In the shifting landscape of law firm real estate, the narrative at mid-year 2025 is defined by a powerful “flight to quality.” According to JLL’s Law Firm Group, even as overall demand for office space has plummeted, resulting in nearly 300 million square feet in occupancy losses since the second quarter of 2022, premium office buildings have bucked the trend. The segment has posted a remarkable 152.8 million square feet of positive absorption. This resilience among top-tier properties is sharpening competition for the best spaces and pushing law firms to rethink their real estate strategies.
Vacancy rates in newly constructed buildings have fallen into the single digits, underscoring just how tight the market has become for high-quality office space. Over the past five years, law firms relocating their offices have, on average, moved into buildings that are 27 years newer than their previous locations, a clear sign of the sector’s preference for modern, amenity-rich environments.
The supply crunch is further exacerbated by the removal of 126 million square feet of office space from the market since 2020, either through demolition or conversion to other uses. Meanwhile, new construction has slowed to historic lows not seen since 2014, drastically limiting the availability of large, contiguous blocks of space that law firms typically seek. As a result, more firms are choosing to renew their leases rather than relocate, with renewal activity up 10.1% compared to 2022 levels.
Recommended For You
Looking at vacancy rates through a different lens, the total office vacancy rate stands at 22.6%. However, if poor-quality buildings are excluded, the rate drops to 15.3%. Excluding financially distressed properties brings the vacancy rate down even further, to just 9.2%. Tier one office assets have seen a 40-basis-point decrease in vacancies during the first quarter of 2025, highlighting the ongoing demand for the highest-quality spaces.
Financial distress is also reshaping the market. An increasing number of buildings are unable to transact due to financial challenges, a trend that is expected to drive renewal rates even higher as options for relocation dwindle.
Despite these constraints, law firm leasing activity has surged. Since 2020, the amount of office space leased annually by law firms has climbed from 14.4 million to 19.4 million square feet in 2024—a 34.7% increase. This represents an 8% rise in volume compared to pre-pandemic averages, with projections pointing to a further 10% increase in overall sector-related deals over the next three years1.
With supply tight and demand strong, landlords of premium properties have gained significant pricing power. Rental rates for buildings delivered between 2018 and 2024 have soared by more than 40% over original asking rents, and in some cases, the increases have been even more dramatic. Miami’s 830 Brickell Plaza, for example, recently signed a 27,000-square-foot lease with a financial services firm at a base rate of $190 per square foot—more than double the original asking rent of $75 per square foot. This deal is a stark reminder that law firms are not the only tenants vying for top-tier office space.
The move to high-end buildings is exemplified by McDermott Will & Emery’s recent lease at 725 12th St. NW in Washington, D.C. The firm committed to 150,000 square feet over a 15-year term, securing the top five floors of a new 320,000-square-foot development. The building’s owner, BXP (formerly Boston Properties), is demolishing the existing 12-story structure to make way for a premier, next-generation workplace.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
