Calgary High-Tech Spark Report

Technology startups in Calgary are emerging from the shadows of the oil and gas industry.

Calgary: The NextHigh -Tech Hotspot

Accelerating success.

2 Spark Report: Calgary: The Next High-Tech Hotspot | Colliers International Canada

“Calgary represents the largest number of technology start-ups, per capita, in Canada”Source: www.calgaryeconomicdevelopment.com/industries/technology

Technology Companies in Calgary

Technology startups in Calgary are emerging from the shadows of the oil and gas industry

Amidst the doom and gloom of Alberta’s oil sector, some industries are burgeoning. The direct link between the price of oil and Calgary’s office vacancy rate has sparked a conversation about the need for more diversity in the Calgary inner city office market to ensure stability through commodity cycles.

The technology sector has been in the shadows of the oil and gas industry until now, when the opportunity exists for non-energy related industries to enter and establish a larger presence in Calgary’s office market. With a highly skilled workforce and a low-cost environment, now is the opportune time for new and growing technology firms to set up shop in Calgary.

Contributing Factors1. Growing pool of skilled workers looking

for employment

2. Low cost premium office space

3. Growth and development of urban mixed-use neighborhoods

4. New provincial government policies

5. Easy access to an outdoor active lifestyle


“The downturn has made hiring easier, as wages have come back to reality”- Bryan de Lottinville, Founder & CEO, Benevity

The Opportunity1. Landlords are offering tenants increased incentives in the form of improvement allowances to create modern, collaborative, loft-type space in traditional office towers.

2. Newer office towers, when compared with character brick and beam buildings, offer more efficient floor plates, newer systems with better quality air and light, and building stainability certifications that are important to an increasing number of employees.

3. Proximity to bike lanes, transit and the LRT are especially important for the younger generation of employees without automobiles and who prefer to live, work and play in the diverse neighbourhoods surrounding the downtown core such as the Beltline, Mission, East Village, Inglewood, Eau Claire and Kensington.

Low cost premium office spaceLower rental rates for office space in Calgary help keep costs down for startups and growth of existing companies alike. As of April 2016, approximately 8.6 million square feet of office space was vacant in downtown Calgary and 1.2 million square feet was vacant in the Beltline, representing 21% and 16% of each respective submarket inventory. This, combined with the future 2.6 million square feet of office space still under construction in the inner city, will result in the Calgary office market remaining in the tenant’s favor, until at least 2019 when vacancy is expected to peak.

Opportunities exist for organizations that are not directly impacted by the oil and gas industry and are looking to relocate to newer space, expand or lower costs. Largely, these opportunities lie with technology firms that want to rebrand and establish an inner city presence. Across Canada, technology and innovation sectors are dominating in revenue growth. The technology industry has been expanding at a faster rate than any other on the stock exchange since 2013, according to the Toronto Stock Exchange. With the increased level of vacant office space in Calgary, there is ample opportunity to benefit from low rental rates, premium space and access to talent.

In a survey of 258 top-level executives, health and well-being of staff, collaborative space and talent attraction were listed as critical or important factors that would influence their future move.

33% CRITICAL 42% IMPORTANT

HEALTH & WELL-BEING OF STAFF


TALENT ATTRACTION


COLLABORATIVE SPACE

Source: Colliers Canada 2014 Tenant Survey

Growing pool of skilled workersIn Alberta, employers have a growing pool of talented people from which to hire following more than 17,000 layoffs in 2015 and in light of lower wage expectations due to decreased competition from oil and gas companies. According to Calgary Economic Development (CED), approximately 24,500 people are employed in the Information, Communications and Technology (ICT) sector across 2,731 organizations. The CED notes that the ICT industry accounts for half of the fastest growing firms in Alberta.

4 Spark Report: Calgary: The Next High-Tech Hotspot | Colliers International Canada4

Growth and Development of Urban Mixed-Use Neighbourhoods In major cities across North America, high-tech firms have been migrating to the inner-city from suburban locations. These companies are trying to attract young, creative and smart individuals who want work-life balance and are accustomed to being more mobile than the previous generation.

Calgary is in the early stages of re-urbanization, meaning that people, especially Millennials and empty-nesters, are jump-starting the move back to the inner city. They want to live there, work there, play there, eat there, shop there — not just because it’s the “place to be”, but to avoid the commute in-between. Urban mixed-use projects around Calgary’s downtown such as East Village and Eau Claire are being revitalized to capture this growing demand.

The live, work, play mentality has resulted in other successful projects in major cities where the younger demographic of the future workforce prefers to be located in the inner city. These mixed-use projects are attractive to technology companies, given the proximity to the next generation of the workforce.

New Provincial Government Policies Calgary has a small but dense and well-formed tech industry. Startups have a higher chance of success given the relatively easy access to capital and the second-lowest small business tax in Canada (tied with Saskatchewan) following a recent reduction by Alberta’s new NDP government from 3% to 2%.

“Better access to capital will help local business expand, innovate, and create jobs.”

- Alberta Minister of Treasury Board and Finance

In addition, the recently announced $90 million Alberta Investor Tax Credit is designed to increase the capital available to small and medium-sized businesses. This policy initiative, coming into effect in January 2017, will offer a 30% tax credit to investors who provide capital to Alberta companies in sectors such as technology, digital media and animation.

Easy Access to Outdoor Lifestyle The Canadian Rocky Mountains are one of the most spectacular natural environments located close to any major city in the world. World-class skiing, biking and hiking are only an hour’s drive from Calgary’s downtown core. According to Outside magazine, studies show that people working in the technology sector are attracted to active outdoor lifestyles.

1993: Market opened, billed as an urban retail and entertainment destination

2000: Falling visitor numbers and sales lead to stores closing

2007: Building and surrounding 2.95 hectare site was purchased with goal of reinventing the complex as an “urban village”

2008: Project put on hold with global recession

2016: Commitments in place to move forward with the mixed use development which includes five towers, 1,000 residential units, 1.4 million square feet of office and retail space and a hotel

SPOTLIGHT: EAU CLAIRE

1900: Energetic community offering mix of commercial, industrial, retail and residential

1941: Area declared a “skid row” after shifts in industry left dilapidated buildings and change in demographics

1960: Significant demolition as part of urban renewal policy and area was vacant for 40 years

2007: $357 million invested in infrastructure and revitalization

2016: East Village is a vibrant, river-front, mixed-use community attracting unique events and is home to a diverse mix of creative young professionals

SPOTLIGHT: EAST VILLAGE

Simmons Building, in East Villiage Calgary AB

Bow River Barley Mill in Eau Claire, Calgary AB

5 Spark Report: Calgary: The Next High-Tech Hotspot | Colliers International Canada55

CALGARY IS IN THE EARLY STAGES OF RE-URBANIZATION

Benevity Head Office | 402 - 11th Avenue SE, Calgary Future Novatel Head Office | 110th Ave


Case Study: BenevityIn 2015, Calgary based Benevity, Inc., a global leader in online workplace giving, matching, volunteering and integrated grant management solutions, grew from 100 to 220 employees and plans to reach over 350 employees by the end of 2016. The rapid pace of growth they experienced was fueled with greater ease in hiring staff and leasing office space.

Challenges still exist for growing tech companies, especially in finding mid-level series fun ding to sustain growth. There is hope that the new provincial government policies will help support this growing industry in Calgary, but for now, companies such as Benevity must often look to the US for private equity.

Since 2012, Colliers has worked closely with Benevity in developing an office strategy that aligned with Benevity’s growth model. From modest beginnings of 1,200 square feet the company has since relocated 2 times to accommodate various growth stages. Today Benevity’s 40,000 square foot head office is located in the Beltline area of Calgary’s inner city which Colliers identified as being a fit with Benevity’s brand and dynamic corporate culture. This submarket, adjacent to the downtown core, is where most of the city’s character brick and beam buildings are located.

Case Study: NovatelNovAtel Inc., owned by Swedish based Hexagon AB, is a world leading OEM manufacturer of precision Global Navigation Satellite Systems, used primarily for applications such as GIS mapping, precision agriculture machine guidance, port automation, mining, marine and defense. Located in Calgary, NovAtel has experienced phenomenal growth and as business continues to thrive, one of the company’s biggest challenges has been finding a new facility that can accommodate their future growth plans and maintain the strong corporate culture NovAtel has become known for.

In 2014, NovAtel engaged Colliers to develop a strategy that would allow Novatel to execute its growth plan and double in size. Through an extensive RFP process, it was determined that NovAtel’s existing building was unable to accommodate their future needs, which led to a design-build project. Since the selected project site was not owned by NovAtel’s chosen developer, Colliers effectively negotiated the sale of the site to the preferred developer over several months while aligning the project design with NovAtel’s objectives of creating a transformational workplace that could accommodate the company over the next 30 years.

In 2019, NovAtel and its sister company Intergraph will move into the 160,000 square foot Hexagon Campus, located in Calgary’s The District, designed by IBI Architects and developed by Remington Development Corporation.

1 Spark Report: Report Title Goes Here | Colliers International Canada

Technology Companies in CalgaryCOMPANY ADDRESS AREA COMPANY ADDRESS AREA

DOWNTOWN SUBURBAN

CGI Group 444 - 7th Avenue SW 28,000 SF Novatel 1120 - 68th Avenue NE 160,000 SFMicrosoft 110 - 9th Avenue SW 8,500 SF Computer Modelling Group 1824 Crowchild Trail NW 100,000 SFGuest-tek 777 - 8th Avenue SW 30,000 SF Resverlogix 4820 Richard Road SW 20,000 SFTelus 411 - 1st Street SW 230,000 SF Pandell Technolgy 4954 Richard Road SW 20,000 SFShaw 630 - 3rd Avenue SW 170,000 SF Blackline Safety 1215 - 13th Street SE 10,000 SFRogers 500 - 4th Avenue SW 20,000 SF SMART Technologies 3636 Research Road NW 100,000 SFLong View Systems Corp 250 - 2nd Street SW 53,000 SF Robots and Pencils 1507 - 14th Avenue SW 6,000 SFBELTLINE Invensense 1000 Veterans Place NW 7,000 SF

Axia Net Media 227 - 11th Avenue SW 45,000 SF Corus Entertainment 3320 - 17th Avenue SW 22,000 SFIBM 227 - 11the Avenue SW 70,000 SFNureva 1221 - 8th Street SW 20,000 SFWmode/App Carousel 1331 Macleod Trail SE 20,000 SFBenevity 402 - 11th Avenue SE 60,000 SFPure Technologies 705 - 11th Avenue SW 20,000 SF

Prince’s Island

St. Patricks Island

9th Avenue SW4t

h St

reet

SW

Cent

re S

treet

N

Mac

Leod

Tra

il SE

9t

h St

reet

SW

17th Avenue SW1s

t Stre

et S

E

4th

Stre

et S

E

3rd

Stre

et S

W

2nd

Stre

et

1st S

treet

SW

1st Ave SW

2nd Ave SW

3rd Ave SW

4th Ave SW

5th Ave SW

6th Ave SW

8th Ave SW

8th

Stre

et S

W

7th

Stre

et S

W

5th

Stre

et S

W

10th Ave SW

11th Avenue SW

12th Avenue SW14th

Stre

et S

W

12th

Stre

et S

W

11th

Stre

et S

W

10th

Stre

et S

W

9th

Stre

et S

W

13th Avenue SW

14th Avenue SW

15th Avenue SW

16th Avenue SW

Olym

pic

Way

SE

14th

Stre

et S

W

15th

Stre

et S

W

16th

Stre

et S

W

17th

Stre

et S

W

18th

Stre

et S

W

21st Avenue SW

23rd Avenue SW

26th Avenue SW

12th

Stre

et S

W

11th

Stre

et S

W

Prospect Avenue SW

Durham Avenue SW

10th

Stre

et S

W

10th

Stre

et S

W

8th

Stre

et S

W

7th

Stre

et S

W

Colle

ge L

ane

SW

5th

Stre

et S

W

2nd

Stre

et S

W2n

d St

reet

SW

1st S

treet

SW

Cent

re S

treet

SW

1st S

treet

SE

14th

Stre

et S

W8th Ave NE

9th Ave NE

7th Ave NE

6th Ave NE

5th Ave NE

4th Ave NE

3rd Ave NE

2nd Ave NE

1st Ave NE

Edmonton Trail NE

1st Ave NE

Centre Avenue NE

McDougall Road NE

2nd Ave NE

4th Ave NE

6th

Stre

et N

E

5th Ave NE

9th

Stre

et N

E

6th Avenue NW

8th Avenue NW

Westmount Road NW

Bowness Road NW

10A Street NW

11 Street NW

11A Street NW

12 Street NW

16 Street NW

18 Street NW

1st Ave NW

2nd Ave NW

17 Street NW

18 Street NW

Memori

al Driv

e NW

1st Av

e NW2n

d Ave

NW

3rd Av

e NW

9th St NW

7th St NW

5A St NW

5th St NW

4A St NW

Memorial Drive NE

Salis

bury

Stre

et S

E

6th

Stre

et S

E

Spille

r Roa

d SE

Ramsa

y Stre

et SE

17th Ave SE

24th Ave SE

23rd Ave SE

10.6 Km6.8

Km10 Km

7.5 Km

8.1 Km

9.2 Km

1.5 Km

DOWNTOWN COREDOWNTOWN CORE

EAST VILLAGE

BELTLINE

BELTLINE

3.2 Km

EAU CLAIRE

d

Where do you see your business growing?


Authors: Lucas Beck Associate+1 403 215 [email protected]

Justin Mayerchak Vice President+1 403 298 [email protected]

Dan Lannon Senior Vice President / Partner+1 403 215 [email protected]

Peter MayerchakExecutive Vice President / Partner+1 403 215 [email protected]

Colliers International 900, 335 8TH Avenue SWCalgary, AB | Canada

TEL +1 403 266 5544

502 offices in 67 countries on 6 continentsUnited States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108

$2.3billion in annual revenue

1.7billion square feet under management

16,300professionals and staff

Copyright © 2016 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

About Colliers International

Colliers International is a global leader in commercial real estate services, with over 16,300 professionals operating out of more than 502 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.

collierscanada.com

Documents

Calgary High-Tech Spark Report