Major shift underway as law firms make their case for growth.
At the same time, the report found, firms continue to face pressures to grow profits and control costs, even as younger lawyers demand better pay and oftentimes costly fringe benefits.
Notably, the average percentage of gross revenue spent on real estate has fallen to under six percent in the past four years, even as rental rates for office space have gone up in most major markets during the same time frame.
Firms are offsetting increased rental rates through densifying their real estate through give-back of excess space and decreasing per attorney space ratios to under 600 s/f per attorney (today's target ratio). In fact, in 2018, the national average of space reduction when a firm relocated was 29.7 percent.
"Legal sector change is occurring at lightning speed," said Sherry Cushman, Executive Managing Director and Leader of Cushman & Wakefield's Legal Sector Advisory Group.
"One of the key drivers of this change is the growing prevalence and influence of the millennial generation, which has a different set of priorities, expectations and way of working. This, combined with technology expansion, has led to a fundamental shift in the way law firms think about real estate and working in general."
For example, 20 percent of firms are now calculating and tracking the per-equity-partner costs for bricks and mortar, up 11 percent from the previous year.
In the next decade, architects surveyed expect the most significant anticipated changes in law firm workplace design to be: more single-size, smaller attorney offices; expansion of hoteling strategies; greater focus on wellness; increased collaborative spaces; hospitality integration; continued space densification; interior attorney offices and open plan for attorneys; increased building and neighborhood amenities; and increased technology costs.
Fourteen percent of the law firm respondents noted that they had already shifted to single-size offices for all attorneys. Eight percent are also sharing offices with two associates or plan to in the future.
"The fact that equity partners share the large financial impact of real estate over time calls for an even greater need to build internal consensus," Cushman said.
"As part of effective business and profit strategies, firms must evaluate how excess square footage, high inefficiencies and per-attorney occupancy rates--combined with increased rental rates--will impact the firm and each equity partner financially."
"In addition, with continued technology advancements, the younger generation doing more and more of their own work, as well as partners using technology on a broader basis, future investment in technology will continue to increase, while real estate costs will trend downward," Cushman continued.
According to a survey of architects included in the report, 78 percent of respondents stated that more firms will "achieve a below 500 s/f per attorney ratio in the next decade," up from 70 percent last year.
In addition, significant real estate rightsizing and downsizing--including a reduction in warehousing growth space--will take place in coming years. Six years of statistics support the idea that continued densification of legal sector real estate is not just a trend, but a reality.
The 2019 survey saw a seven percent increase in firms noting that "now more than ever, diversity demands are impacting business opportunities and we take it very seriously." No doubt this impacts how firms look at recruiting and retaining legal talent of all ages, genders, races and more. However, it is also apparent that diversity is enough of a priority that it factors prominently into the law firm selection process.
For associates, the Bright Insight survey indicates that compensation is now the most important issue, followed by collegial work environment, work-life balance and mentorship by senior attorneys.
Over the past three years, compensation has risen from the third most prominent issue to the top.
"While the top four issues have been the same for the past three years, the shift to compensation being number one makes it more and more challenging for a firm to increase associates' pay while also providing flexible work schedules and work-life balance," Cushman said.
"Businesses can no longer ignore the staggering millennial influence and are taking the changing desires and priorities of the younger generation into serious consideration. It will be interesting in the years ahead to see how firms balance these shifts successfully and retain top talent."
|Printer friendly Cite/link Email Feedback|
|Comment:||Major shift underway as law firms make their case for growth.|
|Publication:||Real Estate Weekly|
|Date:||Jul 10, 2019|
|Previous Article:||Report: Investors plan to increase spending on senior housing.|
|Next Article:||Advertising agency inks 22,000 s/f B'lyn lease.|