In a recent report by brokerage firm Savills, it was revealed that a higher percentage of U.S. law firms opted for office expansions in 2023 compared to the previous year. This trend reflects a notable shift in the legal industry’s preference for in-person work as the impact of the COVID-19 pandemic recedes.
Increasing Expansion Rates
According to Savills, office expansions constituted 42.6% of law firm transactions signed in the first three quarters of 2023, a substantial increase from the 28.5% reported for the entire year of 2022. This surge in expansion activities signifies the sustained importance law firms attribute to physical office spaces.
Emphasis on In-Person Work
Tom Fulcher, chair of Savills’ legal tenant practice group, noted that law firms actively endorse greater office attendance, reversing the flexibility offered during the pandemic. Some firms mandate lawyers to work in the office at least four days per week, reflecting the sector’s commitment to in-person collaboration.
Want to know if you’re earning what you deserve? Find out with LawCrossing’s salary surveys.
Evolving Office Space Utilization
Law firms are transforming how they utilize office spaces despite the focus on expansion. There is a growing preference for smaller individual offices, and some firms are adopting hoteling and shared office arrangements. Collaborative areas are also evolving, with larger central spaces designed to bring people together and an increase in smaller conference rooms.
Notable Lease Transactions
In August, New York-based Davis, Polk & Wardwell renewed its midtown Manhattan office lease and added an extra 30,000 square feet, marking the most significant office lease signed through the third quarter of 2023. This move underscored the continuing significance of office spaces for law firms despite overall muted leasing activity in Manhattan.
Legal Sector Resilience
Savills highlighted the legal services sector as a standout performer in Manhattan’s commercial real estate landscape. The legal industry dominated leasing activity in Q2 and Q3, showcasing its resilience and influencing leasing dynamics throughout the year.
Diverse Leasing Trends
While most law firms are expanding their office footprints, it’s important to note that not all follow this trend. Downsizings accounted for 29.5% of law firm leases in the first three quarters of 2023, with another 27.9% representing leases with negligible changes. This diversification in leasing patterns contrasts with the downsizing-heavy landscape of 2022.
Stable Overall Leasing Volume
Savills reported that overall leasing volume for the legal market remained relatively stable in the third quarter of 2023, with 1.7 million square feet leased. Additionally, average lease lengths for law firms increased across most markets, rebounding from pandemic-era lows.
In conclusion, the legal industry’s evolving approach to office spaces reflects a nuanced balance between expansion and adaptation to changing work dynamics, showcasing resilience and adaptability in a post-pandemic era.
Don’t be a silent ninja! Let us know your thoughts in the comment section below.