Law Firms Are ‘Future-Proofing’ The Workplace To Remain Competitive
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As the legal services industry becomes more tech-savvy, it is causing a shift in law firms’ workplaces.
Bisnow spoke with CBRE head of occupiers research in the Americas Julie Whelan and CBRE Vice Chairman and National Law Firm Broker Stephen Bay to get the scoop on trends disrupting law firms' real estate decisions.
Tech advances have allowed companies to become increasingly efficient in their use of space. Law firms are no longer dedicating large portions of their core office space to massive libraries and filing systems, as data is predominantly stored online and in the cloud.
“There are typical functions each firm has — a good amount of conferencing, support areas, dining for associates, work for attorneys, administrator space, etc. What we’re seeing is tech is having a significant impact on the way firms are using space,” Bay said.
One major shift has been attorneys’ need for legal administrators. Where it used to be one assistant per attorney, now the ratio is more like six attorneys to one assistant.
The removal of the physical libraries and having fewer assistants on staff has resulted in office downsizing. As the average decade-long lease ends, firms are reducing their square footage per employee and making the office more flexible in a move to “future-proof” the workplace and remain competitive.
“Future-Proofing" The Office
CBRE projects there is 29M SF of law firm space set to expire in the next five years (only counting the 26 markets it studied in the report). Half of these lease expirations are in New York, Houston, Chicago and Washington, D.C.
As firms get ready to enter contract negotiations for new leases, one major factor on their minds is how technology will upend workplace design in the next 10 to 20 years, and how their offices will remain competitive enough to stay in the fight, Bay said.
“They’re looking at it saying, 'I’m gonna be here until 2035 — what is my firm going to look like then?' … That’s where the future-proofing comes in,” Bay said. “By 2030, 75% of the workforce will be millennials. How are they going to want to work and are they going to want the same senior partner office or will they be more willing to work in an open environment?”
Firms are designing their offices today in anticipation of trends 10 or 15 years down the road. They are using configurable offices that can be easily adjusted. These offices can be broken into smaller or bigger units as needed; should a two-lawyer room need to split into three this can be easily attained with lighting, electric outlets and sufficient WiFi offerings. Bay said firms are also putting filing cabinets and libraries by the windows so as files are transferred online that space can be converted to office space.
The goal is to be as flexible and appealing as possible.
“The idea is to create an environment that people want to go to because they are getting tools and tech they can’t get anywhere else,” Whelan said.
New Leases vs. Renewals
As the industry cuts back on its square footage and turns to more flexible, amenity-rich workplaces to appeal to young professionals, there are two things to note: one, firms are picking up and relocating offices instead of renewing their leases. Two, much of the costs saved in cutting square footage per employee is being replaced by new, amenity-rich digs.
“From an expense perspective, there is less square feet being invested in, which is positive, but different expenses not going into build-out itself [are going toward] the caliber of the building, floors, amenities or technology,” Whelan said.
Bay said he does not foresee shorter lease terms becoming a trend, especially because law firm build-outs are expensive. Leases are typically predicated by market and macroeconomic drivers. If companies invest a large sum into their space, they prefer to sign on long term. But the terms of the lease can shift depending on the economy and whether or not it is signed in a downturn.
“In 2008 and 2009 we were advising clients to go long because in a recovery it makes sense to lock in [to a contract] at a low period,” he said. “It has to do with efficiency of space and other market factors that you have to take into account.”
An Aging Industry
When it comes to job growth, the legal services industry is taking a blow. Despite the fact that U.S. unemployment levels are hovering near 16-year lows, a shortage of young talent in the legal profession has proved challenging. Whelan said there are several factors contributing to this trend, not least of which is the fact that several industries, including tech and the financial services sector, are all vying for the same talent. The increase in the number of baby boomers retiring out of the workforce is adding to the difficulty of finding adequate successors.
As the workforce and workplace undergoes a massive shift, the industry is making the necessary adjustments to keep pace.
“During the last recession, a lot of firms laid off associates. You had perhaps fewer students going on to law school and [wondering] ‘will I be able to get a job at these firms?’” Bay said. “If you look at big firms today, they're still growing. There was a period of time at beginning of the recession when they significantly cut back on hiring, but the big firms are back to having significant summer and first-year classes.”
The collaborative nature of the latest office design trends is helping, as it appeals to millennial workers and promotes knowledge sharing between age groups.