Artificial intelligence (AI) underpins job growth and real estate demand in North America’s most active markets for tech employment, including Toronto, Vancouver and Montreal. Canadian cities again place highly in CBRE’s newly released annual rating of thriving hubs and emerging centres for both core tech companies and tech-related hiring across broader regional economies. This year’s findings highlight that employers in many office-using sectors are seeking AI expertise.

“The postings for AI-related talent was about 9 per cent of total tech talent jobs in late 2019, and that number has shot up to about 14 per cent currently and continues to grow,” Colin Yasukochi, executive director of CBRE’s tech insights centre, observed during a webinar last week in conjunction with the release of the 2024 tech talent scoring report.

That’s happening in the context of more muted job growth across all fields of tech-related talent. The United States gained about 213,000 new positions in 2023, representing a 3.6 per cent increase in the total tech workforce from 2022, but the quotient of AI specialist jobs jumped by nearly double that rate. Canada added 18,400 new jobs last year, equating to a 1.7 per cent increase in the tech workforce.

Roughly 60 per cent of North American tech-related employees work outside the core tech industry, and those non-tech sectors collectively accounted for about 86 per cent of new hires in the U.S. last year. Job growth was most notable in the transportation/warehouse/wholesale, professional/business services and finance/insurance/real estate (FIRE) sectors.

Drilling down to this year’s rankings, Toronto is the highest placed Canadian city, climbing up to fourth from fifth in 2023. That’s based on a combination of factors considered important for employers and employees, including: labour and operation costs; availability of post-secondary graduates with tech-related training; strength of the local tech economy along with opportunities for business growth and career advancement; cost of living; and lifestyle attributes.

“Operating in Toronto is more affordable than in other U.S. tech hubs,” Liz Nucci, senior vice president, office leasing, for CBRE in Toronto, advised during last week’s webinar. “We have skilled talent here with world renowned institutions like the University of Toronto and the University of Waterloo producing highly educated graduates in fields like computer science and AI, and Canada’s favourable immigration and visa programs, relative to the U.S., attract international talent, creating a more diverse and innovative workforce.”

The top three markets — San Francisco Bay Area, Seattle and Metro New York — remain unchanged from last year, but Austin has moved into the top five, switching places with Washington, D.C., which now sits in sixth. Boston, Denver, Dallas/Fort Worth and Ottawa round out the top 10.

Vancouver (11th), Montreal (15th), Waterloo Region (18th), Calgary (20th) Quebec City (40th) and Edmonton (49th) also crack the top 50, while Halifax and Winnipeg are ranked fifth and 13th respectively in an associated list of 25 emerging markets. In a repeat of last year, the eight Canadian markets were found to have the lowest operating costs in the group of 50, based on average annual wages for a 500-person workforce and rent for 60,000 square feet of office space.

“They generally will have advantages there from a labour cost perspective, and have been the recipients of a lot of growth because of those lower wages and the relative value that you get for the quality of the tech talent in those markets,” Yasukochi acknowledged.

Hiring in core tech companies and across broader economic sectors

CBRE’s research points to notable clusters of AI specialists in a few key markets, with approximately 44 per cent of such positions in the U.S. located in San Francisco, Seattle or Metro New York. AI-related jobs are even more concentrated in Canada where approximately 60 per cent are in Toronto, Vancouver or Montreal.

“When we look at who the AI tech talent actually works for, we found that half of them worked for the tech industry, but also found that tech talent in AI specialty roles work across all industries,” Yasukochi reported. “Finance and professional services also employs a significant amount of this tech talent.”

Real estate insiders in the four top-ranked tech employment markets relayed what they’re seeing, which also illustrates something of a split in the economic profiles of San Francisco Bay and Seattle versus New York and Toronto. About 55 per cent of tech workers in the San Francisco Bay Area and Seattle are software designers and programmers and two-thirds of total tech employment is in core tech companies. In contrast, the majority is employed by non-tech companies in the other two cities and a much larger percentage — 19.2 per cent in Toronto and 20 per cent in New York — work in the FIRE sectors.

Luke Ogelsby, a CBRE executive vice president based in San Francisco, noted that half of the U.S. venture capital invested in AI has flowed into the San Francisco Bay Area, while universities in the region are producing about 5,000 graduates with AI specializations every year. AI firms accounted for about 1 million square feet of office absorption in 2023.

“The Bay Area really feels like we’re at the beginning of the next innovation cycle,” Ogelsby asserted. “When we look at AI, we think it’s going to be pervasive in everything we do. It’s not just going to be the large companies that are hiring tech talent. The impacts to hiring are going to be across all industries.”

Bill Cooper, a CBRE senior vice president in Seattle, suggests that’s already evident in retail, transportation and aerospace. Legal services have also been early adopters, in part, he speculates, to keep up with their clients’ evolving business needs and the many issues arising with the burgeoning technology.

Meanwhile, Seattle-based tech companies and academic institutions have been pioneers of AI development, giving the region a ecosystem of talent and support for innovation that has been built over 20+ years. Cooper characterizes the region as a magnet for American and international talent and also credits the tech industry’s robust intern programs that attract high-calibre students, who then decide to stay.

“With AI, we’re also seeing a lot more collaboration. It’s in-office work due to the need for collaboration and sharing knowledge so that’s creating more of an office need,” he added.

In Metro New York, Sacha Zarba, a CBRE vice chair, reports active requirements from dedicated AI firms or larger tech companies with growing AI divisions for about 500,000 square feet of space. That follows the roughly 500,000 square feet that AI-related ventures have leased since early 2023.

“A lot of the AI-related growth is not necessarily with huge companies,” Zarba said. “A lot of these companies are smaller, scaling companies that are just getting their legs and really represent the beginning of a new cycle.”

That could bode well for Toronto where previous examinations of tech-related talent have shown a greater number of smaller firms than in the other top-five markets. Nucci likewise identifies “homegrown AI startups” as an engine of job growth and real estate leasing. She notes that some are now expanding their footprints in downtown Toronto to more than double their original spaces, as big and small firms are collectively looking for 50,000 to 100,000 square feet.

Zarba foresees demand for AI expertise, and space to accommodate it, will continue to filter through to the many industries that have an interest in pursuing the predictive capabilities that AI is expected to enable. “We’re seeing that in finance, which is a large, if the not the largest contributor of leasing volume in the city,” he affirmed.