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Lawyers Shrinking Their Offices, JLL Reports

 

Steve Burkett

Steve Burkett

HOUSTON (By Dale King) – Law firms throughout the nation are making a concerted effort to trim costs and improve efficiencies. They now have a blueprint for “right-sizing” crafted by a professional services and investment management company that offers specialized assistance to clients looking to maintain and increase the value of their properties.

The latest edition of “Law Firm Perspective” issued by JLL shows the legal industry ways to rein in office rents and reduce the per-attorney “footprint” without negatively impacting productivity.

“Law firms have made significant real estate efficiency gains this year, but the pressure to reduce costs in this area continues,” said Tom Doughty, co-lead of JLL’s law firm practice group. “JLL’s new benchmarking data reveals whether a law firm’s square footage and rent ratios are below, above or in line with the industry average, and what other firms consider to be ideal.”

Legal practices in Houston seem to be taking the report to heart, said Steve Burkett, executive vice president of the Tenant Representation group at JLL’s office in Houston. “Every law firm that’s been here for a while, when it comes time for a renewal or relocation, they get smaller.”

The report says the typical US law office has sharply reduced its space footprint by 22.2% from a historical average of 976 square feet to 760 square feet today, and cut annual US rent-per-attorney by 12.1%, from a historical average of $38,535 a year to $33,879 today.

Houston’s law firms have historically had above-average real estate ratios of square foot per-attorney and rent-per-attorney, but is experiencing “the national trend of law-firm right-sizing,” says the report.

Traditionally, attorneys in Houston have been able to spread their official accoutrements across 1,200 to 1,400 square feet. That space has been pared to between 950 and 1,050 square feet, with the goal of reaching 700 to 800 square feet.

So far, law firm footprint reductions have come through adoption of automated libraries and office systems rather than a dramatic change in workplace strategy, the document notes. However, many companies have shrunk work cubicles for support staff and outsourced some workflow to smaller, less expensive markets.

Among Houston law offices, “the amenities they are putting in are great,” said Burkett. “Wi-Fi is everywhere, break rooms are more comfortable. The access to light gives the staff a better working atmosphere.” All this is being done “within the smaller footprint.”

Across the nation, demand for Class A office space in the central business district has led to double-digit rental increases in many markets, the report says. But in downtown Houston, “rising office supply, increased concessions [by landlords] and falling rents signal an opportunity for the law firm sector to grow as a whole.”

CBD sublease space is also allowing law firms to occupy traditionally sought-after buildings at a discount. Burkett says national and international law firms are flocking to Houston as the city approaches a population level that will make it the third largest city in the country, outsizing Chicago.

“As prominent firms such as Kirkland & Ellis, Hogan Lovells and Orrick relocate to prime space at 609 Main, other firms will feel the pressure to upgrade their space in order to attract top-tier talent,” the report notes.

“What firms save on rent can be invested in new space that better meets company and employee preferences,” said Elizabeth Cooper, co-lead of JLL’s law firm practice group. “However, we don’t see law firms moving to the hoteling model or bench seating arrangements that consulting and technology companies tend to favor. Rather, the legal industry is creatively reducing its footprint while giving attorneys the space and privacy they need to work effectively.”

Burkett added a few bullet points about the Houston situation:

  • While laws firms in America are pushing a leaner, financial operations model, companies in Europe – particularly England – are taking an even more aggressive stance on right sizing.
  • Law practices new to Houston are “looking to be as cost-effective as possible. More often, they take existing spaces and make do for a while until they figure out exactly what they want to do.”
  • The downtown Houston and Galleria areas attract many law firms. Solo and family practices can operate from single-family homes in less-urban areas.

“Being in a high-rise is desirable for law firms. That’s where the other law offices are and that’s where the courthouses are. They can get to the courthouses by walking or taking an Uber.”

JLL’s report will probably be applicable for another “two to four years, five max,” Burkett said, “until the price of oil stabilizes.”

Nov. 3, 2016 Realty News Report Copyright 2016

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