Law Firm Leasing Activity Returns to Pre-Pandemic Levels

Leasing activity among law firms kicked up by more than 43% in the second quarter after hitting pandemic-era lows in mid-2021, with seven deals exceeding 100,000 square feet. 

New research from Savills suggests that leasing volume is on par with the quarterly average over the last four years, clocking in at 1.6 million square feet. The largest deals include Baker Botts’ 172,000 sf restructure in Houston, Clifford Chance’s 144,000 sf relocation in New York, Quinn Emanuel’s 135,000 sf renewal in Los Angeles and Holland & Knight’s 100,000 sf+ relocation and renewal in New York and Boston, respectively.

But “over time, leasing volume may no longer consistently reach the highs seen in years past as more firms look to have greater space efficiency,” Savills’ Tom Fulcher and Devon Munos say. “It appears that flexible in-office work schedules are here to stay, and firms are reimagining their offices to best support that change. Moving forward there may be less dedicated offices, and more space for shared use and collaboration space across firms. As densification continues, this will likely leave a surplus of office space available in the market in years to come.”

Of the Q2 leasing total, 63% have been relocations thus far this year, in line with 2018 and 2019 numbers.

“At the height of the pandemic, the “stay versus go” scenario shifted heavily to “stay” with relocations making up only 30% of leasing in 2020. This shift back has been enabled by more certainty surrounding the future of the office, soft market dynamics, and flight to quality,” Fulcher and Munos write.

“Even before the pandemic, in a record-low unemployment environment, firms were trying to find ways to upgrade their offices. The pandemic accelerated that trend with an even more aggressive “war for talent” underway….Firms that are choosing to stay in their current locations are doing so strategically by comparing their space to other options in the market and using current, softer, market conditions to push for upgrades within their building or space and renew with tenant-favorable terms.”

Savills analysts also say they have yet to see the significant levels of subleasing activity in the legal sector that have beleaguered the tech, financial services and insurance industries. And in another trend to watch, new-to-market transactions are on the rise, with firms increasingly looking outside of core law firm markets like Washington D.C., Chicago and New York and into places like Salt Lake City, South Florida and Texas.