Law Firms Didn’t Sublease Office Space During the Pandemic
Unlike tech companies, financial services companies and energy companies, which contributed to the glut of sublease space in major metros, law firms only account for 5% to 7% of the sublease market.
The office sublease market swelled dramatically during the pandemic in major cities, but one industry was a bright spot: law firms. Unlike tech companies, financial services companies and energy companies—which drove the glut of sublease space in major cities—law firms only contributed 5% to 7% of office space the sublease market, according to research from Savills.
Law firms based in San Francisco contributed the least office space to the market during the COVID outbreak, with about 1% of office space in the sublease market coming from them. Chicago, New York and Los Angeles law firms contributed only 5% and 6%, respectively, to the market through the end of last year. Washington DC was the only outlier. At the end of 2020, DC-based office space from law firms accounted for 31% of the space on the sublease market. However, in the first half of 2020, law firms took back nearly half of the space, bringing the total law firm-contributed sublease space in the market to 16%.
The trend was the opposite in Chicago, New York and Los Angeles. In those cities, law firms continued to add sublease space on to the market. In Chicago and New York, the total additions from law firms increased from 5% to 6% and 5% to 7%, and in Los Angeles, it increased from 6% to 7%. Like Washington DC, law firms took space off of the market in San Francisco as well, with the sublease market containing less than 1% of law firm office space.
Overall, these trends don’t seem to align with the overarching trend in sublease space in these markets. San Francisco’s sublease market has continued to grow in both the first and second quarter this year. The markets in Chicago and Los Angeles are relatively flat, while both Washington DC’s and New York City’s sublease market contracted in the second quarter.
Law firm’s are not only holding onto office space but they are also leading the return to the office. A report in June from Colliers showed that law firms are among the first office-using tenants to ditch their work-from-home policies. Nearly 70% of law firms surveyed by Colliers reported that offices were at least 25% occupied. By the end of 2021, Colliers experts predict that two-thirds of all law firms will be more than 50% occupied.