CRE Braces For Law Firm’s Mass Exodus Of Senior Partners
A large number of senior partners at law firms, primarily Baby Boomers, are getting ready to retire, and Baker Tilly director Hank Windmoeller said this has important implications for the type and amount of office space firms require.
It’s estimated that Boomers comprise slightly under 50% of all partners of The AM Law 200. The preliminary results of legal search firm Major, Lindsey & Africa's 2016 Partner Compensation Survey show that in the next five years, “one in six—16%—of current partners will retire, and 38% in the next decade.”
Windmoeller told us that the impact is exacerbated by slow growth in the industry since 2009, as lower demand for legal services has persisted since the recession.
This leaves law firms scrambling not for mental horsepower, as the supply of young lawyers is still increasing at faster and faster rates, but to preserve relationships as firms transfer responsibility to the less experienced.
What effects will this demographic shift have on CRE?
Answer: a dramatic one, or three rather, according to Windmoeller; space is the second-largest expenditure for law firms, after salaries.
First, he said, the shift will affect the footprint of the firm. As recently as a decade ago, law firms were known to take 1k SF per attorney. Now they lease 750 SF per attorney, with the goal of reducing to the mid-600s.
In Chicago, virtually all large law firms moving into new buildings are taking less space than they currently occupy, creating negative sector-specific absorption, particularly in the market for traditionally prized Class-A office space.
Law firms that signed leases before 2007 or 2008 generally took more square feet than they needed at the time, anticipating growth, increased demand and rising head counts. That has led to rampant subleasing in the Windy City.
Second, senior partners retiring will affect law office design. Windmoeller told us that even the most conventional firms are warming to open floor plans to save space while promoting collaboration and knowledge transfer.
Some firms that want to maintain private or semi-private offices for attorneys are moving to a one-size-fits-all model, where all attorneys, regardless of tenure, get the same amount of space.
Also en vogue is the New York space-use model, in which young associates are assigned shared or interior offices while more senior partners get the corners and windows.
Attorney-to-assistant ratios, which 10 years ago might have been 2:1, are now 5:1 or greater. Interior space previously devoted to secretarial staff has to be repurposed, making demountable walls and similar items that provide flexibility highly desirable.
The third shift, Windmoeller said, is driven by Millennials’ desire for and comfort with telecommuting. As long as Generation Y can efficiently work remotely, remaining connected through their devices, there is little need to be in the office.
“Some smaller IP firms have gone completely virtual, especially on patent prosecution,” Windmoeller told us.
With the change in leadership, some firms are re-establishing their brand identity by radically departing from the Class-A office space they’re expected to occupy and taking up leases in unconventional space, Windmoeller said.
This move imbues the firm with an edgy, disruptive and young corporate image. Clients don’t want to pay for a firm’s lavish accommodation, but everyone wants successful attorneys, who tend to occupy the nicest spaces.
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