Think your law firm is too conservative to sublease vacant space?
As real estate costs skyrocket around the country, independent attorneys and growing small law firms remain agile by subleasing vacant office space. It is a brilliant approach. However, their large law firm competitors tend to maintain traditional values and eschew the subleasing concept in favor of a dwindling bottom line.
The legal industry holds deep, traditional roots that can stifle creative solutions and innovation. However, there are several advantages of looking at new modalities and increasing law firm profit margins.
Reasons Conservative Law Firms Hesitate
To understand why some conservative law firms reject the idea of subleasing vacant space, it is essential to review the historical role of advertising and technology in the legal industry. From large general counsel firms to solo practitioners, here are a few ways in which hesitation has become a part of the legal industry.
Attorney Advertising Laws Shaped Attitudes
In 1977, a U.S. Supreme Court landmark decision changed the trajectory of how small law firms and solo practitioners advertised their services. It struck down a 40-year-old decision that previously prohibited attorneys from advertising. By prohibiting attorney advertising, it limited the public’s access to meaningful legal representation.
Unfortunately, a dangerous myth around attorney advertising began to gain traction within the legal community. Attorneys who advertised were written off as “hacks” or “ambulance chasers.” This attitude continued to shape traditional and conservative law firms’ austere nature and their acceptance of new modalities.
The Legal Game Changed
One common misperception within the legal industry is the concept of subleasing. Traditional law firms hold a deep-seated belief that the physical office location and whether they rent to someone is somehow a measure of their success. While this may have been true in the past, there is nothing further from the modern era’s truth.
The Legal Industry Is a “Late Adopter”
Whether the firm is traditional or not, law firms generally adopt new technology methods more slowly than other industries. Technology is a specialized field that requires extensive knowledge, and stringent rules of attorney-client privilege bind attorneys.
As such, late technology adoption in law firm culture can lead to hesitation in innovation. However, a post-internet market’s energy and needs are pushing law firms to innovate in new ways. Otherwise, the market may leave them behind.
How Subleasing Vacant Space Works
Law firms can bridge the gap by understanding how subleasing vacant spaces works. Instead of leaving offices empty, big law firms can sublease them to non-competing law firms in exchange for rent. This strategy will offset rent costs for the sublessor firm.
Subleasing and Rental Agreements
While this article assumes that the rental agreement provides for subleasing, firm partners must consider this aspect before subleasing vacant space. Not all rental agreements allow subleasing to occur during occupancy or tenancy. Speaking with the property manager can also help clarify any remaining questions about this aspect.
The most significant advantage of a sublease is that they are typically set for shorter periods. This opportunity is beneficial to both the sublessor and sublessee. The sublessor can attract tenants without a long-term commitment and protect future growth opportunities. Growing law firms can participate in Class AA building amenities at much lower entry costs.
Advantages of Subleasing Office Space
There are numerous advantages of subleasing office space aside from time. As COVID-19 continues to ravage the economy, it is worth considering how subleasing office space can benefit a law firm.
Advantage 1: New Revenues
Subletting is an excellent way for law firms to reduce costs while simultaneously increasing cash flow. Regardless of the economic climate, it helps expanding law firms remain agile. Plus, these revenues are relatively low-risk and predictable.
Advantage 2: Flexibility
Law firms can benefit from the flexible terms that subleasing provides. Instead of committing to a multi-year commercial rental contract on a purchased building, they can offset their renters’ costs. These terms also allow them to generate revenue as they explore opportunities to expand operations in the future.
Advantage 3: Networking Opportunities
As a sublessor, law firms have the vantage point of inviting specific law firms into their space. Subleasing an office space to non-competing firms allows for tremendous networking opportunities and synergy. Suddenly, the office buzzes with conversation, case referrals, and a chance to meet new clients.
Advantage 4: Shared Resources
Office sublets are often smaller components of a much larger area. Sublessors can charge tenants for utilities and the use of shared spaces. They can also negotiate access to office supplies and technology, such as fax and photocopying machines.
Advantage 5: This is Ethical!
The Colorado Supreme Court has adopted Ethics Opinion 89 (originally adopted September 21, 1991, revised and reissued March 12, 2018), which lays out the ethical considerations to be considered when office sharing.
LawBank served as the foundation of the latter reissuance of the opinion. Technology firewalls and other practical methods adopted by LawBank for use in this model address each of the ethical issues arising from an office-sharing environment between law firms.
Subleasing office space is be a great way to increase law firm profitability while maintaining the possibility of enhancing the large law firm environment. They can encourage in-house business development and networking among tenants.
However, working with an experienced subleasing provider can make all the difference.
Financially savvy law firms manage the ethical issues by finding the right subleasing partner to facilitate this innovative way to increase their law firm’s bottom line in 2021.
Jordan Deifik and Jay Kamlet are Colorado-based commercial real estate professionals. They co-own LawBank, the largest and oldest shared office space for lawyers in the Mountain West. LawBank has multiple locations in the Denver metro area and Downtown Las Vegas and offers flexible leasing options to attorneys throughout the region. LawBank also assists larger law firms sublet their vacant office space with small law firm tenants. Learn more about LawBank’s amenities, and the Las Vegas and Denver locations.