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Survey: costs of operating law firms in NYC up 18%.

Solo practitioners and small law firms paid 18 percent more to operate their business in midtown Manhattan in 1992, according to a recent report by Foxhall Realty Law Offices.

The study showed that a solo practitioner, in his own suite of 1,200 to 1,500 square feet of space, paid an average of $125,633 for fixed operating costs in 1992, to cover: Real estate rent and taxes; utility costs; equipment replacement and maintenance; labor and benefits; general office supplies; office cleaning; and maintenance of a state and federal law library.

In 1991, the same costs would have averaged $ 106,471.

The study did not address attorney salaries and the cost of a legal assistant.

Foxhall executives say the reason for the increase include: Higher costs of labor and benefits and the growing need for attorneys to automate their offices.

The report was not much brighter for small law firms. It found that while some costs, like common area charges and the spreading of labor and benefit costs over several attorneys, did reduce per-attorney expenses, the resulted savings averaged only about $10,000, each, for the second and third attorneys.

Foxhall based the study around solo practitioners in midtown Manhattan leasing an average of 1,200 to 1,500 square feet of space. The office would typically allocate for areas such as: A private windowed office, secretarial Rpace, reception area, a small conference room, file storage/work room, a kitchenette, and common space. It also takes into account New York City's six-percent real estate occupancy tax.

The only decrease in costs in 1992 was in real estate, which slipped slightly over 1991. However, the study shows that when a solo practitioner or small firm leases space directly, instead of sharing their costs, overall operating costs rise dramatically.

After the cost of real estate, the second most costly item for the practicing attorney was the second member of their office staff. Most practitioners require a professional legal assistant. But in addition to the legal assistant, attorneys with their own office space typically have an additional office worker who serves in a combined roll of receptionist and office assistant.

The third most costly item was the maintenance of a basic law library of federal and state information, which can run as much as $30,000 per year.

"In today's increasingly tough business climate, solo practitioners and small firms are being squeezed by higher operating costs on one side, while fee sensitivity from their clients press in the other direction," said Marie Falco, office manager of Foxhall Realty Law Offices. "As a result, we are seeing more and more attorneys opting for shared office environments."

Falco went on to say that Foxhall predicted a 12 to 15 percent increase in fixed operating costs for attorneys in 1993, a result of the fact that major law firms continue to release senior associates who will not become partners, or more senior attorneys who do not produce significant new revenue for their firms.

Foxhall Realty Law Offices operates a full-service professional office environment for attorneys at 805 Third Ave. The 23,000-square-foot operation includes: 40 professional offices, a full state and federal law library; state-of-the-art office equipment, conference rooms, kitchen facilities, a luxurious reception area file rooms, and secretarial and paralegal stations.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:1992 costs up in New York, New York according to Foxhall Realty Law Offices report
Publication:Real Estate Weekly
Date:Mar 3, 1993
Previous Article:Finances seen driving real estate market.
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