Law firms take a modern approach to return to office

Following the onset of the pandemic, firms are looking for ways to balance real estate costs while also adapting to changing worker preferences, such as remote work. Law firms have historically been known to maintain a relatively traditional office environment, with partners and senior-level associates occupying larger, corner offices.

Now, in an extremely tenant-favorable market, firms are making big decisions about one of the highest expenses on their balance sheets: their real estate footprint.

Nationally, law firms leased more than 11.6 million square feet in 2021, lingering only behind the technology and banking sectors, which leased 32.8 million and 15.3 million, respectively.

Consistent with national data, the legal industry has been among the most active sectors in the Midwest and Great Lakes regions. While some firms are going after advantageous lease restructures and negotiating competitive renewals, others are reimagining their spaces entirely.

In the war for talent, law firms are seeking amenity rich spaces

Many law firms across the Midwest are taking advantage of select market conditions and inking big deals at properties in which the employee experience, feel-good amenities, and unique brand-building opportunities are at the forefront.

Dickie McCamey signed on for a nearly 80,000-square-foot lease in Pittsburgh’s Four Gateway Center—the largest law firm transaction in the area since 2017. Dickie McCamey’s relocation also follows GRB Law’s recent move to the highly amenitized William Penn Place after a 118-year run at the Frick Building.

Similarly, Benesch recently solidified a new 164,000-square-foot lease at Key Tower in Cleveland, Ohio, making it the largest move in Cleveland’s CBD since 2018, and in the top five largest leases in terms of size in nearly 10 years. McDonald Hopkins, on the other hand, renewed their lease at Fifth Third Center—a building with plentiful amenities—with plans to completely overhaul their space with one-size offices and new, collaborative workspaces.

Firms are looking to heighten the employee experience. These buildings offer a host of differentiating amenities, like fitness centers, outdoor spaces and seating, lounges, and hospitality services, along with opportunities for branding.

What’s more is all these buildings are located within CBDs, prominently situated in the heart of downtowns despite volatile market activity over the past 18 months. Firms are placing their confidence in downtowns becoming lively again, creating a unique opportunity for them to compete for new talent as professionals move into the many new or planned residential conversions.

Office space is being used differently

While schedule flexibility will remain the norm, law firms—among other industries—are leveraging the office space differently, using it as a tool to enrich the employee experience.

Pre-pandemic, the average square foot per attorney was 760 square feet. Firms were already trending toward rightsizing their spaces, but Covid-19 accelerated this trend. Now, JLL Research expects the new national average to reach roughly 625 square feet per attorney.

A recent study by Vocon, a national architecture and design firm, found that 57% of law firm employees are willing to sacrifice assigned seating for greater flexibility.

The same study, however, found that 68% of law firm employees miss social interaction and 58% miss the connection to company culture. In turn, firms are using their offices differently, condensing attorney offices and even law libraries, but opening more space for collaboration and professional development—a key incentive particularly for young legal professionals to return to the office.

What this means for commodity assets

Experience-focused amenities, like outdoor gathering areas, fitness and wellness centers, and hospitality services, have become the new standard for downtown buildings to even be considered by companies.

For law firms, specifically, it’s often easier to accomplish these upgrades by relocating to a higher quality asset instead of trying to undertake significant renovations in space still actively occupied. These firms, among other tenants, have shown they are willing to pay more for these higher quality, amenity-rich buildings, often offsetting the increased cost per square foot by leasing less space.

As a result, commodity B and C class buildings may struggle as the performance gap widens. Many are already experiencing higher vacancy rates compared to Trophy and Class A assets in the same area as companies return to the office.