry in the Lower Mainland. Where the province’s tech sector once grew by 22% (2004-09), over the past five years it has slowed to a 6% growth rate.
And compared with other jurisdictions, B.C.’s tech sector is a laggard. It makes up only 7% of our GDP, behind Ontario (8%) and Quebec (9%) in Canada, and miles behind Washington (22%), Oregon (21%) and California (17%).
The biggest constraint to tech growth? According to a recent KPMG report, it’s access to talent. The industry can’t find enough people.
Here’s where real estate comes in. Harries points to three ways to find more people. First, double post-secondary computing capacity – from today’s level of 1,200 computing science and software graduates.
Second, expedite skilled-worker visas by reinstating an immigration fast track for qualified technical and management talent.
“It now takes a year and a nightmare of red tape to do what previously took us 90 days,” he noted.
Given the growing desire of many people south of the border to find a less threatening place to live, this is a timely opportunity.
Finally, he says, we need to see housing prices come down to more closely link to local salaries.
Look what happens when housing prices are lower: in the Okanagan, where housing prices are more closely aligned to local incomes, tech business is exploding. In its latest (2015) report, Accelerate Okanagan shows a 30% growth rate in two years, compared with the B.C. average of 5.2% during those years.
“The growth we’re seeing is being driven from companies across the whole region, from Salmon Arm to Osoyoos, in a wide range of sectors – including agriculture, energy, health care, software, telecommunications and advanced manufacturing,” said Accelerate Okanagan’s CEO, Raghwa Gopal.
And more than half (52%) the Okanagan technology workforce is under age 35 – a cohort that has pretty much given up on home ownership in Metro Vancouver.
It’s time to acknowledge the link between soaring real estate prices and sagging high-tech growth and decide which will bring us the future we really want. •
Peter Ladner (firstname.lastname@example.org) is a co-founder of Business in Vancouver. He is a former Vancouver city councillor and former fellow at the SFU Centre for Dialogue. He is the author of The Urban Food Revolution.