Law Firms Start To Reduce US Office Leasing
USA – Following several quarters of steady office leasing volume, the amount of office space taken up by law firms across the country declined in Q4 2022, potentially signalling a leasing slowdown in the legal industry, reported Reuters on Saturday afternoon (11 March, SGT).
According to data from Savills, law firms leased 1.1 million sq ft of office space during the last quarter of 2022 – down from 1.7 million sq ft and 1.6 million sq ft in the previous quarters. While the Q4 2022 figure is similar to the level seen during the 1st quarter of 2021, it is 31 percent lower on a year-on-year basis.
The data only covers office leases by law firms measuring more than 20,000 sq ft across major office markets in the United States.
Savills said that while one quarter is too short to clearly indicate a long-term slowdown, law firms “have begun pulling back in a number of ways ahead of a potential economic downturn, so it’s possible that real estate may be one of them.”
In H2 2020 through 2021 and into 2022, the revenue and earnings of many large law firms increased significantly before it was negatively impacted by a subsequent cooling global M&A market. In fact, several major law firms have slashed jobs since September 2022 due to weaker demand.
Devon Munos, Research Lead at Savills’ practice groups, noted that law firms usually lease office space for 10 or 20 years as they think far into the future. And law firms may wait for a few quarters to see if they can push back the decision.
Meanwhile, other industries, especially the tech sector, have recorded a “clear drop off in leasing” because of the economic situation, so it is possible that the same thing is starting to happen in the legal industry, she said.
Nonetheless, law firms are pushing for more staff to return to the offices now that the threat of the COVID pandemic has waned, and that can affect leasing decisions such as transferring to better quality office properties, she added.