These last two years have undoubtedly been tough for commercial real estate investors and professionals whose business focuses primarily on office space. The ongoing pandemic has not only added more time to the clock and delayed countless businesses’ plans to return to the office, but it’s also changed the perspective of many employees and job seekers who now see a work-from-home or hybrid model as a necessity going forward.
However, one industry that has been a shining light in the eyes of office brokers and landlords throughout the pandemic is big legal. Large and small law firms alike have posted big numbers in the last 12 months as corporate transactions and deal-making continued at a blistering pace during the momentous Wall Street bull run last year.
As the downtown office market has lagged behind other asset classes such as multifamily and industrial real estate, office landlords have had to resort to concessions and flexible terms in order to lure new leases. The record amount of sublease space available has also been challenging for office property owners as they are now frequently competing with their own tenants for lease deals.
And while some companies — particularly those in tech and marketing — have downsized their office footprint, others are seizing the moment to expand or upgrade their space. The current climate in the office world has led to a “flight to quality,” which has provided corporate tenants with a unique opportunity to move into a nicer office space or better location due to the sheer amount of space available, competitive pricing, and flexible terms.
According to a report from Savills, legal office leasing was particularly strong in Q3. On a national scale, 2.1 million square feet of legal office leasing deals were completed in this last quarter. Of that total, 700,000 square feet of Q3 leasing activity was in Chicago. This most recent quarter was a dramatic uptick in activity compared to the first and second quarters of 2021, where there was less than 150,000 square feet of legal office leasing in Chicago in each quarter.
For cash-flush law firms, the sluggish office rebound is not just a chance to stake a coveted claim, but it’s an opportunity to reimagine the look, feel and function of a legal office.
One of the many law firms that made an office move in recent months is the Chicago practice of Nixon Peabody. With a staff of 145 people based out of its Chicago office, the firm announced its lease of floors 51-53 at 70 W. Madison back in March, unveiled the reimagined space in the heart of the Loop in September, and then marked its official return to the office date on October 4.
While the office move was the result of three years of planning and design, the pandemic did introduce some challenges that pushed the team to put even more emphasis on the themes of flexibility and efficiency, says David Brown, managing partner of the Chicago office.
“What we decided was to try to plan for something that works now and is very flexible and would accommodate whatever the future of legal work looks like. That meant having lots of conference spaces that can be converted into training rooms, into places for receptions for clients, friends and community in the future,” Brown says of the new office.
“And then we also had to take to heart some of the lessons of the remote work that everyone has been doing over the last 18 months in realizing just how important it is to have great video conferencing capabilities,” he adds. “It’s no longer a niche thing that a few clients want — all of us want it.”
But planning a new legal office for the year 2021 and beyond means that technology not only plays a bigger role, but it also helps open up space. While the firm downsized from 85,000 square feet to 72,000 square feet, Brown says that staff frequently comment on how much more open and spacious the new office is. Perkins & Will, which served as the primary architect for Nixon Peabody’s Washington, DC and New York offices, also led design duties for the firm’s new Chicago office.
“Frankly, it feels a lot bigger, just because there’s so much more glass there’s so much more natural light and a lot of the file storage that we were really reliant on 10 or 20 years ago, just don’t matter so much anymore,” he says of the shift from paper to electronic records. “So we were able to dispense lots of that in favor of a more paperless workflow.”
While the bulky file cabinets and storage systems are gone, law practices still have to keep a major focus and emphasis on the confidentiality of clients and in-person meetings. That means having areas that are clearly delineated as secure spaces but also public spaces that are inviting and welcoming, Brown suggests.
But it’s not just the layout and technology that’s changing at the law office of 2021 — the role and purpose of the office itself is evolving, suggests Peter Randolph, an architect and director at Chicago’s Eastlake Studio, a practice that has designed numerous office suites throughout the city’s central business district.
“The post-pandemic office is going to be about the culture and the collaboration. That’s the reason people come back to it; it’s not about leasing a lot of space for people to do work,” Randolph says.
And for law practices, a big part of that culture and collaboration is mentorship, he adds. There are numerous reasons for legal professionals to go back to the office, whether it’s because of the confidential nature of the work, the need to discuss ongoing projects face-to-face with colleagues, or for newcomers to learn the ins and outs of the trade.
“Another really important topic we discussed when we were talking to law firms was how mentorship is such an important part of the law practice. The office can be opened up both to the public and to your industry peers as a space for you to grow professionally,” Randolph says. “That’s something you can’t get at your house.”
Even the physical hierarchy of the law office is changing, Randolph suggests. As collaboration, culture, mentorship, and opportunities for networking become the primary purpose for the office, the top-down nature of the legal office, where private offices and cubicles delineate rank or stature, has to be flexible in a way that also serves those new core functions.
But despite the sluggish downtown rebound from the pandemic, the office is not going anywhere — especially for law firms, Randolph says. What is happening now is more or less an acceleration of office design trends that were happening before the pandemic.
“There’s been a lot of talk about the death of an office, but I think it’s just more of an adjustment,” he says. “These are trends that were already kind of happening but they’re just faster and all at once, which feels very scary to some people that the whole way we work has changed.”
This story also appears in the October 2021 issue of Illinois Real Estate Journal.