With all of the carnage in the office market, law firms should be asking hard questions about their space as they plan for the future.
Right now, real estate is the second largest expense of law firms behind employees for law firms, according to Ryan Hoopes, a director in the Legal Sector Advisory Group at Cushman & Wakefield. For instance, in Dallas-Fort Worth, real estate is about 5.4% of a firm’s revenue, Hoopes says.
Like many professionals, lawyers and their staff aren’t going into the office right now. But business is still happening and cases are moving forward.
“Due to the nature of work today, law firms should look to offer a combination of work from home and in-office work time,” Hoopes writes for Cushman & Wakefield’s Insights.
Many are already taking this step. After watching his team continue to operate at a high level while teleworking during the pandemic, Jeff Schneider, a managing partner at Miami-based law firm Levine Kellogg Lehman Schneider + Grossman, tells GlobeSt.com that the firm is considering shrinking its space.
“The biggest expenses for every law firm are space, personnel and insurance,” Schneider says. “Now have an opportunity to cut one of them by a lot. Even if it’s not a 50% [reduction in office costs], but a 20%, 30% or 40% savings, that’s a massive cut. In addition to that, you end up with a much happier workforce.”
As attorneys work remotely, they’re relying even more on technology. Because of this, Hoopes thinks law firms could increasingly allocate some of their real estate budget to technology. While Hoopes doesn’t expect law firms to lease new space or to try and decrease their footprint in 2000, he expects a “tremendously high amount of real estate deals related to law firms and traditional office tenants rightsizing or downsizing their office footprint or closing office in certain markets.”
As law firms look at new space, Hoopes says they should be asking three questions:
- are short-term extensions a good strategy to bridge into next year when tenant conditions are more favorable;
- have firms properly evaluated the cost of their real estate compared to their number of attorneys and revenues;
- and have they looked at technology costs and other areas where can utilize technology to streamline specific processes and needs?