Real estate footprints for the legal sector are shrinking, but costs per square foot are rising. These finds are according to an analysis by Law.com. As the site notes, "overall real estate spend rose 2.6% for [AmLaw 200] firms, as total square footage fell 2.1%. That’s because the average price per square foot of law firm real estate rose 4.8%."

Additionally, for the first time since 2020, the majority of firms signing leases in 2023 chose to stay-in-place rather than relocate. In fact, 56% of legal tenants signing leases in 2023 renewed their lease, as opposed to only 33.9% in 2022, says a survey by Savills.

As for real estate costs, Law.com reports that "compared to smaller firms, the Am Law 50 proved more capable of controlling rising prices per square foot. The Am Law 50 paid an additional 1.3% per square foot (PSF) in 2023, compared to 3.7% higher PSF costs for the Am Law 51-100 and 7.6% higher PSF for the Second Hundred."

However, downsizing real estate footprints may be off-setting these rising costs with 56% of Big Law firms reporting downsizing, and Savills detailing the average office space reduction at around 40,500sqf. Remote and hybrid work were the biggest contributors to office space reductions.

Cravath's Move

Global firm Cravath is in line with this downsizing trend. The firm (which regularly tops compensation rankings) relocated its London office for the first time in decades to a smaller space, according to Above The Law. Their downshifting from a 25,000sqf office to a 21,700sqf one signals more a success of its hybrid work model than a failing of anything else.

A report by market intelligence firm Legal Futures found that, among UK firms, "70% had a hybrid working routine, with two or three days spent in the office. Almost a fifth (19%) were based fully in the office with 9% fully at home."

The Verdict

The changing office landscape for the legal sector is part of the larger threat to the commercial real estate market, which has yet to fully regain occupancy rates since the pandemic. Yet, most legal professionals (and working professionals across the broader economy) report higher job satisfaction and higher productivity with at least a hybrid work structure.