Why Do Law Firm Offices Keep Changing? We Found Out.
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What will your office look like in 10 years? At our event on Real Estate Strategies for Law Firms at the Renaissance DC Downtown, we asked prominent lawyers and real estate professionals to paint a picture.
Jones Lang LaSalle VP Scott Homa gave a quick State of the Market:
- Though US law firms' average annual revenue growth is around 3% (compared to double-digit growth in the past), the key metric—profits per partner—shows 5% to 6% growth.
- 86% of law firms have already reset their space needs. Whether they renew or relocate, firms give back about 25% of their space. (Scott's also seen one or two cases of over-correction.)
- The legal sector is still down 7,200 attorney and paralegal jobs since 2008 peaks. (On the plus side, DC is in a three-year high for job growth.)
- 88% of new DC households don't have a vehicle. The District has been the second-fastest-growing jurisdiction nationally over the past four years, without any net increase in automobile registrations. Metro accessibility is a necessity for those new entrants, many of them Millennials. (So if tenants are OK with off-metro locations, they can drive a hard bargain.)
A case study panel gave the inside scoop on Hogan Lovells' extensive search for a new building; the firm narrowed its options to 30 sites before voting to stay in Columbia Square—with a full renovation of its 400k SF space. Cushman & Wakefield executive director Malcolm Marshall moderated, joined by Hogan Lovells employment partner Bill Flanagan (who's co-chairing the renovation and was at the firm when it first moved into Columbia Square in '87), and two real estate professionals who are working with the firm: Gensler's Kim Sullivan and DAVIS Construction's Meghan Callahan. Bill says the firm began internal discussions in 2011, five years before the lease was up, and engaged a strategic consulting firm. The partnership "voted overwhelmingly" to stay at 555 Thirteenth St, in part because of a convenient location atop Metro Center. The project should be finished in 2017.
Input from the staff and attorneys has been critical, Bill says. A 50-person team called the "Revision Committee" advises on the renovation, with a core group of 10 meeting once a week for three to four hours. Since it's a phased renovation, people's feedback can be incorporated into the next project, Kim says, and their insights from living in the space have been helpful. Bill says change furthers a key strategic objectives: the "one team worldwide approach." Hogan is integrating all of its support staff and professionals onto the 6.5 practice floors with attorneys. Flexible zones around the interior can use removable partitions to make 80 SF offices, 165 SF associate offices, secretarial spaces or huddle rooms. Since this space is for the next 20-plus years, Kim says, they wanted to make sure it can evolve with changes in the business model or leverage ratio.
Gensler examined three key factors: Hogan's business strategy, its culture and its change management. The latter was important because for people to be shifted through the space for years, there had to be communication, excitement and a vision that everyone could get behind. One effective technique was transforming the 37k SF seventh floor into a "pilot floor" fully outfitted with one-size offices, new furniture, tools and technology, and the "Hogan Hive" (a central meeting place for each floor). The pilot floor let attorneys see how the new office would feel; if a concept didn't work, it could be changed. Three months ahead of the pilot floor build, Meghan says DAVIS made an even smaller mock-up of four offices to select furniture and finishes, and start vetting tweaks early in the process.
For insights about what your office will look like in 10 years, we turned to a panel with a broker, landlord, architect and engineer: Cushman & Wakefield's Malcolm Marshall, Perkins+Will principal Diana Horvat, Boston Properties SVP Peter Johnston and WFT Engineering owner Reardon "Sully" Sullivan. Two drivers Diana sees are flexible office spaces that can be configured to accommodate staff or business changes, and methods to compress over time as law firm practice becomes more efficient and services provided by the firm are complemented by external services.
For how law firm offices will look, you may want to look to clients' offices. Diana says they've asked to speak with firms' clients, as many practice areas are being driven by clients' expectations of service delivery. From a landlord perspective, Peter says there's somewhat of an "amenity war." Aside from the daycares, roof terraces and fitness centers, law firms are setting up casual spaces and breakout areas where people can get out of their own office without leaving the building. (Firms want to keep employees in the building, he says.) At 2200 Penn Ave, Boston Properties also included a Whole Foods, a number of restaurants and two financial institutions. Outside of the law firm space, landlords are looking at what retail they can put on the ground floor that will be attractive to the employees.
Reed Smith new markets tax credit practice leader Olivia Shay-Byrne moderated a final panel about associations and nonprofits, with Hickok Cole Architects director of interior design Sean Wayne, Vornado/Charles E. Smith EVP James Creedon, Doug Meyer, who led the American Diabetes Association HQ's move to Crystal City, CBRE EVP Manny Fitgerald, Cardinal Bank SVP Penny Bladich and Youth for Understanding USA CEO Michael Hill. Olivia pointed out that Reed Smith just renovated its existing space, going with more glass, smaller offices and more communal space.