Sprawling libraries, mahogany desks and large offices with expansive views used to be the law firm standard – but no more.
Today’s firms are shrinking their real estate, both in terms of individual office size and total real estate footprints, in response to sluggish revenue growth and rising office rents.
The typical U.S. firm has cut its real estate footprint by 22.2 percent in recent years, bringing the historic average of 976 square feet per attorney down to 760 square feet. Some firms hope to reduce target occupancy by another 17 percent, down to 625 square feet per attorney, according to JLL’s 2016 Law Firm Perspective report.
“Law firms have made significant real estate efficiency gains this year, but the pressure to reduce total real estate cost continues,” observes Tom Doughty, Co-lead of JLL’s global law firms practice group.
“Given the significance of real estate as an expense item for a firm, the opportunities to create meaningful savings are still great, and they are aided by the growth in technology as well as willingness by younger lawyers to consider more efficient occupancy styles.”
Creating spaces for today’s workforce
Like many other industries, the legal sector is discovering that flexibility is key to winning the war for the next generation of talent. Seven in 10 human resources executives say their companies use a work flexibility program as a recruitment and retention tool, according to Workplace Trends’ 2015 Workplace Flexibility Study.
And although the law sector has been historically slow to adapt to new workplace trends, the rise of a mobile, diverse workforce is driving new design and location decisions. Real estate has consistently been the average law firm’s largest expense after salaries, and rising office rents in many U.S. cities have made that expense even larger. In law firm “hot spots” such as New York, a trophy address can now cost upwards of $100 per square foot.
“While new Class A office buildings command an average premium of 12.1 percent above market rents, law firms will likely find sublease opportunities and attractive, cost-effective options in non-trophy office buildings in traditional areas such as Chicago’s Loop and Midtown Manhattan,” says Doughty.
“For value-conscious firms, landlords of second-generation space will likely boost concession packages to keep assets with less-efficient floorplates and fewer in-building amenities competitive.”
The new look office
Office interiors are also being revamped to reflect a more modern style of working. Today’s law offices increasingly include collaboration areas, floating workspaces, individualized cubicles and visitor offices for clients or retired partners who occasionally visit the office.
Meanwhile, the move toward automated office systems is freeing up space. Many firms have shrunk the size of cubicles for support staff and outsourced some workflow to smaller, less expensive markets. Sprawling libraries have been replaced by computers and online services, manned by tech-savvy paralegals.
However, there are some limits to how far law firms will go to revamp their offices. So far, law firms have avoided concepts like “hoteling”, in which employees reserve a workspace whenever they are in the office rather than having their own desk. Private offices are also expected to remain a necessity, given the highly confidential nature of legal work.
“We don’t see law firms moving to the hoteling model or bench seating arrangements that consulting and technology companies tend to favor,” says Elizabeth Cooper, Co-lead of JLL’s global law firms practice group. “Rather, the legal industry is creatively reducing its footprint while giving attorneys the space and privacy they need to work effectively.”
As rising costs and space demands increasingly impact real estate decisions across the country, real estate cost-efficiency is only one goal. The other is to use the office to help drive revenue, and that means providing the right kind of workplace for the work at-hand.