Law Firm Tidal Wave
The DC real estate community has been avidly following the wave of law firm lease expirations. As the dust settles, here's an update.
Law firms are the driver of the high-end office market in DC, says Savills Studley's Tom Fulcher (black shirt, whom we recently snapped with wife Jill Minneman and Boston Properties' Jon Kaylor and Renee Weir, formerly of Cassidy Turley). And in today's sluggish leasing market, landlords will do almost anything to hold onto the bigger ones, including rent concessions and large tenant improvement allowances. Too-good-to-pass-up deals have caused Sidley Austin (1501 K St), Patton Boggs (2550 M), and Hogan Lovells (Columbia Square) to renew. And Steptoe & Johnson (1330 Connecticut) and Finnegan (901 New York) are rumored to be staying put as well.
Of course, many law firms can't pass up the modern features and prestige of new or redeveloped buildings, where the companies can take less space but get more efficient. The new digs may cost more per foot, but they can pay for fewer feet. Pillsbury will soon depart the West End for Akridge/Mitsui Fudosan's under-construction 1200 17th St (snapped here), where the firm will also enjoy more natural light. Arnold & Porter (601 Mass Ave, Boston Properties) and Miller & Chevalier (900 16th Street, JBG, ICG Properties) have also committed to trophy buildings under construction, and Venable is expected to sign a lease at Gould/Oxford Property Company's 600 Massachusetts Ave (which just broke ground). And Kirkland & Ellis, with a near 250k SF requirement, is rumored to be interested in Quadrangle's redevelopment of 1301 Pennsylvania Ave.
Tom says the movement of many large firms isn't just causing landlords to scramble to lock down anchors, but to do so earlier than expected. Negotiations can begin many years before a firm's lease comes due, he says. "Landlords are looking at the landscape and saying, 'I'm better off doing something now,'" he says. (You may not know what you're having for lunch today, but you better know where you're going to eat it come 2019.) Covington & Burling, for example, began exploring new spaces in 2008 before signing a deal with Hines to anchor CityCenter in 2012. Tom repped Covington in that deal with colleagues Art Greenberg partnered with LMS' Debra Lehman-Smith and Jim McLeish.