Legal Tenants Get a Handle on Their Space Requirements
Last month, law firm Cozen O’Connor announced that it had consolidated its New York offices to 77,000 square feet at Silverstein Properties’ 3 World Trade Center. The lease, signed before COVID-19 disrupted workspace arrangements for office occupiers, represented a legal-sector trend that predated the pandemic, i.e. downsizing and consolidation of space. However, Cozen O’Connor’s announcement also served as a reminder that law firms remain a major tenant class.
A new white paper by Newmark’s Bethany Schneider and Alexander Paul examines the trends that were prevalent prior to the pandemic, how those trends are evolving in the current environment, and two potential scenarios for the future of law firm real estate. Key findings include:
• “Through the 12 months ending November 2020, legal services employment in the U.S. declined 2.8%, a figure significantly lower than the 5.2% legal services job losses resulting from the prior economic downturn. Legal services’ relatively superior employment protection relates to a variety of factors, most notably a significant reduction in client-entertainment, conference, and travel-related expenses.”
• “Some law firms are taking a wait-and-see approach to their real estate decisions, as both the length of the economic downturn and post-pandemic office use trends remain uncertain.”
• “Major firms that were already in the process of increasing space efficiency executed long-term leases to capture immediate cost savings, in many cases securing better terms through the negotiation process as asset owners increasingly felt the negative impacts of the pandemic. Other firms have taken advantage of the tenant-favored environment to renegotiate their existing leases and return unused space to the asset owner. In short, many of the transactions that occurred after the pandemic started were driven by opportunism rather than a change in space usage or configuration resulting from a need for social distancing.”
• “Some firms are considering implementing a more flexible office configuration beyond the single-size offices that had already become a prominent trend. Firms are now considering a continuum of future options ranging from a fully virtual firm to the traditional in-office model that was prevalent pre-pandemic.”
• “Another trend that has emerged from opportunism surrounding the pandemic is a significant uptick in law firms placing excess office space on the market for sublease. Many firms had already begun or were planning to downsize their office space footprints pre-pandemic but now have put more sublease space on the market than perhaps they would have had the pandemic not occurred.”
• “Most law firm office market experts consulted for this study predict that if there is an impact on workplace strategy resulting from the pandemic, it is more likely to be a move toward smaller offices and potentially some shared offices; a strong shift toward universal hoteling is unlikely, particularly among AmLaw 100 firms.”
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).
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