The legal industry is one that sticks to its old ways, from billable hours to traditional offices and cubicle designs. But even law firms are not insulated from change. In fact, faced with technological advancements, demographic shifts and new industry trends, law firms are now responding appropriately to the headwinds of the new economy, especially as it concerns real estate.
“Law firms, historically, haven’t been this challenged to look at the bottom line the way they are doing so now,” says Lenny Beaudoin, senior managing director and co-leader of CBRE’s Workplace Strategy practice.
The traditional law firm was hit hard by the Great Recession, leading to stagnation in the demand for law firm services and declining profit margins, according to the 2017 Report on the State of the Legal Market by Georgetown Law’s Center for the Study of the Legal Profession and Thomson Reuters Legal Executive Institute.
“We are seeing a lot of firms trying to understand how to balance the traditional office entitlements with the realities of expense management and the changing ways in which law firms operate,” Beaudoin adds.
Today, many law firms are implementing new real estate strategies to “future proof” their real estate portfolios by creating a flexible working environment, according to Legal Sector Trends in the United States: Witnessing Change, a 2017 CBRE Research report. Many law firms still base their operations in high-cost business epicenters like New York City, Los Angeles, Chicago and Miami. In the first half of 2017, 74 percent of legal leasing activity was in downtown markets compared to suburban markets. At the same time, many law firms have already initiated space efficiency strategies with the goal of reducing their square footage by an average of 27 percent, per CBRE Research.