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Big Law Firms Riding The Office Consolidation Trend In Atlanta

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One of Atlanta's largest law firms is at a existential crossroads when it comes to office space, one that could see it reduce its office footprint.

Franklin Street Properties
Pershing Park Plaza, home to Jones Day in Atlanta, was recently acquired by Franklin Street Properties.

Jones Day, the seventh-largest law firm in Metro Atlanta, with more than 130 attorneys, is beginning the process of evaluating its future office space needs, Jones Day partner Scott Specht said.

It just tapped Savills Studley to potentially court various Atlanta landlords as its 140K SF lease at Pershing Park Plaza — the landmark office building that lords over the junction of Peachtree and West Peachtree streets in Midtown — runs out in 2020.

“I think there is an opportunity to reduce our space and how we use it,” Specht said. “But we're at the birth of [the workplace strategy] process.”

Jones Day is not the only major law firm locally that is evaluating its office space or has already done so. Eversheds Sutherland (known as Sutherland Asbill & Brennan before its 2016 merger) has been scouting the Midtown market, possibly vacating 999 Peachtree, where it occupies 200K SF. And it could take even less space, as little as 150K SF, the Atlanta Business Chronicle previously reported.

Atlanta's largest law firm, King & Spalding, recently renewed its presence at 1180 Peachtree, the 600K SF-plus Midtown tower, but with some 100K SF less than the original 416K SF it took when it agreed to anchor the tower at its development back in 2003.

When Troutman Sanders, Atlanta's fifth-largest firm, renewed its office at the iconic Bank of America Plaza tower, it shrank its footprint from more than 300K SF to just 200K SF, according to local reports.

Hines Interests
Hines Interests Senior Managing Director John Heagy

“These law firms, just like corporate America, they're finding ways of being more efficient more effective,” Hines Interests Senior Managing Director John Heagy said. “It's kind of the natural progression of any enterprise that gets more streamlined. I'm not aware of any law firms that are in the market that are growing.”

Historically, the country's storied law firms were some of the biggest office users in major cities. In Atlanta alone, at last estimate in 2015, law firms occupied 5% of Metro Atlanta's more than 220M SF of office space, according to Colliers International. 

But there are numerous competitive trends pressuring many law firms to downsize as they move forward.

“With real estate being the [No. 1] expense to law firms other than salaries, firms are continuing to drive down the percentage of gross revenue spent on real estate,” a recent report from Cushman & Wakefield noted. 

Big Law Firms Riding The Office Consolidation Trend In Atlanta
JLL detailing the reduction in average office square footage per attorney in Atlanta

Across the country, the average law firm spends 5.5% of its gross revenues on real estate, which is actually down from 6% two years ago, according to Cushman & Wakefield.

“A continued shift of rightsizing and downsizing real estate and incorporating new workplace strategies will enable firms to decrease their percentage of gross revenue spent on real estate,” according to Cushman & Wakefield.

Some of the trends law firms are considering include:

  • Remote working, hoteling and office sharing, with more than half of the law firms surveyed by Cushman & Wakefield indicating that more attorneys would work remotely over the next five years.
  • Smaller offices for attorneys, from 850 SF per attorney to a low of 600 SF per capita, with some first pushing for 500 SF per attorney in the near future.
  • Technology eliminating the need for big law libraries.
  • Better recruitment and talent retention.

A big reason large law firms are reducing space is to boost their revenues per attorney, CBRE Senior Vice President Jay Dowlen said. And that has much to do with the downward pressure on fees many have felt since the Great Recession.

In Atlanta, like most other markets, rents have gone up and revenues have not generally increased, so law firms have limited options to boost revenues per attorney. And reducing office square footage is one of those “low-hanging fruit options,” Dowlen said.

Chris Murray, senior vice president of CBRE's workplace strategy group, said there are many other office space trends taking shape. Paper is almost nonexistent in law firms — that means libraries are largely gone and file rooms have disappeared, freeing up more space.

The ratio of back office assistants to attorneys has shrunk, and in many cases, firms have even separated back office operations into lower cost real estate or even lower cost markets.

Murray also said a huge change has come in the lunchroom. Many firms have gussied up the common lunchroom to create a gathering environment or a place to break from the office itself.

“To get these lunchrooms to work … they need to all look like a coffee shop,” Murray said.

One firm CBRE worked with even hired a staff barista to operate the space.

“This lunchroom isn't really a lunchroom,” he said. "It's like the family room of the firm."

“Everywhere, the big law firms over the last five to 10 years have been shrinking rather dramatically,” JLL Senior Managing Director Ian Henderson said, adding that he's seen reduction of space use by as much as 25%.

But massive reductions are not universal. Henderson said there appears to be a bifurcation taking place, where smaller law firms, those typically using less than 100K SF, have either remained steady or even taken more office space.

For instance, last year, Drew Eckl & Farnham inked a 60K SF lease at SunTrust Plaza, the 60-story tower at 303 Peachtree St., and one of the most prominent skyscrapers on the Atlanta skyline, a deal Henderson worked on. The firm actually grew its footprint from its previous location.

One of the biggest issues facing law firms is billable hours, or how much they charge clients for work. In some cases, major firms are steering some of their legal work to smaller and boutique law firms that charge less than the big firms, Henderson said.

Among the trends Jones Day could evaluate include the work habits of its younger attorneys who have more computers and online research. The firm already reduced the size of its in-house law library when it moved to Pershing Park Plaza in 2004. But even that fairly small library is oversized today, Specht said.

“You can imagine how much technology has [impacted] that,” Specht said. He added it is too early to say whether Jones Day would actually reduce its footprint, and what office trends to which it would adapt.

And while office space as a means for recruitment and talent retention is a factor, Specht said it is a minor consideration when an attorney eyes Jones Day.

“I think their decision is probably made on more substantive [factors] than that,” he said.