LONDON’S TOP LAW FIRMS SEEK PARADIGM SHIFT IN PROPERTY STRATEGY TO OFFSET RENT RISES
London’s 100 largest law firms by sq ft occupied saw rents rise 7% in 2015 to an average of £43 per sq ft, but many have offset the rise by reducing space and radically rethinking the workplace, according to research from CBRE, the global real estate advisor.
Many of the CBRE Legal 100 firms, 95 of which are now located in the City, have been responding to rising costs by taking less space and occupying more efficiently. Last year, there were 63 relocations, 19% more than the previous year, pushing office take-up in the legal sector to 12% above the 10 year average.
However while UK firms in the CBRE Legal 100 are downsizing their footprint in London, international firms are in expansion mode. UK firms tightened their belts by 9% between 2012 and 2015, losing 725,000 sq ft of floor space to bring average space per fee earner down 8% to 457sq ft per fee earner and offsetting rent rises which now stand at £20,200 per fee earner.
International firms have meanwhile grown their footprint in the Capital by 12%, gaining 225,000 sq ft over the same period in a bid to seek competitive advantage. This has resulted in an average space per fee earner of 588 sq ft, 29% higher than their UK counterparts and 13% more expensive.
A number of law firms have continued the trend towards open plan working including CMS Cameron McKenna, Ince & Co and BLM. The CBRE Legal 100 Benchmark shows that open-plan office layouts require 20% less space per head than traditional cellular structures, resulting in average rent costs of £21,800 per fee earner, £5,300 less than £27,000 for cellular spaces.
Property overheads are the second largest cost after salaries for law firms, so as they face up to rising competition and pressure on fees, real estate costs are one area where savings can be made. London continues its position as a global city, so instead of moving elsewhere, many firms have elected to make their current space work harder, while also nearshoring the use of contract lawyers and legal support centres to improve efficiencies. This approach has allowed law firms to maintain their fee-earner presence in the City.