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Law firms evolving to new office space strategies—whether they like it or not

By Glenn LaFollette | glenn.lafollette@am.jll.com | @PRGlenn

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There’s been no radical shift, seismic tilt or dramatic tipping point, but believe it or not American law firms are finally starting to embrace contemporary workplace strategy.

Truth is, they don’t have much choice. Pinched by rising rents and locked in heated wars for young talent, even the whitest of white shoe firms are now eyeing locations and office layouts that senior partners never would have considered just a few years ago.

“Lawyers are a different breed—conservative by nature,” says Bill Walsh, a retired commercial real estate attorney. “But you see the world changing, evolving, so you have to keep up with that. If you don’t, you’re going to find your firm left behind.”

Not surprisingly, economic realities are driving much of this evolution. Historically, law firms have exclusively sought out Class A, trophy office space in the heart of central business districts. In other words, the most expensive space there is.

So now, even as their profits grow steadily, law firms are seeking to hold down their real estate costs. In some cases this means reducing the space they take up. Major firms gave up an average of 17 percent of their space upon relocating in 2014. And 15 of the top 17 U.S. law firm leasing transactions in 2014 involved square-footage reductions, according to JLL research.

But shrinking footprints may not be enough to match rising rents for the short supply of trophy locations in traditional central business districts. JLL research predicts that 77 percent of North American cities will see a rise in rents due to scarcity of available offices. That’s why law firms, which already pay an 18.1 percent premium for trophy space, have seen their rents rise an average of 3.3 percent year-over-year.

So, facing limited options, law firms will soon be forced to enter a brave new world—the micromarket.

Looking beyond typical address

It turns out that micromarkets, which can be defined as neighborhoods on the fringe of, but sometimes adjacent to, central business districts, are in many cases evolving real estate characteristics that match lawyers’ needs. Areas like South Lake Union in Seattle, River West in Chicago and LoDo in Denver are actually becoming as desirable as their respective downtowns— and at considerably lower rents.

“Whether you’re talking about Mount Vernon Square in Washington, D.C., the Hudson Yards district in Downtown Manhattan or South of Market in San Francisco, buildings that are going up in these areas are some of the highest quality buildings ever built,” says Tom Doughty, co-lead of JLL’s law firm practice group. “So they’re trophy buildings. They’re just not in the CBD.”

As firms move into these unfamiliar locales they’re finding unexpected benefits, too. Migration can also bring access to new client bases and, crucially, talent. They can even spur innovation.

In its new offices in Chicago’s River West, Foley & Lardner carved out 12,000 square feet of space for a digital co-working community. Opening the doors to technology entrepreneurs helps expose the firm to potential clients, and new revenue streams.

The location also opens the door for a new generation of lawyer. That’s an invaluable selling point as law firms, like all businesses, seek to accommodate the shifting tastes of young workers.

“The young people coming out of law school today probably care a lot less about their office space than the lawyers coming out of school in 1977,” says Walsh, who spent 37 years serving on his firm’s real estate and recruiting committees. “I started with my firm and never left, but it’s more common today to move around. So I think you have to be considerate of the needs of your young talent and what they’re looking for in a workplace.”

With hiring expected to pick up in the second half of 2014, according to legal staffing firm Robert Half Legal, live, work and play conditions could become just as important as the industry’s historically rigid commitment to the CBD.

“Law firms are considering new locations mainly as a result of talent and following their client base,” says John Sikaitis, JLL Director of Office Research. “That’s a shift for the legal sector, but it’s the type of activity we’ve seen from other industries.”

One small step for layout

Technology companies typically drive progress for the American workplace, from open floor plans to dedicated video gaming consoles. And while law firms have taken steps to match their more trendy peers and occasionally their clients, don’t expect them to start mimicking Facebook. For instance, lawyers are unlikely to embrace open environments, given that much of their work involves confidential and sensitive client conversations.

“Lawyers have always needed their own space and the industry, as a result, has held on to very traditional workplace needs and strategy,” says Elizabeth Cooper, co-lead of JLL’s Law Firm practice group. “However, you have to be creative with your office strategy when the model changes.”

When global firm Greenberg Traurig moved its Atlanta office in 2012, the firm’s leadership put innovation and the perspective of its younger talent at the forefront of its space and design selection. The new space came with collaborative areas, supplied with new technology and video conference equipment, and a dynamic kitchen—the “GT café”—crafted to offer a communal area for both partners and associates alike to work on briefs and watch the occasional March Madness game.

“The services we provide have changed over the years,” says Amy Kelly, an associate at Greenberg Traurig in Atlanta, who sits on the firm’s space committee. “But the profession hasn’t changed in many ways. We’re always going to have to maintain the confidentially of client material. We’ll always have to work a lot of hours. You need the space to be practical, but also comfortable.”

The firm’s office at Terminus 200 rests in Buckhead, a typical go-to submarket for major Atlanta firms, but internally, it offers other features that indicate a more progressive strategy—for the legal world. To deal with privacy concerns, the firm built out an entire conference floor to welcome clients. The space has already hosted blood drives and periodic art shows for local high schools.

“Collaboration was really important to us when designing our space,” Kelly says. “But there are still times when we need to be able to close our door. That’s pretty standard, and I don’t expect that to change any time soon.”


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