83% Of Law Firms Seek To Reduce Property Overheads As Open Plan Debate Hots-Up

The average area occupied per fee earner in the 100 largest London law firms (ranked by space occupied) has reduced by 5% since 2012 to 490 sq ft, costing £22,400 per annum in 2014, according to the latest research by CBRE, the global property advisor. In the third of CBRE’s Law in London series, 83% of respondents surveyed stated that their firm is considering strategies to reduce property overheads (up from 76% in 2012), however, 69% expect to see growth in their London headcount over the next three years.


Frances Warner Lacey
“The legal sector has benefited from an increase in M&A activity, due to market stability and increasing confidence. However, whilst we’re seeing a return to pre-recession activity and headcount, post-recession values are influencing decisions; growing competition within the legal sector is increasing pressure on fees; clients want more for less. Firms looking for costs saving strategies are targeting real estate spend, the largest cost to legal practices after salaries. As a result, total space occupied has reduced - from 10.8m sq ft in 2012 to 10.4m sq ft in 2014.”
Frances Warner Lacey

The pursuit of alternative space use strategies should result in cost saving in the medium and long term. Of the 60 UK law firms in the list, the top 11 to 25 have been most reactive, cutting the cost of rent per fee-earner by 9% to £19,600 per annum. The benchmark shows a clear differential between open plan and cellular: 310 sq ft occupied per fee earner in open-plan offices in contrast to 550 sq ft per fee earner in cellular workspace.

Colin Manders
”Key tactics that support space reduction are outsourcing, intensifying use of space and the disposal of space. There isn’t a one size fits all approach, but interestingly, many firms find a new office layout, including spaces that support collaboration, integral in developing innovative service offerings and cross-selling, now seen as vital to a firm’s survival. In the long term, the benefits of an inventive real estate strategy can provide more than just cost saving and act as a catalyst for business change.”
Colin Manders

Whilst space occupied has reduced, location is seen as key in attracting the best talent. 74% of respondents cited location as the most important aspect of a firm’s workplace to help attract and retain talent, explaining many law firms’ commitment to the City and Midtown despite rising occupational costs.

Warner Lacey said:“As the market returns to growth, attracting talent has returned to the top of firms’ priority lists. Our report suggests firms should factor this into future property strategies, even perhaps asking whether space can be reduced in preference for a more favourable office location.”

59% of respondents stated that outsourcing or moving certain functions to global locations is either planned or in place within their firms, down from 76% in 2012, indicating that many firms have already outsourced non-core functions. In August 2014, Baker & McKenzie announced plans to open a second global services centre in Belfast, which is also home to similar centres set up by Allen & Overy, Axiom and Herbert Smith Freehills, whose presence has driven up local rents for Grade A space.