Vancouver tech sector driving downtown revival, says report

Workers returning to downtown Vancouver, in part, because of massive expansion of tech sector.

April marked the highest amount of foot traffic in downtown Vancouver in 10 months, according to data from Avison Young | Chung Chow, BIV

Hefty amounts of global capital have been propelling B.C. tech companies into unicorn status over the past year and a half.

That meteoric rise in valuations and further expansion of global tech firms in Vancouver are also among the driving factors bringing people back into the city’s downtown, according to the Downtown Vancouver Business Improvement Association (DVBIA).

“The recent increase in investment from U.S.- based venture capital firms is linked to increases in remote work, with VC firms increasing their investments in Canada-based companies now that geographic proximity is less of a limitation,” states the DVBIA’s latest State of Downtown update, released Wednesday.

Trulioo Information Services Inc., GeoComply Solutions Inc. and Galvanize account for the three newly minted B.C. unicorns based downtown. 

Meanwhile, Vancouver-founded PlentyOfFish (now owned by Match Group), fintech Tipalti Inc., medical devices firm Masimo Corp. (Nasdaq:MASI) and Microsoft Corp. (Nasdaq:MSFT) are among the American tech companies expanding downtown over the past year.

With more workers now returning to the office, those newly expanded offices are drawing more people to the city’s core.

Downtown foot traffic the week of April 11 was up 6.4 per cent compared with a week earlier – the highest level it’s been all year and the highest level it’s been since the week of June 21, 2021, according to real estate services firm Avison Young (Canada) Inc.

But even with restrictions lifting over mask-wearing and vaccine cards the past few weeks, foot traffic in the downtown core is still down 57.4 per cent compared with the week of March 2, 2020, just prior to the pandemic, when thousands of workers either began working remotely or else were laid off from mainly service industry jobs.

“Low operating costs contribute to Vancouver’s allure as a tech hub. Vancouver had the fourth-lowest operating costs of the 30 top tech markets identified by CBRE [Group Inc.],” the DVBIA report stated, referring to recent rankings from the real estate services firm.

“In fact, of the eight Canadian cities that made CBRE’s ranking, all eight ranked at the bottom of the list for an estimated one-year of operating costs. This is due to Canada’s significantly lower salaries for tech workers. For example, equally qualified candidates in the U.S. will see average salaries that are 50 per cent higher for software engineers compared to Canadian markets.”

Downtown Vancouver’s vacancy rate sat at 8.1 per cent by the end of 2021, according to Avison Young data released in January. It’s a sizeable difference from the 2.6 per cent vacancy rate the city had at the end of 2019.

“There were a number of organizations that thought that we can work from home when we first got into this pandemic,” Avison Young principal Glenn Gardner, who specializes in office leasing and sales, told BIV in February.

But since the onset of the pandemic, he said, “organizations have realized that there they are more productive when they’re able to offer a place for people to come to.”

They’re also looking further down the road and anticipating what their office space needs will be like in three to 10 years, Gardner added.

“In the real estate industry, eight per cent is literally the definition of a balanced market.… It offers tenants opportunities to go out and explore their options and/or expand within their buildings,” he said.

“Make no mistake – these international technology companies, they have the ability to set up offices anywhere across North America or the world. And so if there’s not an opportunity to house their requirements, to have office space available to them, they will have no choice but to go and expand somewhere else or look into a different market.”

torton@biv.com

@reporton