Law Firms Still Downsizing, But Also Rank as Top Anchors

Law Firms Still Downsizing, But Also Rank as Top Anchors

The trickle-down of the efficient-office movement is catching up with law firms, forcing partners to figure out ways to not only service downsizing clients, but also save on their own real estate costs.

Colliers International has detailed this movement in its recently released 2015 North America Outlook Report, which includes the legal industry’s efforts over the past five years in adopting workplace strategy solutions, relocations of back offices and other downsizing methods. According to the report, space usage among the top 200 firms is down by 15 percent to 32 percent since the recession. Firms are hiring fewer associates, and space allotted per attorney is down from 1,000 sq. ft. to 650 sq. ft .or less.

Steve Levitas, chairman of Colliers International's Law Firm Services Group, says that even though the national office market is recovering, the law firm trend is to continue downsizing to operate more efficiently. In an industry where office size is an ego boost and a sign of rainmaker status, a few law firms have resisted the workplace strategies that accompanied the efficient office movement. However, he says many firms are working to embrace workspace reduction efforts, such as universal office sizes, teaming attorneys in the same office and adopting paperless methods.

“It’s definitely not a one-size-fits-all for all firms, it really depends on the firm’s culture,” Levitas says. “A few of the larger firms are not as quick to make changes, as they’re happy with their status, but most firms have been watching the overhead costs more than ever before. The ones that are growing are doing it by being better, stronger, faster—and leaner—than their competitors.”

However, firms still need to attract the best new talent and impress clients, so seeking the best class-A, lobby-and-view-popping space in a CBD is still the strategy for top firms. Now that demand has begun to overwhelm supply in this new landlord’s market, many firms looking to upgrade are anchoring up into new planned towers.

For instance, in Chicago, Freeborn & Peters has signed to lease 90,000 sq. ft. to anchor John Buck’s new 36-story planned tower at 151 N. Franklin. Also in Chicago, the firms McDermott Will & Emery and DLA Piper LLP will lease more than 400,000 sq. ft. at the planned River Point tower in the River North section of the city's downtown. On Manhattan’s Far West Side, Skadden, Arps, Slate, Meagher & Flom LLP has signed a 20-year lease for 550,000 sq. ft. at Brookfield Property Partners’ One Manhattan West, a new 2.1-million-sq.-ft. skyscraper.

Some firms have tried outsourcing administrative functions to a third-party firm, or “nearshoring,” by relocating back-office personnel to cheaper space in the less-expensive-rent areas. Tiffany Winne, senior vice president at Savills Studley, says she’s seen administrative-functions moves by firms such as Kaye Scholer’s office in Tallahassee, Fla.; Orrick, Herrington & Sutcliffe’s back office in Wheeling, W.Va., and WilmerHale’s office in Dayton, Ohio. Labor law firm Littler Mendelson PC recently announced it will consolidate its 33 administrative offices into Crown Center in Kansas City, Mo.

“There’s a lot of rethinking of how much space is needed to be in the CBD, and what or who can be located elsewhere,” Winne says.

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