The Jones Lang LaSalle ‘Law Firm Office Perspective’ report is released annually and this year’s states that law firms across the country are rightsizing their needs for space, which means they are renewing their leases. For law firms that have leases expiring, close to two-thirds of those firms are renewing their leases. Law firms from most major markets of the country continue to search for the best locations in terms of space for their operations. These law firms play an important role in the commercial real estate industry as they occupy 17.1 percent of Class-A downtown office space across the country.
New York City has the highest number of law firms leasing 50,000 square feet of space or more at 117. Washington D.C. comes in second with 91, Chicago has 54, Los Angeles has 42 and Boston has 33. The areas of the country with the largest percentage concentration of law firms in the country include Tampa, Austin, and Washington D.C. Throughout all of these markets, law firm occupancy takes up 30 percent of the areas.
“Confidence levels, both consumer-related and business-related, have declined over the past few months,” said John Sikaitis, Director of Office Research, Jones Lang LaSalle. “The legal industry is typically a lagging indicator when it comes to the overall economy, and has continued to add jobs. However, revised economic forecasts do not bode well for firms’ near-term business prospects and we predict most law firms will keep growth contained over the next few quarters.”
The report also released that the law firms can negotiate a discount of at least five percent when using direct-leased space and a discount of 25 percent for subleased space. This trend will likely continue to for quite some time for small and midsize firms but larger law firms will soon see the window of opportunity disappear.
Tom Doughty is the head of the Law Firm Group and he had the following to say:
“In Chicago, only three available blocks of Class-A space larger than 200,000 square feet are currently on the market and a variety of firms including DLA Piper, SNR Denton and Latham & Watkins (as well as a variety of other corporate users) are in the market with large requirements. New York on the other hand, has nearly 100 law firms occupying more than 50,000+ square feet who account for 42 percent of the total market. Law firms actively looking for space include Arnold and Porter, Pillsbury and Sullivan & Cromwell. Another notable city is Los Angeles, where 16 percent of the market is occupied by law firms. Further, law firms currently comprise 32 percent of the overall active requirements in the market. Four firms are currently in the market for more than 50,000 square feet of space in the Los Angeles market. The relative shortage of large-block Trophy-class space could eventually drive the development of one or more new office towers over the next several years,” Doughty said. “Until then, though, the limited amount of big-block options will reduce leverage for large firms.”