LOS ANGELES—Law firms are responding proactively to the challenges brought on by changing business conditions, CBRE says in its inaugural report on the sector. For office landlords, those responses may have unwelcome implications for the space requirements of legal tenants.

Put simply, the largest law firms—the Am Law 100, representing the 100 top-grossing US firms as ranked annually by The American Lawyer, sister publication to GlobeSt.com—are reducing their office footprints. “Am Law 100 firms are more likely to engage in contraction activity vs. their smaller peers,” according to CBRE's report.

Between the first quarter of 2016 and Q2 2017, CBRE says, more than half of the legal sector's transactions and the majority of the square footage that resulted in contraction involved Am Law 100 firms. Twenty percent of the Am Law 100 firms reduced their space needs in one or more markets over that time period, according to CBRE data.

Across the 26 major markets studied by CBRE, it's estimated that nearly 29 million square feet of law firm leases will expire between 2018 and 2022. More than 70% of these expirations will involve requirements of more than 50,000 square feet, and are likely to result in at least some space contraction as part of renewals and/or new leases. Already, says CBRE's report, some two million square feet of shadow space has been created by law firm contractions over the past six quarters.

The contraction reflects the legal sector's rethinking of operational principles they once took for granted. “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,” says 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.”

For instance, one metric that law firms are evaluating is the ratio of attorneys to secretaries. Currently it's four attorneys to one secretary and is projected to increase—or decrease, depending on how you look at it—to 10 attorneys for each secretary.

Taken in tandem with other strategies, the changing attorney/secretary ratio reflects “a trend away from individual attorney offices to a reallocation of space with greater emphasis on shared-support areas,” according to CBRE's report. “This combined effort is leading to an overall net reduction in the square footage per attorney.”

Many firms are seeking to “future-proof” their real estate, with the goal of creating “an environment that is flexible and agile enough to address changing business conditions,” the report states. This strategy comes in response to technological advances, client expectations and an aging workforce.

On the latter point, CBRE cites The American Lawyer in noting that 16% of law firm partners will retire in the next five years and 38% will retire in the next decade. Firms' proactive responses to these generational changes of the guard: “Foster a workplace with collaborative, inclusive and social environments that promote knowledge sharing between generations and aid in succession planning” and “Modernize your workplace to reflect your culture and branding, and ultimately use it as a competitive differentiator when recruiting talent.”

Instant Insights /

Legal Tenants Rethink 'Long-Held Assumptions'

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