The Pandemic Is Pushing Change Into Law Firms' Workplace Strategies

US law firms are taking a mixed approach to real estate strategy in 2021. Following the recession, some law firms are pausing, taking a wait-and-see approach to workplace changes. Other law firms are moving quickly to take advantage of new opportunities in the office market. A new report from Newmark looked into these unfolding trends.

Law firms taking the conservative wait-and-see approach are responding both to the economic dislocation as well as the uncertainty about future office usage. Many of these firms haven’t yet determined the new workplace strategies following the pandemic, including the mix of remote work and in-office work.

The uncertainty is stalling new lease activity. According to the Newmark report, law firm office leasing activity declined 41% from 2019 to 2020. Some law firms also put major expansion plans on hold. For example, AmLaw 100 firm based in New York and Washington DC put a 200,000 to 250,000 square foot New York office requirement on hold due to the pandemic.

Other firms are taking the opposite approach and making moves to take advantage of new market opportunities, and many of these firm’s seem to be moving forward with new real estate strategies. In the second half of 2020, most major law firm lease transactions were for non-headquarters offices. These law firms took advantage of attractive pricing during the pandemic and increased lease flexibility, which included significant concession packages and shorter lease terms.

Shorter lease terms were a major trend even among active law firms. In New York City, the five largest law firm leases following the pandemic each had lease terms of five years or less. Smaller tenants are largely taking this opportunistic approach to lock in lower cost real estate, while larger firms are more likely to take the conservative wait-and-see approach.

The pandemic has also encouraged the industry to change in different ways. Typically a traditional office user, law firms are starting to look at hoteling workplace strategies. Firms are starting to adopt more flexible workplace models. This is a major change for the legal industry, which has been slow to adopt new workplace trends, but forced work-from-home during the pandemic has pushed change in the industry. “Most firms, regardless of size or location, are now willing to ask questions and consider new ways of working that would not have been considered prior to the pandemic,” says the Newmark report.

In September, Savills also reported how the pandemic had catalyzed changes in workplace strategy among law firms. According to the report, 41% of law firms are either already day-officing or are planning to implement a day-officing strategy and another 48% of law firms are interested in an alternative-type of workplace strategy and are continuing to evaluate work formats. Only 10% of law firms are not interested in pursuing or investigating these strategies.