Jones Lang LaSalle Report on Class “A” Commercial Property

The first half of 2009 saw a growing trend among law firms to relocate to fully built-out space that had been occupied by another firm according to  Jones Lang LaSalle’s , Global Legal Perspective 2009.  According to the report, across the U.S. there is more than six million square feet of available built-out law firm space.

“There is a “Perfect Storm” of circumstances that law firms need to understand and take into consideration as they contemplate their real estate plans for the future,” noted Tom Doughty, International Director with Jones Lang LaSalle’s Law Firm group.  “Space options abound – from new buildings to existing built-out space – while competition for premium space is decreasing and rental rates are declining.  As a result, law firms  that are able to take advantage of the current market will have an opportunity to solidify long-term occupancy at significantly decreased costs.”

Law firm revenues continued to fall in the first half of 2009, led by declines in corporate, finance, and mergers and acquisitions practices. As revenues have dropped-off, some firms have looked at their real estate for possible opportunities to decrease overall operating costs. For firms facing relocation, existing built-out spaces are increasingly attractive because they minimize the capital outlay required.

A prime example of this occurred recently in New York when Holland & Knight not only took advantage of a favorable subleasing market to relocate from downtown to midtown, but also was able to leverage  an existing law firm installation by subleasing already built space from Clifford Chance at 31 W. 52nd Street.  Kelly Olsen Michod DeHaan & Richter LLC in Chicago is another example of a firm that leased built-out law firm space at 333 W. Wacker that was previously occupied by Skadden Arps Meagher & Flom.

“Also keep in mind that the market is likely to rebound sometime beyond the next 12 to 18 months depending on the particular location. When it does, rental rates will rise as will competition for prime space,” continued Doughty.  “We are working with firms today with leases that extend well into the future, but  that want to see if they can take advantage of this unique window.”

The report also notes that declining rents and multiplying space options around the globe continue to create favorable conditions for law firms as new supply and sublease space becomes available.  Law firms are expected to maintain their increased leverage in real estate markets across the globe for the foreseeable future because sublease space will keep mounting until job losses stop.

Given current market condition, the report cautions firms to pay particular attention to ownership entities in the buildings where they currently occupy space or are negotiating leases. Many owners are either in or will encounter distress situations over the coming quarters due to purchases or financing based upon aggressive underwriting during the overheated commercial market that existed from 2004 through 2008.

Jones Lang LaSalle’s Law Firm Practice understand the issues law firms face—such as fierce competition and the enormous pressure to reduce costs.  They translate this insight into real estate solutions that help you attract the best people to your firm, distance yourself from the competition, raise your brand’s profile in the marketplace and minimize infrastructure expenses.

The law firm experts provide services in transaction management, portfolio administration and analysis, occupancy analysis and planning, marketing intelligence, construction services, building systems assessment, move and relocation management and inventory management.

Contact : Mittie Rooney + 1 301 602 8709