NEW YORK CITY—Steering the direction of law firms is no longer the exclusive province of upper-echelon partners. Cushman & Wakefield's latest survey of the legal sector finds that law firms increasingly are including the younger generation in decision-making, especially when those decisions revolve around real estate. The survey of 1,100 US law firms is conducted in partnership with ALM Legal Intelligence, sister organization to GlobeSt.com.

“With Millennials taking over the highest percentage of the US workforce in 2015, law firms are taking into consideration the philosophies of the younger generation as they relate to real estate and overall retention and recruiting,” says Sherry Cushman, executive managing director and leader of Cushman & Wakefield's legal sector advisory group. “This is an important step as associates are increasingly involved with business development and succession planning and are influencing real estate decisions.”

More than half of the firms surveyed count Baby Boomers as representing between 40% and 80% of their current attorneys. With the youngest Boomers now in their early 50s, it's safe to predict that many of a given firm's attorneys will retire within the term of a 10- to 15-year lease. Accordingly, “future real estate decisions are being influenced by the younger generation of attorneys as they will become the future leaders of the firm during these long-term lease commitments,” according to Cushman & Wakefield's 2015 National Legal Sector Benchmark Survey.

This demographic shift also raises the question of succession planning, an area of operations in which just 15% of respondents said they have formal plans in place. Another 27% they have an informal plan that is not mandated. Nearly a third of survey respondents said they don't have a succession plan at all, and 84% have no retirement age mandate.

“With the younger generation's views on long-term commitments to partnerships, in-house counsel departures and overall shifts in the legal sector's business model, developing short- and long-term succession plans will be imperative for a firm's future success,” says Cushman. “Long-term planning and involvement with the younger attorneys and associates will be critical and assist in recruiting and retention to convey to them that there is a future plan that includes their involvement.”

The top business issue facing law firms continues to be competitive fee structures continued to be the top business issue facing law firms. Sixty-one percent respondents said it would continue to be the biggest issue for the next decade.

Operationally, technology continues to dramatically change the way law firms operate and serve clients; the survey found that 49% of respondents noted recent or impending significant capital investment in their firms' IT security. In terms of internal decision making, law firms are shifting to a more corporate approach, especially regarding real estate.

“Firms are beginning to re-evaluate how they operate and make significant changes to their current business model,” says Joe Stettinius, Cushman & Wakefield chief executive, Americas. “The future of law is changing, and the firms that are able to be nimble and consistently adapt to the changing times are anticipated to be in the most competitive and profitable position for years to come.”

Although just 12% of respondents reported tracking per equity partner/shareholder occupancy costs, firms will increasingly use this metric, especially as it relates to the long-term effect of real estate costs on profitability. “This metric and benchmarking is relatively new and is often not information shared with partners,” Cushman says. “We anticipate that sharing this information will increase in coming years as firms focus more on overall business-driven decision making and less on individual attorneys—a shift from the 'me” approach to the 'we' approach.”

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Millennials Have Their Say on Law Firms' Future

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