Amidst Rising Rents and Falling Vacancies, North American Law Firms Seek Efficiencies
Like so many industries, law firms are under increasing pressure to approach real estate strategies and workplace practices differently in order to remain competitive. 2016 intensified this pressure thanks to rising office rents and falling vacancies in many markets.
To provide insight into the key real estate trends for law firms to consider, this report highlights the office market characteristics and law firm activity in each of the 23 North American real estate markets covered by Colliers’ Law Firm Services Group.
- The U.S. office market seems to be reaching equilibrium. While rents increased modestly in 2016, rent growth has slowed considerably and vacancies appear to be bottoming out. Absorption also shifted down in 2016 as consolidation, downsizing and renewals became more prevalent.
- The majority (61%) of the markets surveyed saw Class A office rents increase in 2016. Over half (57%) of markets saw office vacancy declines in 2016.
- Renewals are the name of the game as law firms look to control their real estate costs. Seven of the 10 largest law firm leases signed in 2016 involved tenants choosing to stay in place and renew their existing leases. Those that have relocated have generally moved to new developments with space plans that are dramatically more efficient.
- Reflecting the trend of rising rents and falling vacancies, 52% of survey respondents view their markets as being positioned in the landlords’ favor, with another 26% reporting that landlords and tenants are on equal footing.
- Law firms have not been as aggressive as other industries in going to open-plan environments, but many firms have become more efficient with their spaces. From a practice perspective, firms are collaborating more and offering additional services across specialty lines in an effort to efficiently provide clients with improved service.