Law Firms’ Flight to Quality Boosts Office Productivity, Retention

Law firms across the country are leveraging the rise in office vacancies following the pandemic to prioritize employee wellness as a central component of their real estate strategies. Despite a prevailing trend of shrinking office footprints in the legal industry, a recent study by Savills reveals that firms are achieving higher retention rates and stronger corporate cultures in exchange for moving into more expensive, high-quality spaces.

Savills surveyed law firms that have either renovated or relocated in recent years and found that the majority are participating in the “flight-to-quality” movement. However, these firms are also downsizing or negotiating with landlords to modernize smaller versions of their existing spaces.

Most firms surveyed, whether they relocated or renovated, upgraded their office furniture and implemented flexible workday arrangements. However, firms that relocated were more likely to report improvements in areas such as technology, air quality, and moving to higher floors. In contrast, firms that renovated were more likely to introduce wellness programs, shared offices, and healthier food and beverage offerings.

“83% of firms that relocated reported a positive or very positive impact on recruitment,” Savills’ survey noted. “Respondents from firms that renovated saw the biggest positive impacts in office energy, internal collaboration, and employee retention.”

Most firms that chose to relocate moved from buildings constructed in the 1980s to Class A properties built within the last five years. This shift has fueled demand for Class A office space, pushing up rents while reducing occupancy and rents for Class B and C office buildings.

Savills’ findings reflect a broader shift in law firms’ real estate strategies, where smaller office footprints are balanced with evolving workplace dynamics and employee expectations. The report aligns with JLL’s recent findings, which indicated a rise in office space demand in the third quarter of 2024, marking the first decline in availability in five years.

Savills expects leasing volumes to fluctuate over the next six months. The firm also anticipates a decrease in vacancy rates as downsizing becomes less frequent and availability shrinks. In addition, obsolete office spaces are expected to be repurposed or demolished entirely, further impacting the market.