Law Firms Continue to Densify
CBRE VP David Kleinhandler, who has worked in this sector for more than a decade, does not see this trend swinging the other way in the near future.
NEW YORK CITY—Blue chip law firms are traditionally good tenants, paying top dollar for prime locations, staying 15, 20, even 40 years in the same offices. They hold a healthy share of the real estate market. As of Q3 2018, CBRE recorded law firms in Manhattan occupy 36 million square feet, roughly 10% of the borough’s occupied office space.
CBRE’s legal market report also indicates the Am Law 100 firms, the 100 top-grossing firms in the country as ranked by GlobeSt.com’s sister publication, The American Lawyer, are contracting square footage per lawyer.
CBRE SVP David Kleinhandler has worked in this sector for the last 15 years. Some of his 2018 deals include representing Blank Rome and Chapman & Cutler, in leases at Rockefeller Center, and Perkins Coie signing on at 1155 Sixth Ave.
He says, in general, every industry wants to figure out how to save money and one way to do that is by shrinking the real estate footprint.
Law firms using more than 100,000 square feet tend to sign 15-year leases, sometimes even longer. “Law firms aren’t the most radical people,” comments Kleinhandler. “But they are trying to be more efficient.”
Following the recession, he observed law firms saving money by staying in place and avoiding relocation costs. But now as firms have grown and plan to further increase their headcount, he says relocation is another tool in their business decisions. CBRE estimates that for the 26 markets it tracks across the country, approximately 29 million square feet of law firm leases will expire from 2018 and 2022. Relocations tend to occur at the time leases expire or are up for renewal.
In relocations, firm can save money by taking less space or fitting more people into the new space they are leasing, according to Kleinhandler. So, who’s changing their real estate configurations/?
“I think law firms often want to see what the big firms are doing. You need a few firms that want to lead the pack. No one wants to make a radical decision until some of the bigger firms do it and then people generally follow suit,” says Kleinhandler.
In 2016, Paul Hastings moved from Park Avenue Tower at 65 E. 55th St. to the MetLife Building at 200 Park Ave. in Midtown Manhattan. CBRE represented the firm. “They put first and second-year associates in open plan, and I have not really see that done on a large scale in New York. For law firms that was a fairly radical departure,” he says.
He describes Paul Hastings’ open plan increasing collaboration and interactions with the space having generously sized cubicles along a window to provide good light. Kleinhandler notes the firm internally reviewed how their employees work, then consulted with architects and brokers. He adds such changes can often depend upon the culture of the firm.
And cultures evolve. In 2016, The American Lawyer reported 15% of partners will retire in the next five years with 38% retiring in the next decade. Thus, the next wave of leadership is making their mark on the profession. In addition to increased densification, there’s a greater emphasis on transparency. In design, this has resulted in greater use of glass fronts and reduction of the traditional sheetrock and wooden doors. Kleinhandler also sees more democratization, with partners and associates now having greater uniformity in furniture. So, when an attorney is promoted from associate to partner, the furniture can stay the same.
In addition, a 2017 Gallup workplace survey reported 43% of employees in the legal industry work remotely some of the time—and remote working is continuing to rise.
Times are certainly changing—even at law firms, but as expected with some precedence.
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