LAW FIRMS SET FOR AN ACTIVE YEAR DESPITE RISING COSTS
The impact of the Business Rates revaluation will add £31 million to total occupational costs for the CBRE Legal 100 firms, representing an increase of 19% in liability overnight from 1st April 2017. Coupled with this, total annual rent costs in 2016 were £472 million, an increase of just 5% over the past 5 years, demonstrating that law firms have been working hard to manage occupational overheads in London against a backdrop of a significant increase in prime rental levels. These findings are revealed in the fifth edition of CBRE’s Law in London 2017 report, which examines the relationship between the largest 100 law firms operating in London and their use of office space.
The five largest take-up deals from 2016 highlight a variety of trends, including M&A activity (CMS Cameron McKenna, Olswang and Nabarro), expansion (Mishcon de Reya, Goodwin Procter and Quinn Emanuel) and migration east in the pursuit of value for money (Wedlake Bell).
The report revealed that 19% of the CBRE Legal 100 firms are now working in full open plan layouts compared with just 10% five years ago. Cost is a key benefit as CBRE’s findings show that on average firms operating in open plan occupy 40% less space and pay 35% less per fee earner than those operating in cellular.
A further 10% are operating in mixed open plan/cellular configurations. The continued trend away from traditional cellular ways of working is driven both by the need for more efficient space usage and to facilitate greater collaboration between teams.
2016 was a year of rationalisation for law firms, with take-up impacted by the uncertainty surrounding the EU referendum. Although there was a lack of large transactions, the industry saw further consolidation through M&A activity and a continued focus on finding ways to increase efficiency in London, either through changing the way space is used or adopting nearshoring strategies.
2017 is expected to be an active year for law firms with Freshfields committing to c. 255,000 sq ft at 100 Bishopsgate for their new HQ in the City of London, and with current active requirements including Squire Patton Boggs, Kennedys and Sidley Austin. We believe that firms will continue to explore ways to increase space efficiency as well as pursuing nearshoring, agile working and intensification of space. We also expect to see a greater percentage of budget assigned to technology infrastructure as an enabler to facilitate agile working practices. There will be continued investment in AI technology which will inevitably impact on headcount at operational and junior support levels, supporting initiatives to drive efficiency gains in London.