Breaking Down How Law Firms Lease Space in DC
CBRE has released a new study on how law firms in DC—the biggest users of trophy space by far—have changed their real estate habits. The big takeaways: law firm employment is expected to shrink as firms rightsize and there's more merger and acquisition activity on the horizon.
DC is tied with New York City as the metro area with the most Am Law 100 firm offices (94 of the 100). And while NYC has more than doubled the legal employees, the law sector makes up 18% of all professional/business service jobs here, the top mark in the country. Also worth noting: DC law firms make up just 6% of the job market, but occupy 42% of the trophy office space.
The legal industry's recent movement hasn't been kind to DC real estate. New firms entering the marketplace have taken 345k SF since 2008, however, large firms' dissolution have resulted in losses of 635k SF, and M&A activity has vacated another 416k SF in the last three years.
CBRE director of research Revathi Greenwood says that the 345k SF of new firm space should be encouraging because of the way new firms have entered the real estate market.
"These firms are coming in on a growth trajectory," Revathi told Bisnow today. "They're taking small spaces at first and then more and more as they grow."
Revathi was also struck by how many major law firms are in DC and plans to explore the ways the paradigms for how they use their space are shifting. The greater use of technology and more flexible floor plans have caused rightsizing—as everyone in the industry knows—but also creates opportunities for developers to design spaces to meet the firms' needs.
CBRE projects law firms leasing 6M SF over the next five years, which is right in line with the 5.8M SF of offices in line to deliver over the same time frame. The rich figure to get richer and more aging buildings figure to become obsolete sooner.