Law Firms' CRE Execs Have New Priority

NEW YORK CITY—More law firm decision-makers now believe the traditional partnership structure is headed for an overhaul, according to Cushman & Wakefield's second National Legal Sector Benchmark Survey, which focuses on the key drivers affecting real estate decisions in the legal sector. Conducted by C&W's Legal Sector Advisory Group in partnership with ALM Legal Intelligence, sister organization to GlobeSt.com, this year's survey also finds that the number one issue affecting business competition is fee structures, while the real estate spend is diminishing.

Sixty percent of the 400-plus survey respondents—up from 286 respondents to the inaugural edition of the study—cited competitive fee structures as a business competition issue, compared to just 44% who cited recruitment and retention. In the first edition of the survey, attracting and retaining top talent was the most frequently cited competition factor.

At the same time, 17% more decision-makers at law firms predict that traditional partnership structures will be completely reorganized. “The legal sector is quickly coming to terms with the changing workplace environment,” says Sherry Cushman, executive managing director and head of C&W's LSAG. “Finding and keeping talent is the priority, and the way law firms are structured and organized is changing.”

In keeping with a continued decline in the percentage of gross revenue spent on real estate, the survey found that 12% of firms that negotiated a relocation of their lease in the past year relocated into a smaller envelope of space. Only 4% increased in size when they relocated the space.

That trend toward smaller real estate spends dovetails with leaner profit margins. Only 15% of respondents had profit increases above 11% in the year prior; the largest percentage, 33%, saw an increase between 1% and 5%. Seventy percent of firms taking the survey reported that they did not experience a merger in the past five years.

The first edition of the benchmark survey was followed up by a series of symposium events in 26 cities with more than 250 law firms participating. As an outgrowth of tose evtns, the LSAG developed its first-ever National Associate Survey; which polled a broad demographic of more than 200 young lawyers from US firms of various sizes. Released concurrently with the benchmark survey, it provides a view of how the next generation of attorneys view the future of the sector.

Among other findings, the associate survey found that the three top reasons an associate initially joined a firm are its reputation, areas of practice and compensation. In terms of 10-year career goals, 54.7% of associate respondents stated that their ten-year career goals were to make partner at their current or alternative firm, while 18% responded that their long-range career goals were “unknown.” Work/life balance was ranked first among the top 10 personal job-related considerations.

This year's surveys are also the catalyst for a series of symposium events, which began this past Friday with two events in New York City. The LSAG will travel to 25 other cities in the invitation-only symposium series, during which experts in the sector will weigh in on current issues and the legal industry's future.

The second edition of the benchmark survey, which was based on anonymous reeponses to 75 questions collected over a 90-day period in the spring and summer of 2014, marked the first time that C&W and ALM Legal Intelligence partnered on the study. Respondents included global real estate directors; chairmen; executive directors; managing and real estate partners; and senior administrators at law firms, ranging in size from boutique shops to members of the Am Law 100.