Costs Force Law Firms Into Less Extravagant Offices
Office occupiers are reworking their real estate strategies to remain competitive and appeal to workers' changing preferences (especially as the search for qualified talent intensifies). Law firms are no exception.
The legal industry has been under pressure to implement cost-cutting initiatives, which includes reducing its second-largest expense: real estate. As of late 2016, the industry had reduced its office footprint by 22.2% from a historic average of 976 SF to 760 SF.
From Riches To ... Rags?
Law firms were commonly known for leasing substantial office spaces, with reception areas that sometimes resembled boutique hotels. Traditional legal offices also would include massive space for libraries and conference centers. The idea was to convey a sense of elegance, importance and control without flaunting client funds.
These traditional spaces are rapidly disappearing as law firms implement modest budget cuts while reducing the cost of services to clients, according to the Colliers Law Firm Services 2016 Year End Review and Outlook.
Law firms have not been as active in leasing co-working spaces as other sectors of the market because of the nature of their work, but they are increasingly collaborating with other firms to use their space more efficiently.
The Name Of The Game Is Renew Or Reduce
Law firms are overwhelmingly renewing their leases, and those that are not renewing are taking reduced office sizes, up to 20% smaller, claiming floor plans with dramatically more efficient layouts. In the two most expensive office markets for law firms, New York and San Francisco, new office space is scarce and thus renewals were common, Colliers national director for office research Stephen Newbold said. In 21 of the 23 markets Colliers surveyed, at least one of the top three largest leases per square foot were renewals, Newbold said.
Another big trend is the consolidation of library space. When they have the chance, law firms are moving to buildings with less library and storage space, instead filing that information on computers, Colliers Office Advisory Group principal Daniel Arends said.
"All across the board, law firms are adopting to new technology, which makes it easier to communicate and share information in smaller spaces," Arends said.