Maintaining a recent trend, law firms continue to shed office space in favor of leaner, more efficient floorplans. Over the past year in Chicago, two-thirds of law firm leases were for smaller spaces.
“There has been a flight to quality in Chicago and law firms are continuing to seek increased efficiency and flexibility within their space,” said Todd Lippman, vice chairman and member of CBRE’s law firm practice group.
From Q3 2018 through Q2 2019, according to the 2019 North American Legal Trends Report from CBRE’s Law Firm Practice Group, Chicago recorded 854,255 square feet of law firm transactions. This was up from the 702,971 square feet the market saw in the year prior, but these deals were dominated by contractions, with 65.6 percent of transactions in this time period falling into this category.
And these firms aren’t just shaving off a few square feet; the average contraction was 21.8 percent. The majority of the transactions (66.6 percent) that CBRE tracked were relocations. Of the remaining deals, 20.4 percent were expansions, 11.9 percent remained stable and 2.2 percent were new to market.
“The market has seen a surge in new construction in recent years and firms are giving these top-quality sites strong consideration as they look to recruit new talent and retain current employees,” said Lippman. “Firms that do choose to relocate are building out more efficient space, and many have opted for one-sized offices due to high rents and construction costs, as well as for increased space flexibility.”
Chicago’s 26,900 lawyers and 47,600 legal service employees ranks as the fourth-largest legal market in the U.S. And hiring here is up, with attorney employment expanding by 4.6 percent since the third quarter of 2018, beating the national average of 3.7 percent over the same time period.
The two largest law office leases over this time were Jones Day (119,419 square feet) and Perkins Coie (100,000 square feet), both relocating to 110 N. Wacker. Both spaces will be contractions once they move into the new tower that Howard Hughes Corp. and Riverside Investment & Development are developing along the Chicago River.
Brinks, Gilson, & Lione (78,000 square feet), Morgan Lewis (70,000 square feet) and Marshall, Gerstein & Borun LLP (65,114 square feet) rounded out the top five largest law office leases in Chicago during this time span. They, too, were contractions.
Nationwide, the CBRE report finds that many law firms are shaking up their recruitment strategies, prioritizing secondary markets. They are hoping to find new talent in lower-cost environments, gravitating to where the millennial populations are growing the quickest. In fact, five of the highest growth markets for legal sector employment (Austin, Denver, Orlando, Houston and Dallas/Ft. Worth) are also among the top 10 markets for millennial population growth.
“Law firms continue to grow in markets that have emerged as strong business environments this cycle, which also happen to provide a lower cost of doing business,” said Jamie Georgas, global chair of CBRE’s law firm practice group. “These Millennial-rich environments offer highly skilled workers and are a strong complement to the usual legal centric markets.”
