JLL report says law firms are getting creative with space
The legal industry has fresh real estate strategies to prepare for the future
Despite the AmLaw 100’s revenue reaching a record $81 billion in 2014, law firms are focusing on efficiency to define their office layouts and locations. The legal sector is using creative space, development and real estate strategies to assure that today’s offices remain practical for the future, according to a new report by JLL.
“Even though business is better, our clients are still very focused on creating the greatest efficiencies possible,” said Tom Doughty, International Director and co-lead of JLL’s law firm practice group. “That means reacting smartly to the market and embracing cutting-edge opportunities within their office space and location strategy. Law firms are still focused on cost, but in today’s market, there’s an opportunity for law firms to innovate and prepare for their future needs through smart design.”
Gone are the days when expansive interior space was needed for support and staff functions. Gone too is the strict requirement to locate only in the core central business district (CBD). According to JLL’s 2015 Law Firm Perspective, trophy office towers are experiencing record-high occupancy levels across the United States. This lack of options, coupled with a desire to create a premium office experience for new, Millennial generation hires, is pushing firms into locations at the outskirts of traditional city markets. New law firm leases are on the uptick—and many are more creative in their workplace designs than ever before.
Space remains scarce
Until this quarter, Downtown Class A office vacancy in Denver had fallen into the single digits, and the lack of available supply for trophy assets helped drive asking rents up by 19 percent in the past year. The overall asking rent hit a new record high in September, as it has every quarter during the past four years. Further rent escalation is expected as under construction product delivers in Lodo with even steeper asking rates.
While some law firms are leasing space in premium new developments under construction, those facilities will not be available for at least another year. Construction starts were more conservative than in real estate cycles of years past, as developers and their lenders regrouped from the financial crisis.
Investing in modern workplaces
JLL’s most recent United States Construction Perspective indicates many tenants are once again investing in workplace improvements whether that means moving to a brand-new development or an older facility. The same is true of law firms. With legal industry revenues up, success has freed up capital for office modernization, including high-tech features for meetings and collaboration. The focus for law firms remains on efficient utilization of all resources.
“Most traditional office space is outdated, thanks to technology,” Doughty said. “Digitization has reduced support staff ratios, and virtually eliminated the need for law libraries and file rooms. The time is now to get creative with location and building options.”
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $56.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.