PHILADELPHIA, PA AND CLARK, NJ—Demographic and working style changes are creating strong pressure for radical changes in office space buildouts, and these changes are moving rapidly into the legal and financial sectors, according to experts in the design requirements for those professions.
Law firms are seeking new ways to build consensus and affect change to adjust to this evolving reality, according to Sherry Cushman, executive managing director and leader of Cushman & Wakefield’s Legal Sector Advisory Group. Philadelphia law firms are likely to feel the effects of an office space shakeout currently underway in New York, she says.
“New York is going through a legal sector transformation, with some megafirms like Skadden [Arps], Millbank [Tweed], Boies, Schiller [& Flexner] breaking out of the traditional mold of downtown markets,” she says. “All of a sudden they’re saying, ‘the product is old, the floors are inefficient, they don’t have the good window lines, and if we want to reinvent ourselves, we just can’t do it in existing product.’ Hence, we’re seeing a flight to quality in markets all across the United States.”
Philadelphia will feel the impact because many major national law firms are headquartered in New York, and when those firms make office design changes, “it has a domino effect in their other locations,” Cushman says. “It’s going to influence what’s required by the firm moving forward. If they’re doing something very progressive, they’re going to look to their other locations to do something progressive too.”
Law firm clients are increasingly demanding that law firms drop billable hours and move toward fixed fees for legal services, and that is having an impact on how law firms look at their costs, she says. Adding to that evolution, by 2025, more than half of the lawyers in the US will be Millennials, she says, most of whom view success differently than previous generations, and are less-influenced by the traditional trappings of success such as large private offices.
“When you have a fundamental workforce change, people now are not making decisions for their partners of today, they are making them for their partners of tomorrow,” Cushman says. “In Philadelphia, where we are going to see development opportunities is west [of the CBD] toward the train station, and we do believe there will be, in the coming years, some firms that are either gutting and renovating their current space, or potentially committing to a new building or two.”
Technological advances are making it possible for law firms to reimagine their space requirements in radical ways, Cushman says. She cites Marshall Dennehy, a large insurance litigation firm, as an example of this kind of forward-thinking.
“They moved from 1845 Walnut Street to 2000 Market Street,” she says. “Two years before they moved, they invested in the technology and developed the protocol, that when they moved, they got rid of 80 percent of their paper. And their goal is to go completely paperless. That’s an insurance litigation firm, that has the most paper of anybody.”
Office floor layouts are changing to a more open design, with core support teams in the center of the floor in open spaces, with attorney offices on the perimeter of the floor completely enclosed in glass so that natural light reaches the entire floor.
“It has a transparency that creates better vitality, better collaboration, better energy, better morale,” she says. Even with rising space rates, firms can save money on the per-attorney space cost by reducing the amount of space allowed. “They’re actually determining each partner’s pro-rata share of the space costs,” she says.
Bright Insight, the 2017 National Legal Sector Benchmark Survey, conducted in partnership with ALM Legal Intelligence, a sister research arm to GlobeSt.com, polled more than 1,500 individuals from law firms across the United States.
“With real estate being the biggest expense for firms, excluding salaries, we are seeing a continued shift to rightsizing and incorporating new workplace strategies that help firms lower the cost of their footprint, while improving operations and client services,” Cushman says.
In Philadelphia, about one-quarter of law firms reduced their overall space when they renewed leases, says Paul Garvey, senior director at Cushman & Wakefield, adding that future space design is likely to embrace
“Philadelphia is a little more parochial than some of the other markets, so we lag a little bit on some of those trends, such as single-sized offices,” he says. “We’re seeing law firms increase their density, and firms that are able to pick up and relocate are looking at doing that. Not all firms can do it, but within the next three years I anticipate some of them to do that.”
Meanwhile, banks are finding that the space requirements for branches are changing as well.
As bank customers become more comfortable with remote transaction opportunities, including online banking, smartphone apps that even permit check deposits, and standalone ATM machines, banks are moving away from large space requirements for the traditional bricks-and-mortar branch, and even changing the way that space is used.
“Our clients are now building branches of less than 2,000 square feet, but it’s a full-service branch,” says Tim Quinn, branch solution sales specialist for NCR Corporation, a major supplier of financial equipment to the banking industry. Quinn described NCR’s vision of the future of branch banking at the New Jersey Bank Marketing Association’s October meeting in Clark, NJ.
“I actually have a client at the University of Maine, on the college campus, they built a new branch that was 264 square feet,” he says. “That was one office and one interactive teller.”
Quinn says remote interactive teller machines, where clients can make deposits and withdrawals like an ATM machine, but can also interact via two-way video with a live bank teller sitting at a central location, are going to replace many branch interactions in bank branches of the future. Other branch space is being reconfigured to emphasize collaborative meetings between financial specialists and customers, with less space devoted to teller transactions, he says.