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Q&A with Colliers’ Daniel Arends: Law Firms Pivot Toward Hybrid Working

Colliers’ 2022 spotlight report on the legal sector in North America found that law firms have largely come to terms with both the trend toward hybrid working and the fact that office space is still very much a part of their operating model. Connect CRE recently sat down with Chicago-based Daniel Arends, head of Colliers’ North American law advisory group, for an in-depth look at the report’s findings. Here’s what he told us.

Q: Has the pandemic irrevocably altered long-term occupancy trends among law firms, or has it accelerated the downsizing trend that was evident prior to the pandemic?

A: The pandemic has unquestionably changed the long-term occupancy trends of law firms as it has for every industry. While law firms were making moves to downsize prior to the pandemic, the changes they were making were converting to universal office sizes, shedding law libraries and dramatically reducing file storage. These trends have continued, but the pandemic provided all users the world’s largest test kitchen for remote working. What started as how do we survive has flourished into how do we make our firm thrive. Prior to the pandemic, law firms were trying to enhance technology and create space within their working environment that would allow their attorneys to be become untethered from their work space. Now, that freedom has been enhanced so that attorneys can work from anywhere at anytime and many lawyers are embracing this flexibility.

This trend toward hybrid working will undoubtedly allow firms to be more efficient in how they use their space. So, now as firms have the option to reoccupy their space, we have seen several of our law firm clients integrate some form of hybrid work into their strategies and it continues to evolve. We have also seen firms rethink the design of their space to put a greater emphasis on conferencing and collaborative space.

Q: What do occupancy trends look like compared to a year ago for the market as a whole vs. the legal sector?

A: I think Chicago is representative of the rest of the nation. In 2020 Colliers reported gross absorption for the city at 2,530,087 square feet with 280,315 square feet of law firm activity. In 2021 gross absorption was 4,503,744 square feet, with 352,995 square feet of law firm activity.

So far this year, gross absorption has been 4,162,171 square feet through June 30, with 341,572 square feet of law firm activity. In 2020, any firm that could hold off on making a decision did, but those firms that had leases expiring and had no other options looked to sign the shortest-term lease they could. In 2021 and, so far this year, law firms have been more bullish and are once again willing to sign long-term commitments.

Q: What aspects of remote working are especially challenging for law firms?

A: Law firms face the same challenges that many other users are facing with remote work. These concerns include onboarding, mentoring, training and professional development, face to face collaboration, and the overall ability to create a culture and brand that will allow you to recruit and retain the best and brightest talent. This is particularly true with associate and senior associates as law firms try to bring on laterals. In 2021, we saw the number of lateral moves grow by 149%, when compared to 2020, and we saw salaries increase by 22% for associates and senior associates.

Attorneys probably see the greatest challenges as they try to collaborate on litigation cases and communicate with their support during hybrid work. This is simply more difficult to do remotely or over video calls.

While remote work has brought about challenges, law firms have been incredibly productive over the last 12 months. In 2021, every AmLaw 100 firm saw their revenue increase, with 18 of those firms recording growth of more than 20%. The average gross revenue increase was 14.8%.

Q: How does flexible workspace fit into law firms’ occupancy requirements?

A: Office tenants are increasingly considering the role of flexible workspace in their occupancy strategies. National law firms are no different. To date, we have not seen law firms activate a hub and spoke model when it comes to their flex work strategy, but rather they have been using flex space for large litigation matters when they need occupancy for short periods of time.

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Colliers' Arends

About Paul Bubny

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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