Adonis Diaries

Linking Seattle to Vancouver: Next Big Tech Corridor?

Posted on: October 9, 2016

Next Big Tech Corridor? Between Seattle and Vancouver, Planners Hope

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The Amazon campus sprawls throughout downtown Seattle. The political, academic and tech elite of Seattle and Vancouver are looking for ways to bring the cities closer together. Credit Ruth Fremson/The New York Times

VANCOUVER, British Columbia — Seattle and Vancouver are like fraternal twins separated at birth. Both are bustling Pacific Northwest coastal cities with eco-conscious populations that have accepted the bargain of dispiriting weather for much of the year in exchange for nearby ski slopes and kayaking and glorious summers.

Yet 140 miles of traffic-choked roads and an international border divide the two cities, keeping them farther apart than their geographic and cultural identities would suggest.

Now the political, academic and tech elite of both cities are looking for ways to bring them closer together, with the aim of continuing the growth of two of the most vibrant economies in North America.

“Vancouver has a lot more in common with Seattle than we do with Calgary, Montreal, Toronto, anywhere else in our country,” Christy Clark, the premier of British Columbia, said in an interview. “We should make the most of those cultural commonalities.”

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Pedestrians pass a Microsoft location in Seattle. American tech icons like Microsoft are expanding their presence in Vancouver, but the cost of living there is an obstacle. Credit Ruth Fremson/The New York Times

Whether their grand vision of a “Cascadia innovation corridor” — which borrows its name from the region’s Cascade mountain range — ever materializes, leaders on both sides of the border have motives for getting cozier immediately. American tech icons like Microsoft, with voracious needs for global engineering talent, are expanding their Vancouver offices, partly because of Canada’s smoother immigration process.

For its part, Vancouver wants to bring more American technology companies to the city in hopes of spinning out future entrepreneurs who will expand its comparatively small base of technology companies.

One serious obstacle to Vancouver’s tech ambitions is its head-spinning housing costs. The median price for a detached home in the metropolitan area in August was 1.4 million Canadian dollars (about $1.06 million), a 27.8 percent increase from a year earlier, according to the Real Estate Board of Greater Vancouver. In the San Francisco metropolitan area, the median single family home price was about $848,000, according to Zillow.

But while median pay for tech-related jobs is $112,000 a year in the San Francisco Bay Area, it is just under $49,000 in Vancouver, according to an analysis by PayScale, a compensation data firm. (Some of that discrepancy is due to a drop in the value of Canada’s currency relative to the United States dollar.)

We have San Francisco real estate prices with the incomes of somewhere between Reno and Nashville,” said Andy Yan, acting director of the city program at Simon Fraser University in Vancouver.

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The University of British Columbia. Plans to deepen ties between Seattle and Vancouver include more collaboration between the university and the University of Washington. Credit Ruth Fremson/The New York Times

On the thrumming streets of downtown Vancouver, signs of the Seattle region’s growing economic ties to the city are hard to miss. A rectangular glass and steel office building with a large Microsoft sign occupies nearly an entire city block, sitting atop a large Nordstrom store (another Seattle brand).

Microsoft says it invested $120 million in its new offices in Vancouver, which opened in June, and expects to spend $90 million more annually on wages and other operating costs. It plans to employ nearly 750 people in the city.

Microsoft is hiring Canadians for the facility, but the country’s more open immigration policies were an important factor in its investment, Brad Smith, Microsoft’s president, said in an interview. Microsoft and other tech companies have long complained that the United States education system does not produce enough computer science graduates, forcing them to rely on immigrants from India, China and elsewhere.

Foreign workers in the United States can wait about three times as long for a work visa as those in Canada do, the Boston Consulting Group estimates. And the prospect of Donald J. Trump winning the presidency has raised concerns among tech companies, because of the Republican candidate’s comments about further restricting immigration to the United States.

“Right now, there’s just a lot of uncertainty about open immigration,” Mr. Smith said.

Last month, officials and executives from both cities huddled in a Vancouver hotel to discuss how to enable people, ideas and capital to flow more freely between them, as heedless of the international border separating the cities as a pod of orcas swimming in the sea.

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Christy Clark, left, British Columbia’s premier, and Gov. Jay Inslee of Washington signed a memorandum of understanding affirming their shared interest in creating regional economic opportunities for innovation in the technology sector. Credit Ruth Fremson/The New York Times

At the Cascadia conference, Ms. Clark and Jay Inslee, the governor of Washington, signed an agreement to deepen the ties between Vancouver and Seattle, including more research collaboration between the University of British Columbia and the University of Washington. Bill Gates, co-founder of Microsoft, and Satya Nadella, its current chief executive, talked about globalization and education.

One proposal to deal with traffic between Vancouver and Seattle was for a high-speed rail line that would whisk travelers at more than 200 miles an hour between the cities in 57 minutes (it can take four hours or more by car). The details on financing the project — which could cost an estimated $30 billion or more — have not been worked out.

A group of Seattle techies proposed a cheaper alternative: a dedicated lane for autonomous vehicles on Interstate 5, the highway connecting Seattle to the Canadian border.

The plan — which relies on autonomous vehicles that still need a lot of work — would not shave much time off the commute between the cities, but could make the ride less tedious by letting travelers work or watch a movie, said Tom Alberg, a managing director at Madrona Venture Group, a Seattle venture capital firm, and an author of the proposal.

With roots in timber and shipping, Vancouver’s economy has diversified in recent decades with the growth of film and video game production. The city claims a tech “unicorn” — a start-up valued at over $1 billion — in Hootsuite, which makes social media tools.

But Vancouver remains a relative small fry in tech, with about $1.78 billion in venture capital flowing into local tech start-ups in the last decade, compared with about $8.9 billion in Seattle, the research firm Pitchbook estimates.

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Microsoft offices in Vancouver. Canada’s more open immigration policies are a draw for American tech giants. Credit Ruth Fremson/The New York Times

Still, the city’s hoped-for tech boom may hit a wall if it cannot address its cost-of-living issues, which are by some standards more acute than those plaguing other thriving cities. Vancouver was ranked the third most unaffordable city in the world, after Hong Kong and Sydney, in a study published this year by Demographia, a consulting firm.

Mr. Yan has spent years analyzing his hometown’s soaring real estate values and concluded that a surge in foreign capital, primarily from mainland China, has decoupled Vancouver home prices from the local economy. British Columbia recently imposed a 15 percent tax on new home purchases in the Vancouver area by foreign buyers, a move now facing legal challenges.

The housing market is showing signs of cooling off, though it is not yet clear how much of that is because of the tax. The total number of homes sold in the area in August dropped 26 percent from a year earlier and price growth has slowed, according to the Real Estate Board of Greater Vancouver.

Dennis Pilarinos, chief executive of Buddybuild, a Vancouver maker of developer tools for mobile apps, says affordability has been less of a problem for young tech workers, who may be willing to rent smaller apartments and live with roommates.

But when start-ups get bigger, many struggle to recruit senior executives with families, said Mr. Pilarinos, who previously worked for Microsoft and Amazon in Vancouver.

“Companies tend to run into scaling issues,” he said. “You end up with fewer Microsofts or Amazons.”

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