Office landlords are losing the argument on law firms’ leasing.
Legal firms facing renewals are taking 13 percent less space than they were previously, the Commercial Observer reported. The data comes courtesy of a Cushman & Wakefield report on the industry, which is a major tenant in New York City and other large office markets.
“Overall, we have been seeing law firms getting more dense with their space, using less square footage per attorney,” David Smith, the report’s co-author, told the publication.
A majority of those who work at the law firms analyzed by Cushman are working remotely for at least two days a week, reducing companies’ needs for office space — although not by as much as the drop in attendance.
By 2028, square footage per attorney is expected to fall by 5.7 percent to 472 square feet. When considering only American Lawyer’s 100 highest-grossing firms, it is just 461 square feet apiece.
Collaboration among colleagues is common in the industry, so its waning need for office space is a red flag for commercial landlords. Law firms lease 120 million square feet across the United States, according to CoStar data. Law firms spend 10.5 percent of their budgets on real estate; those with at least 1,000 attorneys spend 11.8 percent.
The most vulnerable landlords — meaning those with the highest concentration of offices rented to law firms — are Boston Properties, Irvine Company, CommonWealth Partners and Brookfield.
Brookfield struck it big with legal firms at Two Manhattan West, leasing 481,000 square feet to Cravath Swaine & Moore, 144,000 square feet to Clifford Chance and 71,000 square feet to Crowell & Moring.
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Boston Properties is in particularly risky territory, as Benzinga.com previously reported law firms are responsible for 19 percent of BXP’s rent payments.
Some are bucking the trend. Last month, Greenspoon Marder signed an eight-year deal to sublease 41,000 square feet from CBS Broadcasting at the AllianceBernstein Building in Manhattan. The move is a 16,000-square-foot expansion from the law firm’s previous space.
— Holden Walter-Warner