Law Firms Adjusting Real Estate Strategies In Face Of Changing Business Environment

10/20/17

Law firms are adjusting their real estate strategies in response to advances in technology, shifting client demand, aging workforces and intense competition to attract and retain skilled talent, according to a new report from CBRE. Most commonly, law firms are contracting their space, resulting in a reduced footprint of 27 percent on average between Q1 2016 and Q2 2017.*

When it comes to growth, Austin, Texas ranked as the fastest-growing legal services employment market in the country, with 26 percent growth since 2010. As a subset of overall legal-services job growth, the number of lawyers in Austin has increased by 43 percent (1,770) since 2010—higher than any other metro in the CBRE study. The fastest-growing legal markets are also among the strongest in the country for overall job growth, with Orlando, San Jose, Kansas City and Tampa rounding out the top five.

“Despite being rooted in tradition and precedence, many law firms are employing new real estate strategies when lease expirations present opportunities, in particular, space contraction and workplace strategy,” said Jamie Georgas, global chair of CBRE’s Law Firm Practice Group. “Law firms with leases expiring in the near term are reconsidering long-held assumptions about how their attorneys work and, when determining their space needs, the services and technology they need to be most effective.”

Space Contraction

Contraction activity has been dominated by Am Law 100 firms—the 100 top-grossing U.S. law firms as ranked annually by American Lawyer—with larger space requirements. Twenty percent of the Am Law 100 firms have reduced their space needs in one or more markets since Q1 2016, according to CBRE data.

CBRE estimates that nearly 29 million sq. ft. of law firm leases will expire between 2018 and
2022 in the 26 markets studied. It is anticipated that more than 70 percent of these expirations
involve requirements of more than 50,000 sq. ft., and are likely to see at least some space contraction as part of renewals and/or new leases.

More than half of these expirations are in New York, Chicago, Washington, D.C. and Houston,
where there are heavy concentrations of Am Law 100 firms with average leases of 125,000
sq. ft. New York and Chicago are in an extended period of rent growth and declining vacancy,
making portfolio optimization critical. Washington, D.C. continues to soften as concessions have steadily increased. Houston remains burdened with an oversupply of sublease space due to the energy industry downturn, and could be particularly attractive to firms looking for lease savings to invest in capital expenditures.

Law Firm Workplace Trends

“Law firms are optimizing their real estate portfolios to avoid excess expenses on antiquated workplaces that value space per attorney over client and employee expectations,” said Ms. Georgas. “To minimize risk around uncertain headcount requirements, many law firms are focused on creating agile workplace strategies through configurable office design and flexible lease structures.”

Some of more common strategies being adopted or considered by law firms include:

  • Shifting from two-sized offices (typically 15’ X 15’ for partners and 10’ X 15‘ for associates) to glass-fronted, one-sized offices with seniority recognized by location, not size
  • Putting less emphasis on grand, ceremonial client spaces and more emphasis on functional meeting spaces
  • Orienting the reception area around hospitality, with concierge services and hosted events
  • Transitioning cafeteria space from merely a place to eat to a place to socialize, in a prominent area along a window line
  • Creating smaller, on-demand meeting rooms with interactive technology scattered throughout the practice area
  • Adopting a paperless file storage strategy


“By fostering a modern workplace with a collaborative, inclusive and social environment, law firms can promote knowledge sharing between generations to aid in succession planning and use their office space as a competitive differentiator when recruiting talent,” said Julie Whelan, Americas head of occupier research, CBRE.

*This transaction volume includes only the top 75 percent of transactions by square footage in the 26 markets included in the CBRE report.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

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