Law Firm Perspective
United States . 2013
Winds of change gusting
through the U.S. law firm
office landscape
In recent months, positive economic headwinds have picked up
force across the U.S., fueling increased optimism for 2014 and 2015
prospects. However, for the domestic legal sector, the outlook for most
firms remains muted, driven by fairly stagnant conditions across most
practice areas, which, when combined with fee compression, creates a
slow-growth environment.
As challenges for law firms persist across the business environment,
they have also arisen across the real estate market. After nearly seven
years of enhanced leverage, firms encounter markets with shrinking
quality options, resulting in landlord confidence jumping, fueling
heightened rents and diminished incentives, a trend forecasted to
continue into 2014 and 2015.
Market leverage will blow farther away from firms over the next two
years, yet real estate opportunities will remain. An increasingly supplyconstrained market will lead to additional new developments and
second-generational backfill options coming online over the next 24
months. In addition to the increased space options, firms that embrace
modern layouts and enhanced efficiency measures have the opportunity
to shrink real estate occupancy by more than 15.0 percent, providing the
potential to cap cost structures in a still-challenging business climate.
...
Mid-sized and large block
availabilities of Trophy and
Class A space have dwindled
considerably across U.S. cities
due to the flight-to-quality
coupled with historic lows in
development activity. As a result,
nearly 60.0 percent of markets we
track have less than three blocks
of vacant or available space
greater than 100,000 square feet
and approximately 80.0 percent
of markets we track have less
than three blocks of vacant or
available space greater than
200,000 square feet. With limited
new construction not delivering
in most markets until the 2015/
2016 time frame, pricing will
continue to escalate, likely at
higher levels than the past 12
months, and provide challenges
to law firms.
3 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Jones Lang LaSalle Law Firm Group
In the evolving economic environment we encounter, decision makers
tasked with management responsibility for global, national or regional
law firms increasingly find themselves in the real estate business as
a matter of sound firm management. The amount of time required to
deal with portfolios in multiple offices in different cities and/or countries
has increased and has become ever more complex with critical events
arising on a regular basis. These events are nearly always contextual;
accordingly, they require a deep understanding of local market
conditions for proper evaluation and action.
With over 1,000 offices in 70 countries worldwide, the Jones Lang
LaSalle Law Firm Group has the scope and platform to proactively
anticipate those issues and events and advise you on how to navigate
the path forward regardless of the market environment or local
geography your firm is embedded in.
The Jones Lang LaSalle Law Firm Group concentrates on developing
occupancy strategies, executing transactions and providing related
occupancy services to our law firm clients, locally, nationally and
globally. The team deeply values the importance of providing timely,
accurate and relevant market information and research to our law firm
clients that enable them to efficiently manage their real estate in such a
way as to generate maximum productivity while mitigating cost.
Accordingly, we are proud to present the eighth annual issue of our
market perspective. This annual report provides information on 40+
major markets across the United States. Additionally, those clients with
broader geographic reach may find our global law firm perspective of
interest as well. That report details market trends for law firms around
the globe, with the goal of assisting you and your firm in navigating the
increasingly changing global marketplace.
We trust you will find this information useful and solicit your feedback if
there are areas you would like to see expanded in the future.
4 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
In this report
Jones Lang LaSalle Law Firm Group
3
Orange County
In this report
4
Orlando33
United States Law Firm Perspective executive summary
5
Palo Alto
Availability, leverage and pricing for law firms
7
Philadelphia35
Law firm composition, activity and space utilization
8
Phoenix
36
Law firm composition, activity and space utilization9
Pittsburgh
37
Atlanta10
Portland
38
Austin11
Raleigh-Durham39
Baltimore12
Richmond40
Boston13
Sacramento41
Charlotte14
San Diego
42
Chicago15
San Francisco
43
Cincinnati16
Seattle-Bellevue44
Cleveland
17
Stamford, CT
45
Columbus
18
St. Louis
46
Dallas19
Tampa Bay
47
Denver20
Washington, DC
48
Detroit21
White Plains, NY
49
Fort Lauderdale
Wilmington, DE
50
Houston23
Appendix
51
Indianapolis24
Law firm and overall office-using employment statistics 52
Los Angeles
25
2013 law firm lease transactions > 50,000 s.f
53
Miami26
Active law firm active requirements > 50,000 s.f.
54
Milwaukee
27
Law firms’ emphasis on efficiency
55
Minneapolis
28
Law firm concentration
56
New Jersey
29
Class A asking rents, tenant improvement allowances and free rent 57
New York
30
Market outlook favorability for law firm-concentrated submarkets 58
Oakland-East Bay
31
22
32
34
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Table of contents
United States Law Firm Perspective executive summary
In recent months, positive economic headwinds have picked up
force across the U.S., fueling increased optimism for 2014 and 2015
prospects.
•
Corporate profits remain at all-time highs with many companies
sitting on piles of cash to re-invest back into the economy.
•
The white-collar segment of the U.S. economy is moving at
optimal speed not just with respect to profitability and revenue
patterns, but employment levels are nearing full employment
with white-collar unemployment levels below 4.0 percent, half the
overall rate of the U.S.
•
Along with a deleveraged private sector, the U.S. banking industry
is well-capitalized and has shifted from villain to model citizen
across the global landscape.
•
A steadily improving housing sector will be challenged with higher
interest rates ahead, but pricing and volume have consistently
ticked up from market lows.
•
The tech and energy sectors remain the darlings of the current
economic cycle with growth rates double or triple what we are
experiencing more broadly across all sectors in the economy.
These improved economic conditions have driven renewed business
and consumer confidence and thus have spurred increased decision
making, greater investment and overall growth in the broader economy.
Forecasts for GDP growth over the next several years are projected to
escalate from 2.0 percent in 2013 to 3.0 percent in 2014 to close to 3.5
percent in 2015. At the same time, U.S. employment levels, which have
been depressed for close to seven years, are projected to rise above
pre-recession levels over the next 14 months.
However, even though broader progress has shifted to most segments
of the economy, the outlook for most law firms has remained more
muted driven by fairly stagnant conditions across most practice areas,
which, when combined with fee compression, creates a slow-growth
environment. Revenue levels of the AmLaw 100 grew by just 2.8
percent in 2012 after growth rates of 4.7 percent and 5.9 percent in
2010 and 2011, respectively. The recent revenue gains appear even
more moderate when comparing them to the 11.0 percent annual
growth in revenues from 2001 to 2007 for AmLaw 100 firms. As revenue
growth slowed, so did profits per partner with just 66 of the AmLaw
100 firms demonstrating increased profitability. This shift in profitability
has created an environment of haves and have-nots. Globally-focused
firms with diverse practice groups have fared best and have been able
to reinvest into the business, attracting specialty practice groups and
boutique shops that further enhance the firm’s offerings and geographic
scope. In the U.S., particularly, as firms have remained somewhat
stable in the gateway markets of New York, Washington, Chicago and
Los Angeles, they have increasingly focused their growth in cities like
Houston, Denver, Palo Alto, San Francisco and Miami due largely to
opportunities in energy, technology and from Latin America.
As challenges for law firms persist across the business environment,
they have also arisen across most geographies of late in the real estate
market. After nearly seven years of enhanced leverage for tenants,
firms encounter a more challenging market ahead in 2014 and 2015.
A flight to quality, particularly in cities, has diminished the amount
of Trophy and Class A options, spaces that most international and
domestic firms usually flock to. In that segment of the market, blocks of
spaces, of all sizes, have shrunk from 12 months ago.
•
Available blocks > 200,000 s.f. have shrunk by 16.2 percent
•
Available blocks 100,000 s.f. to 199,999 s.f. have shrunk by
1.7 percent
•
Available blocks 50,000 s.f. to 99,999 s.f. have shrunk by
7.4 percent
•
Available blocks 25,000 s.f. to 49,999 s.f. have shrunk by
16.5 percent
This decrease in available space has pushed rents up across the
board nationally by nearly 3.0 percent year-over-year. However, when
looking at Class A CBD rents, the part of the market law firms focus
on, rents have grown by 6.0 percent over the past 12 months and are
14.0 percent above the market low rental rates of late 2009. At the
same time that rents have increased, concessions from landlords have
continued to dwindle too. Rent abatement levels across the U.S. are
down more than 18.0 percent from their highs in 2009, while tenant
improvement allowances still remain at near all-time highs, but are
down 9.1 percent from 2010 highs. As space options have diminished,
causing rents to increase and concessions to inch down, leverage has
shifted away from law firms in many markets JLL tracks.
•
In 2012, 64 percent of markets JLL tracks were considered law
firm-favorable
•
In 2013, 49 percent of markets JLL tracks are considered law
firm-favorable
•
In 2014, 29 percent of markets JLL tracks will be considered law
firm-favorable
6 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
•
In 2015, 7 percent of markets JLL tracks will be considered law
firm-favorable
As this leverage continues to slip away, we can expect rents to increase
at a rate higher than they increased in 2012 and 2013. We have
already seen this occur in the most supply-constrained and demandheavy markets of late including San Francisco, Seattle, Pittsburgh,
Minneapolis and Denver.
While market leverage will move farther away from firms over the
next two years in many markets, real estate opportunities will remain.
Ironically enough, the markets where law firms have the most
significant occupancy are likely the markets where firms will continue to
extend leverage over the next 12 to 24 months: New York, Washington,
DC, Chicago and Los Angeles. Based on stagnant demand from the
financial services sector in New York and the government sector in
Washington, the number one and two law firm markets will likely see
leverage stay with law firms until the end of 2014, even early 2015. The
same can be said of the next largest market segments: Chicago and
Los Angeles. Late-blossoming and slower-moving recoveries in both
of those geographies will hand firms enhanced leverage in negotiating
favorable deal terms over the next two years. While top-quality
spaces are becoming more limited in all of those markets, numerous
commodity A options still exist and more will be created through some
law firms moving to new developments:
•
In New York, Morrison Foerster’s space is on the market at 1290
Avenue of the Americas, in addition to space being vacated
elsewhere in the building by Microsoft. Former Dewey space at
1301 Avenue of the Americas is also available, providing ample
opportunity for firms interested in the Sixth Avenue corridor.
•
In Washington, DC, both Arnold & Porter’s 400,000-square-foot
space at 555 12th Street, NW and Covington’s space at 1201
Pennsylvania Avenue, NW come available over the next
24 months.
•
In Chicago, McDermott’s space at 227 West Monroe (more than
400,000 square feet) will be returning to the market in 2016 / 2017
as the firm relocates to River Point.
•
In Boston, Goodwin Procter will be vacating 415,000 square feet
at 53 State Street over the next three years as they relocate to the
Seaport District.
Another opportunity for law firms revolves around space utilization.
Firms that embrace modern layouts and enhanced efficiency measures
have the opportunity to shrink real estate occupancy by more than
15.0 percent, providing an opportunity to cap cost structures in a stillchallenging business climate. In today’s real estate market, evolving
demographics are encouraging greater collaboration among colleagues
and new patterns for how and where we work. This shift has not just
affected law firms, but banks, consulting firms, technology companies
and really any office tenant across both the United States and the
globe. Law firms, in many ways, have been at the forefront of cutting
occupancy levels most aggressively in the past two to three years.
•
The digitalization of the workplace has radically reduced the
need for law libraries, filing on practice floors and in many cases,
additional filing on the concourse or basement levels of
office buildings.
•
Similar to consulting and accounting firms, as well as banks, the
support ratio of revenue generator to administrative professional
has increased, moving from an average of 3:1 to as high as 8:1 in
some cases, eliminating the need for more interior workstations.
•
While only a few firms have migrated to the one-sized office for
attorneys, many firms are shrinking the sizes of offices, as well
as shrinking the amount of square feet per attorney as part of an
overall space reduction trend. As a result, in many primary cities,
firms relocating are migrating from upward of 900 square feet per
attorney to, in the most efficient cases (brand-new developments)
as low as 550 square feet per attorney, averaging today about 650
to 750 square feet per attorney.
•
As most firms have not yet culturally migrated to moving
associates to the interior of the floorplate, this has affected
the type of building law firms desire to move into. In 2013, we
continued to see a trend develop of law firms migrating to smaller,
or at least shallower, floorplate buildings. Overall, when law firms
moved from one building to another building in 2013, the new
building they are relocating to possesses a floorplate that is 7.1
percent smaller than their prior floorplate.
As a result of firms becoming more efficient, additional opportunity has
been created for firms as overall more space is coming back into the
market. In 2013, on a national basis, 56.5 percent of lease transactions
greater than 100,000 square feet involved rightsizing and 41.7
percent of lease transactions greater than 50,000 square feet involved
rightsizing. In a poll JLL conducted with our on-the-ground experts,
41.3 percent of markets responded that mid to large-sized firms were
consistently rightsizing, while only 10.9 percent of markets responded
that firms were consistently growing (see the above on technology and
energy demand markets seeing growth).
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Availability, leverage and pricing for law firms
Availability is shrinking across markets for all-sized law firms
Over the past 12 months...
200,000 s.f.+
options down:
23.5%
50,000-99,999 s.f.
options down:
14.1%
100,000 - 199,999 s.f.
options down:
19.3%
25,000-49,999 s.f.
options down:
25.3%
In a JLL research poll:
And rents are moving UP
2.1%
41
across the
law firm-concentrated markets
we track over the past 12 months
71.7% of markets expect rents for
law firms to increase over the next 12 months
37.0% of markets expect concessions
to continue to decline over the next 12 months
34.9% of markets said that law firms
> 50,000 s.f. are out of existing options and
forced to renew in place or look at new construction
12-month increase in rents
across law-firm
concentrated submarkets
12.6%
Dallas
12.2%
San Francisco
5.6%
Pittsburgh
5.3%
Seattle
Thus, market leverage will move away
from law firms increasingly ahead
Tenant-favorable markets:
49%
29%
7%
2013
2014
2015
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Table of contents
Law firm composition, activity and space utilization
Number of law firms occupying more than 50,000 s.f. and
(number of AmLaw 100 firms with presence in that market)
125 (96)
Washington, DC 91 (95)
Chicago 54 (38)
Los Angeles 29 (69)
Boston 28 (33)
Houston 27 (45)
Dallas 27 (20)
Philadelphia 23 (96)
New York
Shrinking
According to a recent survey of
41.3%
JLL researchers and brokers across
markets, with respect to occupancy
across markets, law firms are generally:
Stable
Growing
47.8%
10.9%
The shrinking office...
71.7%
of markets polled said law firms
are extremely focused on utilizing
space more efficiently
15.2%
of space was given back
when firms moved offices
in 2013
Analyzing 2013
lease transactions:
56.5%
>100,000 s.f.
41.7%
>50,000 s.f.
26.7%
all transactions
involved rightsizing
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Table of contents
Law firm composition, activity and space utilization
Shedding law libraries, outsourcing filing and increasing support-staff
ratios have pushed law firms
to more efficient and
shallower floorplates.
Nationally:
law firms moved to
7.1%
smaller floorplates
average floorplate
24,554 s.f.
firms are shrinking into
Overall, only 28.3% percent of markets said that law firm demand
and leasing velocity would pick up over the next 12 months
However, growth across the sector remains,
as 7.1% of markets are reporting new
law firms entering their market to establish offices.
Minneapolis
Key spots law firms
are looking to grow:
Palo Alto
Houston
Miami
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Table of contents
Atlanta
Locational preference: Atlanta’s largest and most venerable law firms are located in the Central Business District along
the Peachtree corridor in A-plus tower space. The Midtown submarket houses the largest concentration of legal tenants, although some
firms remain Downtown for convenient access to the city’s courthouses and government agencies. To the north, Buckhead’s financial district
has also attracted some of Atlanta’s most visible firms; however, few big blocks of contiguous premium space remain in Buckhead that can
accommodate significant requirements, whereas Midtown still has plenty of options.
11.2%
2.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firm activity has been relatively quiet for the last 24 months after several years
on the immediate heels of the recession, in which some of the city’s biggest firms
committed to relocating or renewing existing space. Currently, there are no big firms
in the market on par with what was seen in 2010 and 2011. Activity in the traditional
law firm submarkets has been muted, if only because most of the biggest firms have
already made their real estate plays. Two years ago, large firms were giving back
significant amounts of space, a trend which has since stabilized since most of the
activity has stemmed from mid-sized and small firms.
21
5
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Bryan Cave
1201 West Peachtree Street
152,383 s.f.
Renewal
Hunton & Williams
600 Peachtree Street
45,707 s.f.
Renewal
For those who are in the market for space, conditions are starting to tighten.
Firms seeking premium high-floor Trophy space in Buckhead will find their options
extremely limited due to lack of big block space. Midtown offers more flexibility and,
additionally, has proven to be the go-to submarket for the greatest concentration of
law firms over the last 15 years.
Johnson & Freedman
1587 Northeast Expressway
50,000 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$29.80
Class A annual escalation
13.1%
3.6%
26.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$50.00/$25.00
TI allowance ($ p.s.f.)**
25,000
Foltz Martin
20,000
OUTLOOK
3.6%
Class A asking rent ($ p.s.f)
Fish & Richardson
12/3
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Particularly in Buckhead, there is limited availability of large contiguous blocks of
premium space in the Trophy towers.
• Pricing has begun to tighten in both Buckhead and Midtown and landlords have
tightened their fists on concessions.
Opportunities for law firms
• Dissolutions and sublease dispositions have created additional space options
for tenants.
• Competition in the marketplace is limited by a finite number of near-term
lease expirations.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
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Austin
Locational preference: The majority of Austin firms are located in the CBD, with proximity to the Capitol being a huge
draw. Due to high rents in downtown Austin, some law firms like Vinson & Elkins have opted to lease space in high-quality projects in
Southwest Austin or along the South MoPac corridor. However, with new construction finally commencing downtown, several firms are locking
in deals at new buildings there, such as Scott, Douglass & McConnico and Dubois Bryant at Colorado Tower.
32.1%
3.5%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Though law firms traditionally dominated office leasing in the CBD, an influx of
downtown office demand from high-tech tenants has left law firms with fewer options
for high-quality office space in the city. Plummeting supply in Trophy and Class A
projects downtown led to a race for office space in 2011 and 2012, especially for
law firms. Thus, the majority of the significantly sized law firms in town have already
locked down space for the next 10 years. The percent of law firms comprising the
overall active tenants in the Austin market has gone from 32.0 percent in 2012 to
just 3.5 percent in 2013 and the majority of that 3.5 percent is comprised of groups
that will likely renew their existing space.
8
PRICING AND INCENTIVE AVERAGES
$42.41
2013 LAW FIRM COMPLETED TRANSACTIONS
Hohmann Taube & Summers
100 Congress
16,050 s.f.
Renewal
K&L Gates
2801 Via Fortuna
12,000 s.f.
Relocation
Class A annual escalation
7.9%
5.0%
12.1%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$20.00/$10.00
TI allowance ($ p.s.f.)**
Metcalfe Wolff Stuart & Williams
221 W 6th Street
7,965 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Jackson Walker
60,000
Andrews Kurth
30,000
Germer
30,000
OUTLOOK
$0.75
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
New construction downtown has attracted several firms away from their existing
space with Scott, Douglass & McConnico and Dubois Bryant both signing deals at
Colorado Tower. Apart from that, activity in the law firm realm is pretty stagnant with
only a few smaller deals being signed so far in 2013.
With new construction finally moving down the development pipeline, firms
outgrowing their space and/or looking for some rental relief can consider moving into
either Colorado Tower or IBC Bank Plaza, both Class A buildings with below-market
rental rates and 2014 projected completion dates.
20
1/1
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Currently a low vacancy and quickly increasing rent environment exists downtown.
• Due to tech growth downtown, firms will find it increasingly difficult to secure ample
space in a traditionally law firm-dominated submarket.
Opportunities for law firms
• The Colorado Tower is set to complete in 2014, which will bring much-needed
supply to the market. The building currently boasts below-market rents and
decent concessions.
• The South MoPac corridor could be a viable relocation option for law firms
looking for some rent relief; however, few large blocks of contiguous space
remain even in this area.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
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Baltimore
Locational preference: The majority of law firms in Baltimore City are located along Pratt and Charles Street in the CBD.
A handful of firms have relocated to Harbor East, but most firms have remained closer to the traditional downtown.
12.5%
4.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firm activity remained notably quiet in 2013 following major reshuffling within
the market in 2010 and 2011. A flight-to-quality by several major firms during
the economic downturn resulted in relatively tight market conditions for newer
construction along Pratt Street and the Inner Harbor, but left major blocks of
vacancy along the Baltimore Street Corridor. Smaller law firms currently located
on Charles Street have taken advantage of the soft conditions on Baltimore Street,
where landlords have been aggressively luring tenants with generous concession
packages. For law firms seeking more than 20,000 square feet on Pratt Street, the
trend has left few existing options, but Exelon’s planned relocation to Harbor Point
will open large blocks in the 2015/2016 time frame when the next wave of large law
firm expirations occurs. While Harbor East and Fells Point have attracted numerous
financial and architecture firms from the CBD, the only significant law firm relocation
to this area has been Hogan & Lovells as the majority of firms have elected to
remain in the traditional downtown market.
8
6
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Ferguson Schetelich & Ballew
100 S Charles Street
11,024 s.f.
Renewal
Shawe & Rosenthal
1 South Street
9,012 s.f.
Relocation
Blades & Rosenfeld
20 S Charles Street
8,800 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$23.70
Class A annual escalation
35.0%
5.0%
20.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$55.00/$25.00
TI allowance ($ p.s.f.)**
90,000
Law Offices of Peter T. Nicholl
15,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Whiteford Taylor & Preston
12/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• There are limited available large blocks of desirable space.
• Lack of new construction in the CBD and residential conversions of obsolete space
will limit office supply.
• Rental rates for Class A / Trophy space on Pratt Street have seen limited growth.
Opportunities for law firms
• Landlords continue to offer generous concession packages, especially on
Baltimore Street.
• Few law firms are currently in the market actively seeking space.
• For firms not requiring Class A space directly on the Inner Harbor, many
options remain.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
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Boston
Locational preference: The city’s premier law firms occupy space in the most prestigious office towers in Boston’s Back
Bay, Financial and Seaport Districts.
17.6%
8.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law practices in Boston have begun to turn the corner as evidenced by the positive
employment growth over the past year. The city of Boston is experiencing growth
in the intellectual property law practice, spurred by the area’s rise in the high-tech
and life sciences fields. As a result, the Seaport District, dubbed the Innovation
District of Boston and home to a growing number of high-tech start-ups and
pharmaceutical giant Vertex, has attracted law firms from within and outside Boston
looking to maximize proximity to potential clients. The area also presents build-tosuit opportunities as restacking current spaces has proven costly and inefficient. For
instance, Finnegan announced its move to the Seaport in 2012 following Vertex’s
move; Concord, MA-based Hamilton Brook will open a Seaport branch looking
to compete in the IP space; and Goodwin Procter signed a build-to-suit lease to
occupy 360,000 square feet at Fan Pier, downsizing from 415,000 square feet in
Financial District.
Due to the rightsizing trend, however, Boston law firms are not increasing their
footprints in the same proportion to the numbers of their employees as they used
to. Advanced mobile technology, cost cutting measures and open-space work
environment are examples of factors leading to fewer square feet per employee
across law firms. Some have eliminated the needs for support roles in high-cost
spaces altogether, choosing to establish a centralized support offices elsewhere or
outsource to third-party business services companies.
PRICING AND INCENTIVE AVERAGES
$50.67
Class A annual escalation
20.0%
10.0%
30.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$50.00/$30.00
TI allowance ($ p.s.f.)**
33
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Goodwin Procter
2 Harbor Shore Drive
360,000 s.f.
Relocation
Skadden
500 Boylston Street
48,000 s.f.
Relocation
Todd & Weld
One Federal Street
25,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Choate
250,000
Pierce Atwood
30,000
Sherin & Lodgen
30,000
OUTLOOK
$1.00
Class A asking rent ($ p.s.f)
28
4/2
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Rising rents prompt large users to seek alternative spaces outside the established
submarkets of the Back Bay and the Financial District.
• Average-sized users compete with high-tech firms for spaces within the 10,000 to
30,000-square-foot range.
• Concession packages are becoming less attractive as free rent and tenant
improvement allowances are decreasing.
Opportunities for law firms
• Options exist for build-to-suit opportunity and brand new spaces throughout the
Seaport District and downtown.
• Low and mid-rise options present cost-reducing solutions to small, growing
law firms.
• Lease expirations from major corporate firms provide options on large blocks
over the next two years.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
14 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Charlotte
Locational preference: The majority of law firms are located in the CBD and Southpark submarkets of Charlotte.
Firms gravitate to buildings with views of the Charlotte skyline and access to addresses on Trade and Tryon in the heart of the city’s
business district.
10.9% 10.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Rightsizing continued to be the dominant trend in law firm activity in the Charlotte
market. The majority of relocations involved a reduction in footprint, with a smaller
average square footage per attorney in addition to pushing their libraries and
storage to off-site facilities, a trend not as expected in Charlotte based on lower
basis rents than cities like New York and Washington where this has been common.
Despite a diminishing footprint, law firms continue to demand space in close
proximity to Charlotte’s most prominent location: Trade and Tryon.
10
10
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Horack Talley
227 W Trade Street
27,000 s.f.
Relocation
Smith Moore Leatherwood
101 N Tryon Street
16,000 s.f.
Relocation
Relocation activity has been concentrated within Class A buildings, which has
continued to result in negative net absorption due to rightsizing, particularly in the
Skyline (what JLL categorizes as the city’s most prominent buildings) of Charlotte’s
CBD. Despite the downsizing of law firms, Charlotte’s Skyline has maintained a low
vacancy rate due to new users in the CBD. With the relocation of Charlotte School
of Law and stability of the major financial groups, there is a limited supply of Trophy
and Class A space. Changing market conditions could force users to address their
real estate options two to three years before their lease expiration.
Kilpatrick Stockton
214 N Tryon Street
11,513 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Winstead Law Firm
25,000
Oliff & Berridge
PRICING AND INCENTIVE AVERAGES
$24.75
OUTLOOK
4.0%
Class A asking rent ($ p.s.f)
Class A annual escalation
30.0%
25.0%
3.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$35.00/$15.00
TI allowance ($ p.s.f.)**
8,000
7/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Large blocks of space among well-located, recently delivered Trophy buildings
continue to decline.
• Restrained new development will result in very few additional options for tenants
in the near term.
• With an undersupplied market, rents will continue to increase while concession
packages decrease from their highs.
Opportunities for law firms
• Dissolutions and sublease dispositions have created additional space options for
tenants, particularly in lower elevator bank space.
• Banks continue to give back large amounts of space, creating space options in
second-generation buildings.
• Competition among tenants has diminished due to a lack of near-term
lease expirations.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
15 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Chicago
Locational preference: Most of Chicago’s largest law firm tenants are located in the West Loop and Central Loop
submarkets and a few are in the River North. The Central Loop is also home to the largest share of the market’s small and medium-sized
firms. The East Loop is still a viable option for firms looking for space at competitive rates. There are an abundance of large blocks available
with views of Grant Park or Lake Michigan.
17.6% 13.8%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
For the first time since 2009, a new office tower is under construction in downtown
Chicago and two local law firms have already announced plans to relocate to the
prime Class A tower. McDermott Will has signed a lease for 225,000 square feet at
the new West Loop development, called River Point.
54
38
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
McDermott
444 W Lake Street
225,000 s.f.
Relocation
With the market for high-end, high-rise Trophy space tightening, firms seeking
such space are seeing fewer landlord concessions, while others in the market for
standard Class A and B space still have leverage. Once River Point is delivered,
though, the market for Trophy blocks is expected to loosen slightly, particularly if a
second new building commences.
Dentons
233 S Wacker Drive
204,705 s.f.
Relocation (in building)
As in many markets across the U.S., Chicago law firms are increasingly cautious
and efficient with their space by shifting to single-sized offices, adding interior offices
and reducing their footprint by restructuring their leases or subleasing a portion of
their current space. Of the top 25 Chicago law firms, 15 have either downsized or
sublet space in the past few years. A recent example of this is the 55,000-squarefoot sublease of Locke Lord’s space at 111 S Wacker Drive by Harris Associates.
Lewis Brisbois
550 W Adams Street
54,782 s.f.
Renewal w/ expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$36.41
Class A annual escalation
21.4%
5.0%
35.5%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$57.00/$28.00
TI allowance ($ p.s.f.)**
200,000
Holland & Knight
100,000
Freeborn & Peters
90,000
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
Seyfarth Shaw
9/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• The market for high-end, high-rise Trophy space is still tight so firms are facing
more landlord favorable conditions.
• As the number of large-block spaces decline, firms in need of 100,000 square feet
or more have fewer options.
Opportunities for law firms
• Smaller and emerging firms have more opportunities for good deals.
• Cost-saving solutions that firms are making could allow for more future growth,
which would drive greater real estate needs in the future.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
16 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Cincinnati
Locational preference: The vast majority of Cincinnati law firms can be found within the CBD submarket, offering firms
easy access to corporate headquarters and courthouses and the highest concentration of Trophy and Class A space. With the current
development of the Kenwood submarket and the proposed development of the Mason/Montgomery submarket, law firms are eager to take
advantage of this attractive space.
13.9% 10.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Cincinnati law firm activity began to stabilize following the delivery of Great
American Tower in 2011 and subsequent flight to the building’s quality. Frost Brown
Todd, Vorys and Redigs were among the law firms relocating last year. Still, the
majority of law firms this year elected to renew at current locations due to the
dwindling availability of large blocks of Class A space.
8
PRICING AND INCENTIVE AVERAGES
$23.21
2013 LAW FIRM COMPLETED TRANSACTIONS
KMK
1 E Fourth Street
90,000 s.f.
Renewal
Class A annual escalation
15.0%
20.0%
10.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$20.00
TI allowance ($ p.s.f.)**
Jackson Lewis
201 E Fifth Street
10,000 s.f.
Renewal w/ expansion
Calfee
255 E Fifth Street
9,000 s.f.
New deal to the market
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Bricker & Eckler
17,000
Peck Shaffer William
16,000
Dressman
12,000
OUTLOOK
2.0%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
KMK, one of Cincinnati’s largest law firms, recently renewed 90,000 square feet in
the One East Fourth Street Tower, but had been browsing before opting to stay at
its current location. Similarly, Jackson Lewis renewed and expanded their downtown
location at the PNC Center as it plans to add to its team. One last example is
Javitch, Block & Rathbone staying put in 7,000 square feet at the Gwynne Building.
Although lease renewals comprised the bulk of Cincinnati law firm activity,
some expanding firms opened new locations or relocated out of the CBD.
Cleveland-based Calfee expanded their statewide presence with the opening of a
9,000-square-foot office in Cincinnati’s First Financial Center. Outside of the CBD,
Millikin & Fitton took advantage of continued development in the Butler
submarket by moving into new construction of 9,000-square-feet at 9032
Union Centre Boulevard.
2
6/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Trophy large blocks of space are dwindling.
• With only one delivery downtown in recent history, first generation space is limited.
• With market conditions tightening, rents are expected to increase over the next 12
to 24 months.
Opportunities for law firms
• Planned office space at the Banks will provide additional Trophy space in
the CBD.
• While starting to increase, rents currently stand at depressed levels, providing
tenants an opportune time to act on real estate decisions.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
17 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Cleveland
Locational preference: The majority of Cleveland’s law firms are located in the CBD, within the Financial and Public
Square submarkets. These submarkets offer the highest concentration of Trophy and Class A assets with convenient access to corporate
headquarters, as well as city, county and federal courthouses.
27.7% 20.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firm activity has remained elevated through 2013, following an eventful 2012 in
which Jones Day renewed their headquarters’ space of 290,000 square feet at North
Point and Calfee relocated to a redeveloped 115,000-square-foot historic building
at 1405 East Sixth Street. While the majority of firms are located downtown, some
have set up shop in the suburban submarkets, including Reimer, Arnovitz, Chernek
& Jeffery, which recently relocated its 150-employee staff to a one-time fitness
center in the southeast submarket, increasing its footprint by nearly 30.0 percent to
46,500 square feet. Other notable leases in 2013 include Buckley King’s renewal
of 28,000 square feet at the Fifth Third Center and Porter Wright’s lease of 25,000
square feet at the new Trophy Ernst & Young Tower, who will be joining Tucker Ellis
in the tower.
The Ernst & Young Tower was the first multi-tenant office building to be constructed
in Cleveland’s CBD in nearly 20 years. The project received a great deal of
attention, especially from law firms and opened nearly 90.0 percent leased. With
such leasing success, talk has begun for another tower to be added to Cleveland’s
skyline. When such a project is officially announced, we expect it to garner a similar
level of interest from law firms looking to upgrade space.
PRICING AND INCENTIVE AVERAGES
$22.32
Class A annual escalation
18.7%
15.0%
19.4%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$50.00/$25.00
TI allowance ($ p.s.f.)**
6
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Reimer Arnovitz Chernek & Jeffrey
30455 Solon Road
46,500 s.f.
Relocation
Buckley King
600 Superior Avenue E
28,000 s.f.
Renewal
Porter Wright
950 Main Street
25,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Baker Hostetler
150,000
Zashin & Rich
20,000
Bricker & Eckler
12,000
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
13
10/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Limited large blocks of space are currently available in Trophy assets.
• Economic conditions have stalled growth plans for law firms.
Opportunities for law firms
• Recent developments have added first generation space to the CBD, the first
time in 20 years.
• Compressed rates and increased concessions are available in Class B assets.
• The continued exploration of the Marcellus Shale will offer increased revenue
opportunites for intellectual property and other related sectors.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
18 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Columbus
Locational preference: As the state capital, Columbus’ law firms are mainly located in the CBD’s Capital Square and
Arena District submarkets, both offering the highest concentration of Trophy and Class A office properties with quick access to courthouses,
corporate headquarters and the state government.
5.5%
10.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Columbus law firm activity has been lively over the past 12 months, following a
variety of scenarios that have led to an increased demand for office space. Atlantabased Fisher Phillips moved into a 6,000-square-foot space at 250 West Street with
expressed plans for continued growth. Isaac Wiles signed a lease of 42,000 square
feet at Two Miranova Place, following the merging of firms Isaac Brant Ledman &
Teetor LLP and Wiles Boyle Burkholder & Bringardner. Meanwhile, Zaino Hall &
Farrin opened its doors on 12,000 square feet in the Huntington Center on 41 South
High Street. Finally, longstanding Columbus firm Kegler Brown renewed their space
of 52,000 square feet in the Capitol Square Office Tower at 65 East State Street.
9
5
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Porter Wright
41 S High Street
130,000 s.f.
Renewal
Kegler Brown
65 East State Street
52,000 s.f.
Renewal
This year’s colorful legal services scene comes with no surprise, as the industry
has always equated to a significant portion of the Columbus economy. The uptick
in activity can also be attributed to the Marcellus Shale natural gas mining and
exploration throughout the mid and eastern sections of Ohio. A number of locally
based law firms have expanded their practice and specialty teams to handle the
needs of the Marcellus Shale drilling activity. In addition, an influx of outside firms
(mainly from Houston) have opened satellite offices in the Columbus region.
Isaac Wiles
Two Miranova Place
42,000 s.f.
Expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$25.41
Class A annual escalation
35.0%
20.0%
20.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$20.00
TI allowance ($ p.s.f.)**
60,000
Confidential
25,000
Ulmer & Berne
10,000
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
Confidential
8/1
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Limited large blocks of Trophy and Class A space are available.
• Due to current market conditions, many landlords could have little opportunity to be
aggressive moving ahead.
• Lack of reserved parking in downtown office towers is becoming a major hindrance
to filling some of the remaining vacancies.
Opportunities for law firms
• Lease rates through the next 12 months will remain below historic norms,
benefiting tenants.
• The exploration of the Marcellus shale is increasing demand in the legal
services sector.
• Small tenants with requirements less than 25,000 square feet will retain leverage
over the next 12 months.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
19 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Dallas
Locational preference: The majority of law firms (78.0 percent) are located within the downtown area (the Dallas CBD &
Uptown), with the next largest concentrations in Central Expressway, LBJ and Far North Dallas. The larger law firms are concentrated in the
AA and Trophy properties of the Dallas CBD and Uptown. Their movement will parallel any new, high-end development delivered in these
submarkets. Both the CBD’s and Uptown’s latest spec developments are significantly occupied by law firms.
16.4%
4.9%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Tight market conditions are beginning to drive the latest office construction cycle in
Dallas’ Downtown. While law firms alone do not typically kick-off new construction,
they are significant tenants in AA and Trophy assets in the CBD and Uptown areas.
Timing looks optimum for new construction because a great deal of churn is taking
shape as leases expire at a number of major law firms over the next four years.
27
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Hartline Dacus
6688 N Central Expressway
36,603 s.f.
Renewal
This pattern occurred in the last cycle when Thompson & Knight (One Arts Plaza),
Koons Fuller (Park Seventeen) and Patton Boggs (2000 McKinney) all took
substantial blocks in the newest offerings. Halls’ Arts District project will be the next
office building to break ground. Although KPMG is the lead tenant, Jackson Walker
has a deal in the works for up to a 100,000-square-foot block.
Effective rents on these new projects are significantly higher (typically about 30.0
percent) than average existing Class A rates. To balance these costs, law firms are
optimizing their space. Some large firms with leases expiring near-term are reducing
their requirements by 40.0 percent. A few regional-scale firms, however, have
bucked the higher rents, opting for more economical, existing downtown
Class A space.
20
Jim Adler & Associates
2711 N Haskell Avenue
28,162 s.f.
Relocation
In addition to the above mid-sized deals that closed in 2013, several high-profile
law firm leases were completed in the latter part of 2012 including leases by Jones
Day and Akin Gump for 133,187 s.f. and 104,277 s.f., respectively, as well as midsized leases finalized by Munsch Hardt (78,524 s.f.) Baron Budd (47,077 s.f.).
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Locke Lord
160,000
Gardere
110,000
Jackson Walker
PRICING AND INCENTIVE AVERAGES
$24.31
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
Class A annual escalation
30.0%
12.0%
40.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$45.00/$10.00
TI allowance ($ p.s.f.)**
80,000
12/6
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• The market has shifted from strongly tenant-favorable to neutral of late; effective
rates are rising, especially in Uptown.
• Limited new construction over the next couple years will force law firms with nearterm lease expirations to renew in place or consider second-generation space.
• Financing constraints for new development limits construction levels below
historic norm.
Opportunities for law firms
• Full floor tenants or smaller continue to have a plethora of options.
• One or two new construction projects may begin construction (could deliver in the
next 24 to 30 months).
• Increase in institutional ownership in CBD makes existing properties more
attractive to law firms.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
20 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Denver
Locational preference: The majority of law firms in Denver are located in the CBD, with a large concentration on the east
end of downtown in the Uptown and Midtown CBD micromarkets; however, as Lodo continues to develop, a handful of law firms have opened
doors at the west end of the CBD.
15.0% 15.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firms have historically officed on the eastern side of downtown Denver in the
Midtown CBD and Uptown/East Side micromarkets where many business and
financial services firms are also located. With the continued development and
migration westward to Lodo, however, firms are looking to newly constructed or
renovated office space. Lodo’s new and vibrant feel, edgier landscape and proximity
to nightlife destinations, along with Union Station and access to the light rail station,
make it a great location when trying to recruit and retain younger talent.
10
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Hall & Evans
1001 17th Street
50,875 s.f.
Relocation
Snell & Wilmer
1200 17th Street
36,575 s.f.
Renewal
Similar to the majority of tenants in the market, law firms are looking for
opportunities to save money on rent, while maintaining occupancy in view space in
higher quality buildings. Many firms are creating more efficient office layouts with
smaller offices and an open layout in hopes of avoiding construction costs when
intra-office moves occur. Currently, most firms in the CBD are stable or rightsizing,
with just a few out in the market looking to expand their presence in Denver.
Owners of newer construction projects continue to offer up decent tenant
improvement packages to attract new or relocating tenants, although rental rates,
especially in the Lodo area, continue to climb up. That being said, leverage and
leasing concessions depend greatly on the size of the deal, as larger, quality blocks
are becoming increasingly sparse.
19
Fairfield and Woods
1801 California Street
26,679 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Holland & Hart
150,000
Polsinelli
100,000
Moye White
PRICING AND INCENTIVE AVERAGES
$31.09
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Class A annual escalation
22.9%
5.0%
23.2%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$20.00
TI allowance ($ p.s.f.)**
45,000
6/3
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Large blocks of space among well-located Trophy buildings, where firms prefer to
office, continue to decline.
• Credit enhancements are in greater demand as market tightens and owners
evaluate leasing options.
• Owners of Trophy buildings have aggressively pushed rates based on limited
options, especially high-rise view space as well as space in Lodo.
Opportunities for law firms
• Large blocks are being vacated by GSA, which will provide available large block
options in the near term.
• Sublease dispositions have created additional space options for tenants,
particularly in small to mid-size blocks.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
21 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Detroit
Locational preference: While many of Detroit’s largest law firms are located in the CBD, a significant portion of small-
to medium-size firms have chosen to locate in the northern submarkets of Bloomfield, Southfield and Troy. In either case, CBD or suburbs,
metro Detroit law firms have gravitated toward Class A office buildings within significant transportation corridors providing optimal
signage opportunities.
14.3% 23.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Real estate activity for Detroit area law firms has been quiet this past year, as firms
look to further cement their position within the Detroit CBD. As such, renewals
have accounted for the majority of activity within the market. Miller Canfield signed
a renewal for 70,000 square feet at 150 West Jefferson. Dykema Gosset also
renewed their lease of 85,000 square feet in Tower 400, a location they have held
since 1985. Finally, Foley & Lardner signed a renewal of 44,000 square feet in One
Detroit Center. Sommers Schwarz relocated to a new space of 23,000 square feet at
One Towne Square after plans to rightsize.
15
2
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Dykema
400 Renaissance Center
85,000 s.f.
Renewal
Miller Canfield
150 West Jefferson
70,000 s.f.
Renewal
With long-standing firms firmly rooted in the Detroit market, many have taken the
opportunity to probe into new locations through acquisition of other firms or by
opening new office expansions. Detroit-based firm Clark Hill acquired Pittsburghbased Thorp Reed & Armstrong, while Dickinson Wright absorbed 60 attorneys from
Mariscal, Weeks, McIntyre & Friedlander. Detroit-based firm Dykema Gosset has
also opened new locations in Charlotte, NC, Austin, TX and Minneapolis, MN, all
within the past year.
Foley
500 Woodward Avenue
44,000 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$22.60
Class A annual escalation
15.0%
12.5%
15.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/20.00
TI allowance ($ p.s.f.)**
50,000
Confidential
30,000
Honigman
9,000
OUTLOOK
2.3%
Class A asking rent ($ p.s.f)
Confidential
10/10
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• The local economic environment has provided minimal opportunity for law firms to
grow revenue.
• Market conditions have prevented any new development, limiting options to secondand third-generation space.
Opportunities for law firms
• Vacancy is among the highest in the country, offering an array of location and
space options.
• Rents will remain severely depressed compared to other markets, while
concessions will continue to be generous.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
22 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Fort Lauderdale
Locational preference: Most major law offices tend to cluster in the Fort Lauderdale CBD due to the proximity to both the
federal and county courthouses. Also, having an address in a Trophy asset along Las Olas Boulevard, the most prominent thoroughfare in the
county, lends credibility and prestige.
29.2% 32.5%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
A year ago, Downtown Fort Lauderdale was struggling with large vacancies as
a result of sizable tenants leaving the market. The most notable was Ruden
McClosky, a prominent local law firm, which filed for bankruptcy and was absorbed
by Greenspoon Marder, resulting in 50,000 square feet of occupancy losses in
the CBD. Today the CBD has absorbed nearly all of the space those tenants
vacated, but the Downtown still remains a discounted market. Therefore, we’ve
seen increased tour activity in Class A assets on two fronts. Within the CBD, local
law firms that currently occupy small Class B and Class C space in the courthouse
district (south of the New River) have been touring Class A assets along Broward
Boulevard in an effort to upgrade space with minimal effect on their bottom lines. In
addition, suburban users have been touring and executing leases within the CBD,
some of which are opening new offices and expanding their presence in the market.
As the economy has slowly improved over the last 12 months, there has also been
an increase in out-of-market law firms circling the CBD. Although, with the market
tightening Downtown, the window of opportunity for tenants to receive favorable
lease terms should narrow over the next 12 months. With less large quality blocks
available, options for sizable law firms are limited; however, given the scarcity
of large tenants in the market, large firms should retain some leverage at the
negotiating table over the short term, as landlords remain aggressive when seeking
to maintain occupancy. Although law firms continue to get more efficient with space
needs, firms are expanding practice groups and becoming more diversified, while
adding talent.
PRICING AND INCENTIVE AVERAGES
$31.98
Class A annual escalation
21.1%
6.0%
13.2%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$35.00/$20.00
TI allowance ($ p.s.f.)**
4
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Becker & Poliakoff
1 East Broward Boulevard
46,600 s.f.
Relocation
Boies Schiller & Flexner
401 East Las Olas Boulevard
22,500 s.f.
Renewal with expansion
Arnstein & Lehr
200 East Las Olas Boulevard
17,900 s.f.
Renewal with expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Greenspoon Marder
50,000
Lewis Brisbois
15,000
Kelley/Uustal Law
12,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
1
8/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Occupancy in the Trophy Class A office market downtown continues to rise and
asking rents should rise accordingly.
• Options for large firms in Class A assets are dwindling.
• The absence of new construction Downtown will accelerate the shift in conditions if
the market continues at its current pace.
Opportunities for law firms
• Boutique firms, which comprise the majority of the market’s users, will continue to
have plenty of options priced at a discount.
• Due to many landlords’ preference to retain occupancy in a slowly improving local
economy, renewal terms will be favorable.
• Tenant incentives remain high, particularly for properties along
Broward Boulevard.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
23 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Houston
Locational preference: Houston law firms are found mostly in the CBD submarket. They are concentrated in Class A
buildings with some of the most expensive rental rates in the city. Because of the lack of vacancy downtown, if law firms were to move they
would consider moving to Midtown, Greenway Plaza and Galleria submarkets into new and proposed buildings with high-end finishes.
16.0%
2.2%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
The Houston office market continues to grow, largely in part due to the impact of
the strength of the energy sector on the local economy. For this reason, tenants,
especially energy-related law firms, are drawn to Houston, making space options
scarcer. In the CBD, the vacancy rate for Class A space is currently at 9.2 percent,
supporting evidence for the reality that large blocks are tough to piece together.
As a result of this, when looking at law firm activity, most firms have been forced
to renew their leases rather than relocate to new space. Similarly, even in renewal
negotiations, landlords currently have the upper hand in the market and are able
to increase asking rates across the board. Expect this to be the case for the next
several quarters until the market supply can meet the needs of high-end tenants.
27
45
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
BakerHostetler
811 Main Street
75,737 s.f.
Relocation
Linn Thurber
3555 Timmons Lane
30,637 s.f.
Renewal
While options for Class A space downtown are very limited, there are a number of
proposed buildings and new projects that could potentially draw some of the law
firms away from the CBD. These include BLVD Place in The Galleria, Kirby Grove in
Greenway Plaza and CityCentre Five in The Energy Corridor.
Strasburger
909 Fannin
28,226 s.f.
Expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Gardere
PRICING AND INCENTIVE AVERAGES
$39.20
Class A annual escalation
5.0%
4.0%
20.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$50.00/$35.00
TI allowance ($ p.s.f.)**
Akin Gump
75,000
FosterQuan
21,572
OUTLOOK
$0.50
Class A asking rent ($ p.s.f)
100,000
4/2
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• CBD vacancy is currently very low, making it difficult to expand or relocate to large
blocks in Class A buildings.
• With limited availability, rents will continue to increase, especially in A+ buildings.
• Firms must be willing to commit to longer leases than they may desire in order to
gain a more competitive rent on space.
Opportunities for law firms
• West Houston development remains strong, offering an alternative to the innerloop locations and access to a growing number of energy firms in that area.
• With development of the Grand Parkway, future projects are being proposed
farther outside of CBD, which could mean a cheaper cost for firms looking to
move outward.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
24 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Indianapolis
Locational preference: The majority of law firms are located in the CBD submarket of Indianapolis. Trophy buildings with
high-class amenities and finishes attract law firms to the CBD as does the proximity to the state capitol.
14.3%
1.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Leasing activity remained high as Indianapolis’ largest law firms have largely opted
to renew on existing, second-generation spaces. Firms occupying more than 50,000
square feet, such as Ice Miller and Bingham Greenebaum Doll, signed renewals at
the beginning of the year. These firms are in good company as a total of 20 leases
were inked in the year by law firms like those and Krieg DeVault and Frank & Kraft.
8
PRICING AND INCENTIVE AVERAGES
$26.00
2013 LAW FIRM COMPLETED TRANSACTIONS
Ice Miller
1 American Square
127,883 s.f.
Renewal with contraction
Class A annual escalation
20.0%
7.5%
30.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$50.00
TI allowance ($ p.s.f.)**
Bose McKinney & Evans
111 Monument Circle
111,372 s.f.
Renewal with contraction
Bingham Greenebaum Doll
10 W Market Street
70,000 s.f.
Renewal with contraction
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Wooden & McLaughlin
25,000
Tucker Hester
5,000
Pollack Law Firm
4,000
OUTLOOK
2.8%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
Larger firms are in the midst of strategic hiring and reorganizing their operations and
landlords are eager to work with these firms, especially those that sign long-term
leases. In 2013, large firms renewed for lease periods ranging from 10 to upward of
17 years, while smaller law firms, for the most part, signed five-year leases.
Typically, Indianapolis firms have a variety of practice groups; however, the
greatest momentum comes from energy and government practice. Also, as the local
technology sector takes off, firms are adding intellectual property lawyers to the mix.
To accommodate growing practices, speculative construction returned to the market
in 2013 with the addition of a 24,000-square-foot building in the CBD submarket
and an 81,000-square-foot building in the Keystone submarket. Other development
projects are on the horizon in 2014 and will provide greater options for law
firms ahead.
4
10/7
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Supply constraints, especially among large blocks in Class A buildings in the CBD,
will prompt premium rents.
• In Trophy properties in the CBD, even mid-sized firms will encounter limited options.
Opportunities for law firms
• Amenity enhancements in the CBD such as revitalization projects, multifamily
housing developments and new parking garages will entice the millennial
associate that desires close proximity to the office.
• Favorable economic and employment growth in office-using sectors may create
the potential for new practice groups.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
25 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Los Angeles
Locational preference: Los Angeles law firms are concentrated in the Downtown CBD near the courthouses. Specialized
practice groups catering to entertainment and media companies are located close to their clients on the Westside in the Century City
submarket. Moving ahead, some law firm tenants will elect to be closer to tech and entertainment clients and thus will migrate to more nontraditional low rises in Santa Monica and Playa Vista.
21.9% 21.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
We continue to see Los Angeles law firms playing musical chairs with a market
driven by cost-saving opportunities. Los Angeles remains a tenant-favorable
market and owners have been offering generous rents and concessions to attract
larger tenants. Blank and Rome relocated within Century City from Watt Plaza to
the Century Park Towers. Additionally, CohnReznick consolidated their Westside
operations, combining their Brentwood and Century City offices and moving into
the Towers.
41
PRICING AND INCENTIVE AVERAGES
$41.99
2013 LAW FIRM COMPLETED TRANSACTIONS
Bowman and Brooke
970 West 190th Street
36,703 s.f.
Relocation
Blank Rome
2029 Century Park East
25,723 s.f.
Relocation
Class A annual escalation
4.4%
20.5%
37.3%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$55.00/$37.00
TI allowance ($ p.s.f.)**
Barnes & Thornburg
2049 Century Park E
25,273 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Sidley Austin
250,000
Nixon Peabody
75,000
White & Case
50,000
OUTLOOK
4.0%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
We also witnessed a few new entrants to the Los Angeles market. Barnes and
Thornburg signed a new lease at 2049 Century Park East. The firm has been adding
headcount nationwide and chose to expand its presence in Southern California by
opening an office in Century City at 2049 Century Park East. Philadelphia-based
Pepper Hamilton also opened a new office in the Los Angeles CBD at
350 S Grand Avenue.
The Century City and Downtown Los Angeles markets have high vacancy and a
large number of available blocks of space. Changing ownership partners in both
markets will infuse cash to fund improvements as well renewed competition for toptier tenants in the market.
69
10/10
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• CBD Class A ownership consolidation is leading to sizable market share likely to
lead to high rents.
• Increasing residential rents in the CBD are making it more expensive for new
associates to locate close to work.
• CBD and Century City parking remain some of the most expensive in the Los
Angeles market.
Opportunities for law firms
• Large near-term Westside lease expiration creating short-term leverage for law
firms looking at early renewals.
• Concession packages have increased to all-time highs.
• Robust media and entertainment sector performance, coupled with new
technology entrants from Silicon Valley, are creating opportunities for specialized
practice groups.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
26 Law Firm Perspective • United States • 2013
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Table of contents
Miami
Locational preference: Miami’s CBD is comprised of two submarkets, Brickell and Downtown. The majority (57.3 percent
of Class A law firm users) occupy space within the Downtown sector of the urban core. Law firm requirements presently comprise over
420,000 square feet throughout Miami. Of this, nearly 384,000 square feet or 90.0 percent are designated for the CBD.
21.0% 19.5%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Over the last two years, mega deals (40,000 square feet plus) throughout Miami
reveal a diversified office base with the majority of companies preferring suburban
settings. Among the largest law firms, however, the urban core remains the location
of choice as the CBD captured all of the leases within this size category. Florida’s
top five law firms each have a CBD Trophy address. Congregating among like
users, all but one of this year’s top law firm transactions were either CBD renewals
or relocations from within the CBD.
6
PRICING AND INCENTIVE AVERAGES
$40.46
2013 LAW FIRM COMPLETED TRANSACTIONS
Fowler White Burnett
1395 Brickell Avenue
30,000 s.f.
Renewal with contraction
Weil
1395 Brickell Avenue
24,000 s.f.
Renewal
Class A annual escalation
10.0%
4.5%
25.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$55.00/$55.00
TI allowance ($ p.s.f.)**
Gunster
600 Brickell Avenue
21,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Shutts & Bowen
80,000
White & Case
60,000
GrayRobinson
35,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
Size still matters and tenant-favorable conditions persist for the crème of the crop
users who can choose premium space from new construction as well as secondgeneration options. Downsizing of office space needs does not necessarily mean
downsizing of staff. Rightsizing or efficiencies due to space design and rapidly
changing technology have allowed space for more employees. Most core and new
business law practice areas here are either stable or growing.
National law firms establishing a Miami foothold are strengthening and underscored
by new-to-market users and acquisitions/mergers/new law firm formations. What
is different is the relatively high ratio and swelling presence of AmLaw 200 firms.
A variety of demand factors is at play fueled by the significant and rewarding
opportunity for capturing international business, especially from Latin America.
20
7/7
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Contiguous Trophy space with prime views is limited.
• Concessions continue to whittle down for both new and renewal activity.
Opportunities for law firms
• While pricing is shifting, overall levels remain favorable and are on par with rents
nearly seven years ago.
• Tenant improvement allowance offers, particularly for the newest buildings,
remain high, compared to historic norms.
• New assets/upgrades from existing product offer greater efficiencies, upgraded
finishes and increased amenities.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
27 Law Firm Perspective • United States • 2013
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Table of contents
Milwaukee
Locational preference: The majority of law firms are located in the CBD, particularly in the downtown east submarket
where Trophy and Class A buildings are located. While firms will likely stay within the CBD market, there may be a push to move to the
downtown west area, as a new development has commenced there with an estimated completion date of May 2015.
21.1%
8.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Milwaukee’s office market is experiencing a gradual tightening in tenant demand as
leasing velocity has increased over the past year with users being more receptive to
relocation than in the past four years. Law firms are using this opportunity for interior
redesign such as smaller partner offices, the elimination of libraries, increased ratio
of administrative support per attorney and the gradual movement toward electronic
file storage. The new standards can result in a footprint reduction in excess of 15.0
to 20.0 percent in certain situations in which firms have occupied current space for
20 years without redesign.
7
1
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Michael Best & Friedrich
100 E. Wisconsin
89,725 s.f.
Renewal
Given improving economic conditions, firms are also taking the opportunity to
upgrade their space. Local law firms have benefitted over the past five years from
weaker market conditions by way of landlord concessions including rent abatement,
increased tenant improvement allowances, moving allowances, aggressive lease
rates and the ability to utilize a portion of unused tenant improvement allowances for
soft costs such as technology and furniture upgrades. Milwaukee’s tightening market
conditions have allowed some landlords to begin reducing and/or eliminating these
concessions and as such space efficiency is a primary goal for many local law firms.
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$24.75
Class A annual escalation
22.0%
11.0%
65.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$35.00/$25.00
TI allowance ($ p.s.f.)**
90,000
Davis & Kuelthau
9,000
Pitman Kyle Sicula & Dentice
9,000
OUTLOOK
2.3%
Class A asking rent ($ p.s.f)
Godfrey & Kahn
6/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Quality, large blocks of space are nonexistent.
• Godfrey & Kahn has signed LOI to anchor only proposed new office tower, limiting
new options.
• Market is gradually shifting in favor of landlords and thus firms should expect a
reduction in concessions.
Opportunities for law firms
• Law firms with lease expirations in the next two years should consider a blend
and extend now to lock in rates.
• Firms in excess of 75,000 square feet have the ability to anchor a new
office tower.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
28 Law Firm Perspective • United States • 2013
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Table of contents
Minneapolis
Locational preference: The Twin Cities’ major law firms are concentrated in the Minneapolis central business district,
including the majority of law firms occupying 50,000 square feet or more of space. The central business district is home to the Hennepin
County courthouse and is the business epicenter of the Twin Cities.
17.8% 32.1%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firms occupy more than 2.7 million square feet of space in the Minneapolis
CBD, the predominant location among this tenant sector in the Twin Cities. Multiple
law firms entered the Minneapolis market in 2013 (including Cozen O’Connor,
Hogan Lovells and Dykema Gossett) and additional firms with a national presence
are looking to establish Minneapolis offices, an indication of increasing business
opportunities locally. The improving economic landscape is also creating mobility.
Local attorneys are changing firms with more frequency as some firms look to
expand their practice areas.
Despite the increased drive for space efficiency by tenants, including multiple law
firms, landlords have become more bullish in lease deal negotiations. A lack of
large quality options, new ownership in multiple Trophy buildings and increased
confidence for sustained job growth have helped fuel the optimism and landlords
have begun to press on asking rates in multiple Trophy office properties. In
response, value-driven tenants have begun to increasingly consider mid-tier Class
A and Class B buildings with lower asking rates and more available space options.
Illustrating this are lease deals recently struck by Moss & Barnett and Fabyanske,
Westra, Hart & Thomson. Both firms are relocating to lower-priced Class A buildings
within the Minneapolis CBD. However, since options are scarce for users of more
than 100,000 square feet, renewals are the most likely scenario for the larger law
firms with upcoming expirations.
PRICING AND INCENTIVE AVERAGES
$29.81
Class A annual escalation
10.0%
10.0%
40.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$44.00/$25.00
TI allowance ($ p.s.f.)**
6
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Gray Plant Mooty
80 South 8th Street
109,000 s.f.
Renewal
Foley & Mansfield
250 Marquette Avenue
45,000 s.f.
Renewal with contraction
Moss & Barnett
150 South 5th Street
40,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Dorsey
250,000
Briggs & Morgan
100,000
Lindquist & Vennum
100,000
OUTLOOK
$0.50
Class A asking rent ($ p.s.f)
16
7/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• A number of Trophy properties have sold in recent quarters and landlords are
pressing on rents to achieve pro-formas.
• The Minneapolis CBD has seen no new Class A construction since 2001.
• Multiple large law firms with lease expirations coming in the next few years will
heighten competition for space.
Opportunities for law firms
• While options remain limited, recent consolidations, relocations and subleases
have increased the number of potential options larger than 50,000 square feet.
• Multiple options remain for active users with requirements of less than 50,000
square feet.
• Mid-tier Class A buildings with lower rents and some larger availabilities provide
additional options for firms.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
29 Law Firm Perspective • United States • 2013
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Table of contents
New Jersey
Locational preference: The Newark, Route 280 Corridor and Route 24 submarkets contain the largest concentration of
law firms in New Jersey. Law firms have historically located their operations in these submarkets due to their proximity to federal and county
courts. Submarkets with Class A buildings near major highways or accessible via transit hubs will remain on the radar screen for law firms.
3.1%
9.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
After New Jersey law firms completed more than 200,000 square feet of
transactions during the first half of 2012, moderating demand led to approximately
140,000 square feet leased during the same time frame one year later. Much of
the recent activity has involved relocations rather than expanding requirements as
law firms mirror other business sectors by focusing their efforts on utilizing their
workspaces more efficiently, while reducing operating expenses. The evolving trend
of smaller offices and collaborative workspaces are anticipated to guide future law
firm real estate requirements.
A large portion of the leases signed by law firms during the first half of the year was
focused in the Route 24 submarket, where law firms occupy more than 740,600
square feet of office space. The availability of high-end office space, combined
with its strategic location in proximity to several major highways, have historically
attracted law firms and other corporate occupiers to this submarket. During the first
half of 2013, Drinker Biddle relocated its operations from 500 Campus Drive and into
60,000 square feet at 600 Campus Drive. In addition, Edwards Wildman moved from
1 Giralda Farms and into 22,180 square feet at 44 Whippany Road, while DLA Piper
absorbed 22,000 square feet at 51 JFK Parkway in Short Hills.
20
17
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Drinker Biddle
600 Campus Drive
60,000 s.f.
Relocation
Edwards Wildman
44 Whippany Road
22,180 s.f.
Relocation
DLA Piper
51 JFK Parkway
22,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Wolff & Samson
PRICING AND INCENTIVE AVERAGES
$27.00
Class A annual escalation
13.0%
8.0%
16.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$35.00/$23.00
TI allowance ($ p.s.f.)**
Sills Cummis & Gross
80,000
Connell Foley
70,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
100,000
3/3
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Firms face an aging suburban office market with many buildings having been
developed in the 1980s.
• There are limited existing high-end quality space options for firms looking to
upgrade their operational needs.
Opportunities for law firms
• Financially favorable leasing opportunities for credit tenants.
• Opportunities exist to lease space at Gateway Center in Newark following
Prudential’s decision to relocate its operations into a new tower by 2015.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
30 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
New York
Locational preference: Firms gravitate to newer Trophy/A buildings within the Columbus Circle, Grand Central, Plaza
District and Times Square in Midtown and the Financial District Downtown. Though large blocks of Class A space are becoming available
Downtown at a significant discount to comparable Midtown space, most firms have remained in the Grand Central and Plaza Districts. The
westward migration appears to have slowed down, until large blocks of Class A space in the under-construction Hudson Yards begin to hit the
market in 2015 and beyond.
11.4% 12.5%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Stagnant employment growth in legal services, increased consolidation and
improving space efficiencies, have resulted in overall negative absorption for the
industry. In June, the New York-based law firm Weil Gotshal announced that it would
eliminate 60 salaried attorneys and 110 staff as the result of diminished demand for
high-end legal services. The firm is just one of the many that have announced either
layoffs or scaled-back recruiting efforts.
125
PRICING AND INCENTIVE AVERAGES
$74.26
2013 LAW FIRM COMPLETED TRANSACTIONS
Simpson Thacher
425 Lexington Avenue
595,799 s.f.
Renewal
Patterson Belknap
1133 Avenue of the Americas
198,000 s.f.
Renewal
Class A annual escalation
15.0%
13.4%
20.1%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$56.00/$27.00
TI allowance ($ p.s.f.)**
Baker Botts
30 Rockefeller Plaza
104,161 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Weil Gotshal
500,000
Jones Day
400,000
White & Case
400,000
OUTLOOK
1.6%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
As in the past, many law firms are opting to stay in place to avert significant
relocation costs. Equally important, landlords have been reluctant to risk down-time
and re-tenanting expenditures in a flat market. Simpson Thacher renewed for nearly
600,000 square feet at 425 Lexington Avenue in the largest law firm lease of the
year. Of the top four law firm lease transactions year-to-date, all were renewals.
When firms haves chosen to move in recent years, many have migrated to the west
side of Midtown—for more efficient, large block availabilities in new construction—
and in some cases downtown for higher-quality space at a discount to comparable
spaces in Midtown.
Over the next year, mergers and acquisitions could further erode the industry’s total
footprint. Growth—where it exists—has been in small to medium-sized firms, nonNew York-based firms and those specializing in the legal needs of technology and
media companies. These law firms have different space needs than Manhattan’s
more traditional firms with many opting for value spaces in less conventional
buildings or locations outside Midtown’s Trophy inventory.
96
7/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Value options will become limited as demand from other industries, including
technology and media, increases.
• Rents in top-tier Trophy buildings have increased as demand from hedge funds,
private equity and wealth management expands.
• Limited new construction on the east side of Midtown could force some firms to
move outside of traditional submarkets.
Opportunities for law firms
• Landlords are eager to avoid the risk of down-time and cost of re-tenanting in a
flat market.
• New construction in the Far West Side and Downtown will increase
viable options.
• The potential rezoning of the area surrounding Grand Central Terminal and
Park Avenue would provide for new development in a law firm-concentrated
submarket.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
31 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Oakland-East Bay
Locational preference: The majority of law firms are located between Eleventh Street and Sixteenth Street in downtown
Oakland. Law firms are attracted to top-floor space in a select few Class A buildings for the views of the San Francisco Bay. Also, law firms
are concentrated by two BART stations, either 12th Street-City Center or 19th Street station.
8.0%
5.1%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Most law firms practice litigation law with an emphasis in employment, labor,
benefits and mediation disputes within the East Bay. Additionally, there are a few
firms that specialize in the area of construction and commercial law as well as
criminal. The downtown Oakland market, where nearly all firms have congregated
historically, remains in a transitional period causing a majority of law firms to follow
one of two trends: downsizing or relocation to another market.
1
0
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Burnham Brown
1901 Harrison Street
39,321 s.f.
Renewal
Gordon & Rees
1111 Broadway
24,134 s.f.
Relocation
Leasing activity is picking up in Class A buildings, causing an increase in rental
rates and depletion in available large blocks of space, but many law firms are
downsizing in response to cost concerns and perceived lack of amenities. This is
also feeding into the trend of relocation to the East Bay. Law firms are looking to
East Bay suburbs where rental rates for desirable Class A space are lower and
BART is still easily accessible. Additionally, some law firms are consolidating into
one office location, moving out of their Oakland office and consolidating in either
San Francisco or the East Bay suburbs.
Katten
1999 Harrison Street
9,097 s.f.
Renewal with contraction
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$33.96
Class A annual escalation
8.0%
4.0%
20.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$30.00/$15.00
TI allowance ($ p.s.f.)**
11,000
AAA-Law Group
10,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Aiken & Welch
3/1
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Quality blocks of space are depleting and no new construction is on the horizon.
• The market is still in transition and there is a lack of desirable amenities.
Opportunities for law firms
• Relatively affordable compared with other Bay Area markets.
• Downsizing among certain tenant industries provides firms with additional
space opportunities.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
32 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Orange County
Locational preference: Seeking the highest-quality office space, Orange County’s most prominent law firms are
typically located in Newport Beach, Central Irvine and the towers in Costa Mesa surrounding South Coast Plaza. Although there is currently
minimal availability, South County’s Irvine Spectrum area has become one of the more popular areas of the market. The submarket has an
abundance of amenities in close proximity and is easily accessible to the residential neighborhoods in South County and Airport Area.
10.0%
4.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
A year ago, the nature of Orange County’s law firm leasing activity was quite
different than what it is now in 2013. In 2012, many firms were still shedding excess
space as a result of staffing cutbacks, while others were attempting to renegotiate
existing leases to take advantage of the market rent discounts. Rightsizing
continues to take place among Orange County’s law firm tenants, although not on
the scale that was so common in the post-recession period between 2009 and 2012.
9
18
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Newmeyer & Dillion
895 Dove Street
53,036 s.f.
Renewal
Lewis Brisbois
650 Town Center Drive
35,552 s.f.
Renewal
Competition for space among law firms is poised to increase in the next year as
the amount of full floors in Class A towers in the Airport Area market is dwindling.
However, comparable options in Central County’s Class A market are still plentiful
and will become an alternative to law firms that are unwilling to pay a soon-to-be
premium for locations in Irvine, Costa Mesa and Newport Beach. It is highly unlikely
that the level of demand from the Orange County law firm sector will spark any
new construction in the near future. Law firms will find more competition from the
county’s other industries, like financial services and technology firms, which are
expected to be drivers of activity into 2014 and 2015.
Manatt Phelps
695 Town Center Drive
19,886 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$25.99
Class A annual escalation
25.0%
13.5%
25.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$45.00/$20.00
TI allowance ($ p.s.f.)**
50,000
Haynes and Boone
26,000
Sedgwick
15,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Sheppard Mullin
10/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Evaporating options in high-quality office towers located in the popular submarkets.
• With growing demand for quality space in Irvine Spectrum and Newport Beach,
whispers of speculative construction are becoming more common.
• Sharp increase for Class A rents is expected, particularly in Irvine Companyowned towers.
Opportunities for law firms
• Options for Class A space in Central County are still prevalent, holding back
rent increases.
• Although tenant demand is growing, rental rates remain low relative to
historical peaks.
• Landlords of Class A office buildings, outside of the Irvine Company portfolio,
remain aggressive in hopes of filling vacancies.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
33 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Orlando
Locational preference: Most law firms are located in the downtown CBD due to the proximity to the Orange County
Courthouse and epicenter for recruiting/retaining talent and ability to network with other local business leaders who may office or visit
downtown frequently. Smaller firms may elect to relocate to suburban markets such as Maitland Center, Millenia, Tourist Corridor and Lake
Mary to avoid higher downtown rents and increasing parking charges. Firms focused on reducing occupancy costs and improving firm
profitability may find value in these suburban markets.
18.2%
9.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firms in Orlando remain in the central business district as has been customary,
but will face challenges staying in downtown if new construction does not take
place. With large blocks of contiguous space becoming scarcer, build-to-suit options
appear to be the next best option for this industry as there has not been a migration
from the higher-quality, Class A space. Currently, there are no plans for construction
downtown, but as market fundamentals return near their historic averages, look
for a developer to take the risk of speculative construction. With the rumors of new
construction becoming a possible reality in the near future, law firms who are looking
to move from their current space are signing two- to three-year renewals with the
hopes that a new tower will be available at the conclusion of the renewal.
5
3
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
GrayRobinson
301 East Pine
70,000 s.f.
Renewal
Foley
111 N Orange Avenue
34,989 s.f.
Relocation
The market conditions for negotiating new leases moving forward are not ideal for
the tenants. Leverage during lease negotiations has been on the side of the tenant
for the past four years, but will be shifting back to the landlord due to vacancy
decreasing in the Class A product set by 17.1 percent, year-over-year. We expect for
law firm activity to increase through the latter half of the year due to rising rents and
concession packages that are decreasing.
Baker Donelson
200 S Orange Avenue
23,496 s.f.
New deal to the market
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$24.90
Class A annual escalation
5.0%
10.0%
20.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$8.00
TI allowance ($ p.s.f.)**
40,000
Greenspoon Marder
15,000
Winderweedle
15,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
KEL
15/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Shrinking availability of large blocks of Class A space.
• Concession packages are decreasing.
• The availability of low-cost parking alternatives is decreasing.
Opportunities for law firms
• Tenants still have negotiation leverage downtown although market fundamentals
are tightening.
• Proposed new-development opportunities offer higher visibility options for firms
interested in improving image.
• Early lease restructure opportunities may still exist for reputable firms with longterm perspective.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
34 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Palo Alto
Locational preference: The majority of firms in Silicon Valley are located in Palo Alto within the Stanford Research Park.
The area has had a long history of having the highest concentration of law firms given the proximity to Stanford University and venture capital
companies on Sand Hill Road in Menlo Park. Given tight market conditions in Palo Alto, law firm tenants will likely look to Menlo Park as a
potential relocation option.
44.2%
9.1%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Over the past 12 months the demand for law firm space has begun to increase.
Some firms with upcoming lease expirations are following trends in the tech sector,
as they look to upgrade their image to newer office product that offers greater space
efficiency. Although it appears that most firms are neither growing nor contracting
from a rentable square feet perspective, the usage of the space has evolved.
Palo Alto continues to be the most demanded submarket for law firm tenants.
However, the lack of suitable space options, combined with the continued rise of
asking prices and an aging office inventory, has created challenging conditions. The
game of musical chairs continues to be an ongoing trend, with tenants relocating
and reconfiguring into buildings formerly occupied by another firm. With very little
turnover in space in Palo Alto, tenants looking for more than 30,000 square feet
are considering proposed construction. Although there is approximately 1.2 million
square feet of proposed office space currently under review by Palo Alto city
planning, public concerns over parking shortages as well as traffic implications have
slowed the approval process. There is 87,000 square feet that could potentially
come out of the ground in Research Park by the first quarter of 2014; however, there
are rumors that several firms are already actively negotiating on the entire project.
6
27
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Wilson Sonsini
601 California Avenue
111,653 s.f.
Renewal
Simpson Thacher
2475 Hanover Street
83,982 s.f.
Relocation
Pillsbury
2550 Hanover Street
80,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Fenwick & West
PRICING AND INCENTIVE AVERAGES
$86.76
Class A annual escalation
10.0%
5.0%
15.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$30.00/$10.00
TI allowance ($ p.s.f.)**
Morrison Foerster
90,000
Morgan Lewis
50,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
160,000
5/3
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Shortage of quality blocks of Class A space leaves few options, especially for
larger firms.
• Rents continue to rise for both new and second-generation space.
• Increased competition with expanding near-term lease expirations and new firms to
the market.
Opportunities for law firms
• Future speculative development could ease some supply constraints.
• Several tenants in Palo Alto with upcoming lease rollovers could potentially place
some quality space on the market.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
35 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Philadelphia
Locational preference: The majority of Philadelphia’s law firms are located in the CBD’s Market Street West submarket.
This location provides easy access to abundant amenities and immediate proximity to the city’s concentration of professional services
companies. Despite upward rental pressure at Trophy product and limited availability of contiguous blocks, Market Street West will remain the
core location for law firms.
20.2%
8.7%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Following the highest volume of large law firm transactions in more than 15 years
in 2012, renewals by Pepper Hamilton and Drinker Biddle in the first half of 2013
finalized near-term, large firm rollover, shifting demand to mid-sized firms in the
Philadelphia CBD. Amidst no available Trophy blocks larger than 100,000 square
feet and rents 25.0 percent below replacement cost rents, both firms opted to renew:
Pepper Hamilton renewed in place and Drinker Biddle will reduce its footprint by
25.0 percent. While law firms continue to look at increasing space efficiency, less
than 20.0 percent of transactions entailed rightsizing—a cross sector shift exhibited
in 2013 deal flow thus far.
While alternatives exist across desirable Trophy and Class A assets, growing
competition from mid-sized legal and financial services tenants will drive the decline
of quality blocks, a catalyst for decreased tenant leverage and future Market Street
West rent growth. Pond LeHocky, Hangley Aronchick and Weber Gallagher—all
between 30,000 and 60,000 square feet—are currently in the market for space.
These users additionally face competition from new users to the market: Law firms
Gordon & Rees and Carroll McNulty secured new offices between 10,000 and
20,000 square feet at Trophy assets.
PRICING AND INCENTIVE AVERAGES
$27.43
Class A annual escalation
20.3%
10.0%
11.4%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$25.00
TI allowance ($ p.s.f.)**
16
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Pepper Hamilton
Two Logan Square
268,000 s.f.
Renewal
Drinker Biddle
One Logan Square
155,000 s.f.
Renewal with contraction
Akin Gump
Two Commerce Square
18,000 s.f.
Renewal with expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Pond LeHocky
60,000
Hangley Aronchick
40,000
Weber Gallagher
33,000
OUTLOOK
$0.50
Class A asking rent ($ p.s.f)
23
6/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Stabilized Trophy and Class A landlords are pushing rents for quality availabilities.
• Competition is growing for mid-sized quality blocks of space, between 25,000 and
50,000 square feet.
• Inbound demand is spurring increased competition for space.
Opportunities for law firms
• Pending large tenant leasing decisions could increase Trophy availability,
softening concessions in the short term.
• Repositioned Class A assets will bring new alternatives to market.
• Availabilities for small-sized law firms, less than 10,000 square feet,
remain abundant.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
36 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Phoenix
Locational preference: The majority of law firms are located in the Downtown and Midtown submarkets of Phoenix. Firms
have historically chosen these locations due to the proximity to courthouses, major highways and Sky Harbor International Airport. As the best
spaces are leased, law firms are beginning to explore locations outside of the Phoenix Core. Submarkets such as the Camelback Corridor
and Scottsdale area provide high-end options and amenities, while maintaining proximity to key transportation, legal and executive
housing hubs.
10.5%
2.3%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Echoing what is being seen in markets across the country, Phoenix’s legal
landscape is in a state of pause. Outright growth in the industry – especially in this
secondary market – has slowed to a crawl thanks to the commoditization of services
and fee compression. Furthermore, because of systemic improvements in space
utilization, increased attorney-to-secretary ratios and the digitization and elimination
of onsite records and libraries, the number and size of tenant requirements have
continued to contract.
15
PRICING AND INCENTIVE AVERAGES
$22.84
2013 LAW FIRM COMPLETED TRANSACTIONS
Quarles & Brady
2 N Central Avenue
105,000 s.f.
Renewal with contraction
Lewis & Roca 201 Washington
73,878 s.f.
Relocation with contraction
Class A annual escalation
10.0%
15.0%
15.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$50.00/$25.00
TI allowance ($ p.s.f.)**
Dickinson Wright/Mariscal Weeks
1850 N Central Avenue - Viad Tower
50,119 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Jones Skelton & Hochuli
50,000
Renaud Cook
25,000
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
Though a few notable deals have made headlines over the last year like Quarles &
Brady (120,000 square feet), Lewis & Roca (73,000 square feet), Osborn Maledon
(65,000 square feet) and Dickinson Wright/Mariscal Weeks (50,000 square feet), the
majority of larger firms in Phoenix made moves in 2010 to 2011 when market rents
bottomed and viable Class A space options were more prevalent. Since then, the
number of legal tenant requirements has fallen dramatically and today only make up
2.5 percent of total tenants in the market.
Despite this, tenants looking in the Downtown market should act fast as overall
vacancy is hovering around 15.0 percent – one of the lowest rates in all of Phoenix.
Expect Midtown and the Camelback Corridor to capitalize on the tightness and rent
premium seen in the CBD, though current demand from law firms is stagnant.
12
12/9
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• As the market picks up, landlords are less willing to hold space for firms wishing to
lease space years in advance of their expiration.
• Quality space is thinning and limited construction means firms will be relegated to
second-generation space.
• Rents are expected to increase as concession packages wane in this
tightening market.
Opportunities for law firms
• Rightsizing years have left the market with multiple space options already built
out to law firm specifications.
• High vacancy in traditional law firm markets like Downtown and Midtown means
increased opportunities for concessions.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
37 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Pittsburgh
Locational preference: The majority of Pittsburgh law firms are located downtown along Grant Street and Liberty Avenue.
Of the top 31 Pittsburgh law firms, all but two are located here because of access to the region’s courthouses, government agencies and
corporate headquarters. Additionally, over 65.0 percent of firms gravitated to Trophy and prime Class A buildings. Future movement of law
firms will be to one of the office developments in the Downtown pipeline, including The Gardens or North Shore Place.
12.8% 20.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Pittsburgh law firm real estate activity was subdued this past year as tight market
conditions provided few relocation options for tenants in the market. Due to the lack
of available Class A space, market activity consisted of mostly renewals. Dickie,
Mccamey & Chilcote renewed 105,000 square feet in Two PPG Place. Leech
Tishman decided to stay put at Three Mellon Center, expanding from 23,000 square
feet to 47,000 square feet. Finally, newcomers Saul Ewing leased 12,000 square
feet in One PPG Place.
While activity within the market was minimal over the last year, many local firms
continued to grow their presence outside of the Pittsburgh market. Jones Day
opened its first office in Florida, while Dickie, Mccamey & Chilcote opened offices
in Cleveland, OH, and Lancaster, SC. On the West Coast, Pittsburgh firm Leech
Tishman opened an office in Pasadena, CA. The Marcellus shale industry has
no doubt had a significant impact on the region’s economy and legal sector, in
particular. We expect to see continued growth in the arena as local firms add
staff in order to accommodate increased work levels as well as a continued influx
of natural gas companies as well as secondary suppliers concentrating on the
growing Pittsburgh energy sector. Of the six law firms that entered southwestern
Pennsylvania between December 2011 and July 2012, officials stated that the
Marcellus shale activity triggered all of these moves. Examples include Houstonbased national firm Sadler Law and DC-based Steptoe & Johnson, both opening
their doors in 2011.
PRICING AND INCENTIVE AVERAGES
$27.43
9
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Dickie Mccamey & Chilcote
2 PPG Place
105,000 s.f.
Renewal
Leech Tishman
525 William Penn Place
47,000 s.f.
Expansion
Saul Ewing
1 PPG Place
12,000 s.f.
New deal to the market
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Eckert Seamans
100,000
Fox Rothschild
30,000
Edgar Synder
27,000
OUTLOOK
2.0%
Class A asking rent ($ p.s.f)
11
Class A annual escalation
20.0%
15..0%
15.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
Challenges for law firms
• There is a lack of large blocks of quality space in the market.
• Rents are increasing and concessions packages are thinning due to tightening
market conditions.
Opportunities for law firms
• Growth in the shale sector provides opportunities for firms to grow.
• Completion of recent developments to provide additional space.
*rent difference from Class A average
$30.00/$15.00
TI allowance ($ p.s.f.)**
2/4
Free rent (months)**
**averages on 10-year new/renewal transactions
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
38 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Portland
Locational preference: The majority of law firms are located in the CBD of Portland. Firms gravitate toward the north end
of SW where there are more restaurants, bars and other amenities. There have been a few firms that have moved farther west and north to
the Pearl District and the west end of town where most new development has happened.
12.7%
9.5%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Portland remains a tertiary market for major national law firms, but interest in a city
presence is rising as the number of local outposts of the AmLaw 100 continues to
increase and grow in size. This has largely been at the expense of top homegrown
firms, who have seen small groups of partners defect to help expand these offices or
set up smaller boutique shops.
6
PRICING AND INCENTIVE AVERAGES
$27.03
2013 LAW FIRM COMPLETED TRANSACTIONS
Ball Janik
101 SW Main Street
41,750 s.f.
Renewal
Class A annual escalation
7.0%
1.5%
15.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$55.00/40.00
TI allowance ($ p.s.f.)**
K&L Gates
1 SW Columbia Street
21,179 s.f.
Relocation
Harrang Long Gary Rudnick
1001 SW 5th Avenue 16,221 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Stoel Rives
130,000
Perkins Coie
70,000
Barran Liebman
16,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
In Portland, leverage, motivation and strategy will be different for local versus
regional / national firms and for firms with a smaller versus a larger footprint. With
only one firm occupying more than 100,000 square feet across the area, the large
blocks of space discussion can be fairly brief: there are limited options and demand
for space is shallow. Leverage for larger firms (larger than 50,000 square feet) can
really only be enhanced by looking at new development. In doing so, a law firm may
secure a significantly higher build-out allowance and more free rent, but they will
need to pay a higher rental rate and bear the cost of a move.
Mid-sized firms, who also happen to include many of the increasing number of
local outposts of the AmLaw 100, are pushing the modernization trend seen in the
area. After several years of limited hiring and the aging partner population, firms
are looking to the future, recognizing the need to appeal to a younger demographic
to compete in their recruiting and retention strategies. Adding teaming spaces,
enhanced onsite amenities and more social areas are the most common
space enhancements.
8
8/6
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Limited large blocks of space will significantly reduce leverage.
• Speculative construction remains remote, further tightening the market and
limiting options.
• Local firms have limited capital to fund significant tenant improvements, making
renewals more likely.
Opportunities for law firms
• Mid-sized firms continue to have options to consider and may be able to take
advantage of full floors vacated by righsizing firms.
• Large firm could anchor new development, securing significant concessions and
exercising influence on design.
• Competition in the marketplace is limited by a finite number of near-term
lease expirations.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
39 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Raleigh-Durham
Locational preference: The majority of law firms are located in the downtown Raleigh submarket. Firms gravitate toward
the views of the skyline and access to addresses on Fayetteville Street in the heart of the city’s business district. Due to an overall lack of
availability in the urban submarkets, law firms looking for new Class A space are considering the markets of 6 Forks Road, North Hills and
West Raleigh for new spaces where some firms are already located.
27.3% 10.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Activity among law firms in Raleigh has increased compared to the previous year. A
group of firms totaling 235,000 square feet of combined space are currently touring
the market. Mid-sized law firms occupying 10,000 to 25,000 square feet are fueling
demand driven by lease expirations, but not much by organic growth.
4
3
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Parker Poe
301 Fayetteville Street
50,000 s.f.
Relocation
With new buildings proposed to be delivered soon in Downtown Raleigh, we expect
flight to quality will be a prominent trend as law firms sign new leases. From a space
perspective, firms are working to identify more efficient uses, including the use of
more community space and less private office space. Other trends include longer
lease terms, particularly for relocations, as a result of the high upfront costs and time
consumption associated with moving. Small- to mid-sized users are often taking
advantage of the current leasing environment before landlords push rental rates in
the local office market. It is not uncommon for a firm to take on extra space now for
the possibility of future growth.
Wyrick Robbins 4101 Lake Boone Trail
24,000 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$23.36
Class A annual escalation
36.0%
5.0%
33.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$25.00/$10.00
TI allowance ($ p.s.f.)**
75,000
Ellis & Winters
30,000
Hedrick Gardner
20,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Womble Carlyle
7/2
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Lack of large Class A blocks (greater than 50,000 square feet) in the CBD.
• Owners of proposed projects are beginning to push rates due to limited options
in CBD.
Opportunities for law firms
• Concession packages have remained at all-time highs and generous free rent
and tenant improvement allowances have driven net effective rents sharply lower.
• Tenants expanding their businesses can plan to prelease space in buildings
proposed for construction.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
40 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Richmond
Locational preference: Law firms in the Richmond market are concentrated in the CBD, particularly the southernmost
boundary, which offer panoramic views of both the James River and the downtown skyline. This area also consists of the newest inventory
in the CBD, as well as unimproved sites for new construction. However, McGuireWood’s new headquarters–Gateway Plaza–has reduced the
number of viable developments sites to two options, both located on the southern border of the CBD.
23.9%
1.6%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Richmond’s three largest law firms have completed renewals or relocations for their
2015 lease expirations; only one firm opted for new space. Downsizing from 270,000
square feet, McGuireWoods leased several floors for a total of 217,000 square feet
at their new tower, Gateway Plaza. Hunton & Williams also considered build-to-suit
options; however, new construction rates defeated the purpose of overhead reduction,
leading the firm to renew at their current location. Additionally, Troutman Saunders
renewed for a total of 104,000 square feet at Riverside on the James, giving back one
floor, which was immediately leased by Harris Williams. LeClair Ryan is the largest
firm in the CBD with an active requirement. Current activity suggests they will vacate
their office at 411 E Franklin and consolidate personnel to Riverfront Plaza East where
they occupy roughly 68,550 square feet. However, it is unclear whether they will be
expanding or contracting that footprint.
Currently, the availability of large blocks is limited. Only one potential option larger than
100,000 contiguous square feet exists and is currently occupied by McGuireWoods until
2015. Larger firms seeking Trophy space in the Richmond market will be limited to new
construction options that carry a 30.0 to 50.0 percent premium over the average Class
A rate in the CBD. Aside from downsizes with the largest firms, an influx of incubator
requirements from outside the market surfaced, backfilling Downtown’s Class A and
higher-end Class B inventory. Generally centered on labor law, many of these firms
are involved with preserving Virginia’s right-to-work status and seek offices with close
proximity to the Capitol with space needs ranging from 5,000 to 8,000 square feet.
PRICING AND INCENTIVE AVERAGES
$25.72
Class A annual escalation
9.7%
5.9%
32.4%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$25.00
TI allowance ($ p.s.f.)**
6
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Hunton Williams
951 E Byrd Street
257,349 s.f.
Renewal
McGuireWoods
800 E Cary Street
217,000 s.f.
Relocation
Troutman Saunders
1001 Haxall Point
104,722 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
LeClair Ryan
70,000
McCandlish Holton
35,000
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
5
7/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Limited large blocks of space are available in the CBD’s first-generation
building supply.
• New construction rates carry a substantial premium to the existing
building inventory.
Opportunities for law firms
• Anticipated relocations and downsizes in 2015 will open a block of space greater
than 200,000 square feet.
• Rightsizing within some of the CBD’s Trophy assets have placed discounted
sublet space on the market.
• Concession packages remain strong in the CBD due to limited new
leasing activity.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
41 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Sacramento
Locational preference: The majority of law firms are concentrated in the Capitol Mall district, along Capitol Mall between
3rd and 7th Street and the Government Affairs district, along L and K Street between 8th and 12th Street. Moving forward, we expect to see
some tenant migration closer to new ESC following its completion in 2016.
14.2%
5.0%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Tenant-favorable market conditions over the past 24 months, with landlords offering
generous concessions and below historical average rental rates for Class A office
space, allowed law firms to trade up to higher quality space options during the peak
of the downturn. Additionally, many firms were able to execute early renewals or
extensions, while negotiating for lower lease rates than their contracts signed during
the peak of the market. As a result, the majority of law firm leases are not set to
expire until the 2016-2017 time frame. Over the next 36 to 48 months, Sacramento’s
CBD is expected to reach full recovery, leaving few existing options for prospective
tenants looking to relocate or expand. Additionally, rental rates are expected to be
15.0 to 20.0 percent higher than current rates tenants are facing.
2
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Jackson Lewis
801 K Street
17,000 s.f.
Renewal
Olson Hagel & Fishburn
555 Capitol Mall
13,299 s.f.
Renewal
Law firm tenants that are actively signing leases today are falling in line with the
recent rightsizing trend, consolidating their footprints and partner private office sizes,
to utilize space more efficiently.
Looking forward, the future development of Sacramento’s Entertainment and Sports
Complex is likely to have an impact on demand from law firms looking to relocate
in closer proximity to the ESC, therein attaining additional locational capital that will
come from the completion of the new sports complex.
12
Cordell Practice
500 Capitol Mall
4,989 s.f.
Relocation and expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Crowell and Lewis
10,000
Confidential
PRICING AND INCENTIVE AVERAGES
$31.20
OUTLOOK
2.5%
Class A asking rent ($ p.s.f)
Class A annual escalation
15.0%
6.8%
30.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$55.00/$25.00
TI allowance ($ p.s.f.)**
8,000
10/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• The window for generous concessions is closing; rents for remaining large blocks
are poised to grow substantially over the next 12 to18 months.
• Firms can expect increased demand from private and public sector office tenants
over the near term as the hype surrounding the new entertainment and sports
complex drives office demand in the downtown market.
Opportunities for law firms
• Rents are holding steady for the immediate future, leaving opportunity for law
firms looking to relocate or blend and extend their existing leases.
• Redevelopment projects around the new ESC may present opportunities for law
firms to transition into creative use floorplates.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
42 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
San Diego
Locational preference: San Diego’s major law firms are concentrated in four submarkets – Downtown, Del Mar Heights,
University Towne Centre (UTC) and Mission Valley. Law firms are primarily concentrated in Del Mar Heights, Downtown and UTC, with
Mission Valley a less popular, but still viable submarket home to a notable group of legal tenants.
18.5%
2.1%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Leasing activity among San Diego’s law firms has slowed in the last year due in
large part to the industry’s continued trend of rightsizing and consolidation. Another
factor contributing to legal tenant demand tapering off dramatically was the surge
of activity in 2010 and 2011, when those who could have restructured early did so,
as rents were depressed and space availabilities peaked. Those deals locked the
majority of San Diego’s firms into 8-to 10-year leases, which left very few with a
need to lease space in the years that immediately followed. As an example of this,
672,000 square feet of law firms were inked in 2010 compared to only 109,000
square feet so far in 2013.
For those tenants in the market now, however, a different dynamic is in play: a
diminishing quantity of quality space and rents escalating. The inventory of available
law firm-quality space is tightening quickly, especially in submarkets popular among
legal tenants such as UTC, Del Mar Heights and Mission Valley (Downtown, in
contrast, still has numerous space options). For the most part, asking rents are
increasing and concessions are waning farther as the market continues to tighten.
Furthermore, with no new speculative construction planned to deliver in the next two
years, this trend is forecasted to continue.
PRICING AND INCENTIVE AVERAGES
$33.69
Class A annual escalation
14.4%
7.9%
26.6%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$43.00/$10.50
TI allowance ($ p.s.f.)**
20
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Perkins Coie
11988 El Camino Real
27,629 s.f.
Expansion/extension
Ogletree Deakins
4370 La Jolla Village Drive
8,842 s.f.
New deal to the market
Friedberg & Bunge
655 W Broadway
5,761 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Morrison Foerster
80,000
Sheppard Mullin
55,000
Troutman Sanders
18,000
OUTLOOK
3.5%
Class A asking rent ($ p.s.f)
11
7/7
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• The submarkets that law firms have historically occupied are tightening with fewer
options for larger users.
• Popular submarkets’ rental rates are on the rise with tightening concessions for the
top-quality large spaces.
• Until 2015, when the first phase of speculative construction may begin to deliver,
law firms must pick between existing space or a costly build-to-suit option.
Opportunities for law firms
• With firms right-sizing, opportunities for high-end second generation space are
becoming available.
• Proposed, Class A/ Trophy space in Del Mar Heights and UTC will deliver options
for firms in two to three years’ time.
• With firms leaving the CBD for the suburbs, pricing downtown is becoming more
aggressive, driven by The Irvine Company.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
43 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
San Francisco
Locational preference: The vast majority of law firms prefer to office in high-profile buildings concentrated in or bordering
the North Financial District, where there is a large concentration of premium Class A office product. Firms, especially within the AmLaw 100,
also prefer to be located on higher floors with quality view space.
6.9%
7.7%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Activity among law firms has been greatly subdued over the past year, conceivably
one of the most stagnant periods in the last decade, as the legal industry still
recovers from declines experienced during the recession. Firms that have managed
to succeed, however, are those with strong ties to the thriving technology industry
and start-up community, such as Fenwick & West, Wilson Sonsini, and Cooley.
These firms, as well as other law firms that have remained competitive, are some of
the few maintaining their current footprints or expanding.
19
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Gordon & Rees
275 Battery Street
50,195 s.f.
Renewal
McKenna Long & Aldridge
1 Market Plaza, Spear Tower
42,288 s.f.
Sublease
While law firms still experience moderate leverage in the market due to a significant
amount of new supply coming online, the landlord community remains bullish as a
result of the flourishing technology industry. Though, despite a slight rent premium
for new construction, the capital expenditure involved in relocation is a bitter pill
many law firms are unwilling to swallow.
Although the shifting landscape of the market presents its own challenges, law firms
in San Francisco strive to enhance the quality and culture of their firms through
creating more efficient, collaborative and welcoming office space as they look out
over the next 10 to 20 years.
44
Allen Matkins
3 Embarcadero Center
39,825 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Cooley
PRICING AND INCENTIVE AVERAGES
$57.63
Class A annual escalation
23.8%
5.0%
30.1%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$48.00/$25.00
TI allowance ($ p.s.f.)**
Coblentz Patch Duffy
85,000
Fenwick & West
60,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
150,000
4/2
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Law firms will continue to compete with high-growth technology tenants for large
blocks of space.
• With several large lease expirations coming over the next two to three years,
tenants will have to weigh their options as rents continue to rise.
• New supply slated to hit the market may prove cost-prohibitive for smaller firms.
Opportunities for law firms
• A surge of new development delivering to the market this year will bring welcome
relief to an otherwise supply-constrained market.
• As tech tenants compete over the hotly contested South of Market and South
Financial District submarkets, large blocks of space remain available in the North
Financial District.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
44 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Seattle-Bellevue
Locational preference: The majority of law firms are located in the Seattle CBD, Belltown/Denny Regrade, Pioneer
Square and Bellevue CBD submarkets of the Seattle-Bellevue office market. Firms gravitate to buildings within the core with views of Puget
Sound, close-in amenities and a dense urban atmosphere. While there are many firms in Class A properties, a majority of the smaller firms
are in the plethora of Class B buildings in these areas.
13.8%
5.6%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
2013 has been a very active year for the law office climate in the Seattle market.
Whereas in recent years the trend has been rightsizing, this year a majority of the
firms have renewed their existing space, extended their leases or expanded to
accommodate growth and lock in rates before they escalate. While law firms are
having to compete with technology companies for the highly sought-after premier
Class A space in and around the CBD, they are also finding that the explosive
growth of blue chip tech firms, coupled with the flourishing startup scene, is
providing an opportunity to capitalize on a rise in mergers and acquisitions and the
commensurate increased need for patent, litigation and hiring advice and consulting.
Market vacancy has been on the decline and top-tier space continues to dwindle.
Law firms seeking space in the northern part of the CBD face a lack of options
and elevated rental rates. While not particularly newsworthy, leasing activity has
recently picked up in the South CBD. There is still, however, a significant amount of
premier Class A inventory in this area. Landlords may favor dealing with law firms,
as they have traditional needs in terms of deal structure, while many tech tenants
are seeking lease flexibility. This, along with openness to locating in the South CBD,
may provide firms in the market for space with much needed leverage.
PRICING AND INCENTIVE AVERAGES
$33.11
Class A annual escalation
30.0%
5.0%
30.0%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$60.00/$40.00
TI allowance ($ p.s.f.)**
12
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Foster Pepper
1111 3rd Avenue
92,671 s.f.
Renewal with expansion
Karr Tuttle Campbell
701 5th Avenue
39,617 s.f.
Relocation
Ryan Swanson & Cleveland
1201 3rd Avenue
31,807 s.f.
Renewal
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Christianson O'Connor Johnson Kindness
35,000
Helsell Fetterman
22,000
Pacifica Law Group
20,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
7
8/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Firms are competing with tech companies for premier Class A space in and around
the CBD.
• Market momentum shifting to landlords, making them feel more comfortable raising
rental rates and cutting back concessions.
• Adjusting to quickly changing company dynamics in Seattle; more technology,
younger demographics.
Opportunities for law firms
• As tech companies flood to North CBD and South Lake Union, South CBD has
premier Class A space at lower rental rates and higher concessions.
• The flourishing startup scene in Seattle provides an opportunity for future
M&A work.
• Massive employment growth in the CBD area will add to potential client pool,
both corporate and individual.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
45 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Stamford, CT
Locational preference: The majority of law firms and practices are concentrated in the Stamford CBD/Railroad
submarket, which has direct access to transit. Firms also dot the periphery of the CBD/Railroad in Stamford’s other submarkets that are
slightly farther from the transit hub and offer more competitive pricing. The Greenwich CBD/Railroad is also a desired location for law firms as
well, but space is priced at a premium.
5.5%
2.5%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
A significant reduction in law firm activity in Fairfield County transpired at the start
of 2013. Many law firms exercised early extension and renewal options as market
rents bottomed back in 2011 and 2012, resulting in a dearth of activity related to
imminent lease expirations. That being said, law firms that have recently leased
space or are looking for space have tended to favor relocations in favor of renewing
in place. The change in preference indicates a return of confidence as certainty in
workflow and labor pool dynamics allows firms to find the best space for their needs
– even if that means relocating.
The supply line is more uncertain. Rents are ticking up; large blocks of direct space
were at a minimum until recently. Recently added blocks are unlikely to sit on the
market, however, given few alternatives. UBS’ sublease space is steadily being
absorbed at 400 Atlantic, while the entirely vacant BLT Financial Centre remains
the elephant in the room. The vacancy is not directly impactful at the moment as
ownership is waiting to open the doors for a major tenant. Once they do, increased
availability could suppress or even exert downward pressure on rents. Whether the
priority is cost-effectiveness or transit-location, short-term opportunities are limited,
but more options will emerge in the medium term.
PRICING AND INCENTIVE AVERAGES
$46.60
Class A annual escalation
9.4%
7.6%
18.5%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$35.00/$25.00
TI allowance ($ p.s.f.)**
3
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Day Pitney
24 Field Point Road
7,900 s.f.
Relocation
Ogletree Deakins
281 Tresser Boulevard
6,455 s.f.
New deal to the market
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Kelley Drye
35,000
O'Connor Davies
12,000
OUTLOOK
$1.00
Class A asking rent ($ p.s.f)
2
3/3
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Pricing at premier assets close to transit is close to pre-recession levels and
concessions are tightening.
• Previously abundant sublease options are dwindling, reducing lower cost
space availability.
• Limited tenant movement due to early renewals signed during the recession period
is restricting relocation options in the short term.
Opportunities for law firms
• Many firms are rightsizing, creating built-out space opportunities for firms
considering expansions or looking for a more cost-effective sublease.
• Medium to long-term new construction options are on the horizon, which could
offer more high-quality space options near to transit.
• There are major developments under way, encouraging a mixed-use, 24/7
environment that will help attract talent to the area.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
46 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
St. Louis
Locational preference: The major St. Louis firms are concentrated in two of the region’s submarkets, Clayton and the
CBD. These submarkets offer high-rise buildings with large floor plates and close proximity to city and county courts.
19.5%
3.7%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
After several years of moving sideways, St. Louis saw its office space demand
by area law firms begin to escalate most recently. While there are fewer firms in
the market compared to last year, many have done small expansions increasing
footprints from 4.0-22.0 percent. Firms are seeing an increase in healthcare clients,
technology start-ups as the local entrepreneurship community continues to grow
and even some merger activity. Husch Blackwell recently merged with Dallas-based
Brown McCarroll and had the transaction closed earlier in the year it would have
given St. Louis its second headquartered AmLaw 100 law firm.
9
5
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Greensfelder
10 S Broadway
105,000 s.f.
Renewal
Dentons
211 N Broadway
40,000 s.f.
Renewal
An improving office and labor market has led to a shrinking supply of Class A
availabilities. A year ago Clayton had five Class A spaces over 25,000 square feet
available and now there are none. The CBD offers eight such options but only
three of those spaces are above 50,000 square feet. This, coupled with no new
construction, means options are limited for the larger firms. However, it is expected
that many will be unactive in the search arena until 2015 and beyond due to existing
lease expiration schedules.
Spencer Fane
1 N Brentwood
26,000 s.f.
Expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$21.71
Class A annual escalation
14.7%
12.0%
9.8%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$20.00
TI allowance ($ p.s.f.)**
30,000
Schlichter Bogard Denton
20,000
MVP Law Firm
17,500
OUTLOOK
$0.50
Class A asking rent ($ p.s.f)
Carmody MacDonald
8/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Lack of construction limits options to existing product.
• There are no Class A blocks of space larger than 25,000 square feet available
in Clayton.
• Limited supply of space in Clayton minimizes the opportunity to create competition
amongst landlords.
Opportunities for law firms
• Market availability in the CBD is allowing law firms to make small expansions
when needed.
• Lack of competition from law firms as most firms signed lease more than two
years ago.
• The St. Louis CBD, despite tightening, remains a tenant-favorable market.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
47 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Tampa Bay
Locational preference: Law firms are split between two submarkets in Tampa. The first submarket is the Tampa CBD
which is home, on average, to 76.0 percent of Tampa law firms. The second submarket is Westshore, which accounts for 19.0 percent of
law firms. Due to the lack of availability of contiguous blocks of space greater than 50,000 square feet in the Tampa CBD, law firms may
continue their slow migration to Westshore. That being said, new construction in the CBD would be enough to encourage law firms to stay
put near the courthouse.
30.3% 14.2%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Barring that leasing activity on the behalf of law firms does not change in the latter
half of 2013, the current year will post the highest amount of leased space by
law firms, in Tampa’s CBD Class A space, since 2004. This is due to a couple of
reasons. First is that firms already located within Tampa are expanding. Second,
2013 falls on the natural five-year leasing cycle for law firms that signed deals in
2003, which currently has the second highest lease totals this century. Lastly, firms
that may have left downtown during the recession for cheaper suburban rental rates
are returning to the common home of law firms in the Bay area.
4
5
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Hill Ward Henderson
101 E Kennedy Boulevard
71,576 s.f.
Renewal
Wilkes & Mchugh
1 N Dale Mabry Hwy
29,476 s.f.
Renewal
Moving forward, Tampa’s CBD may struggle to continue landing large law firms
due to its availability of contiguous space greater than 50,000 square feet in higher
quality buildings. At the present time, there are no blocks of contiguous space
within the Class A product set in downtown greater than 47,000 square feet. In
comparison, Westshore has five blocks of contiguous space greater than 50,000
square feet. For the past two years, Westshore secured 20 percent of the leases
signed by law firms, which is an increase of 21.2 percent over the 2010 to
2011 average.
Morris Hardwick
5110 Eisenhower Boulevard
18,000 s.f.
Renewal with expansion
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
PRICING AND INCENTIVE AVERAGES
$23.37
Class A annual escalation
19.5%
3.4%
18.3%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$27.00/$12.00
TI allowance ($ p.s.f.)**
80,000
Trenam Kemker
75,000
Butler Pappas
65,000
OUTLOOK
3.0%
Class A asking rent ($ p.s.f)
Folwer White Boggs
11/4
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• No contiguous blocks of space greater than 50,000 square feet are available in the
Tampa CBD.
• Rents are on the rise with concessions decreasing.
• No speculative construction has been announced.
Opportunities for law firms
• Westshore is becoming a more accepted option for law firms, which allows for
greater leverage in negotiation.
• Firms have the ability to split up shop; that is, have small office in CBD near
courthouse with larger office in suburban market at a lower rent.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
48 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Washington, DC
Locational preference: The majority of law firms are located in the CBD, East End and Capitol Hill submarkets of
Washington, DC. New developments with efficient floorplates are also attractive to law firms. Given few large existing quality blocks of space
in the core, many AmLaw 100 firms are considering future developments with several of these options located in fringe locations of the CBD
and East End, increasingly the northern part of the CBD or the emerging Mount Vernon Triangle segment of the East End.
45.0%
4.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Washington, DC is one of the top global law markets, containing the second highest
number of lawyers in the country following New York. AmLaw 100 law firms located
within the District of Columbia recorded profit growth of 4.6 percent year-over-year,
primarily a reflection of firms’ ability to cut costs. In recent years, some Washington,
DC law firms have seen top-line revenues stagnate or decline as fee compression
has intensified. As a result, many law firms maintained profit margins by becoming
operationally leaner, trimming overhead and shifting administrative functions to
lower cost markets. In 2013, Pillsbury, Patton Boggs and K&L Gates were three
firms that moved forward with plans to cut local payrolls and trim their downtown
Washington, DC real estate holdings.
91
95
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Arnold & Porter
601 Massachusetts Avenue, NW
375,000 s.f.
Relocation
Sidley Austin
1501 K Street, NW
289,000 s.f.
Renewal
The next wave of large law firm lease expirations is not set to occur for another few
years, as over 4.0 million square feet of leases are set to expire over a 24-month
period between 2016 and 2017. Large firms such as Hogan Lovells, Venable,
Finnegan Henderson, Morgan Lewis and Steptoe & Johnson are expected to enter
the market well ahead of their lease expirations in those years, evaluating both
existing options and potential new developments.
Pillsbury
1200 17th Street, NW
108,000 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Steptoe & Johnson
PRICING AND INCENTIVE AVERAGES
$59.50
Class A annual escalation
24.8%
5.0%
32.2%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$95.00/$70.00
TI allowance ($ p.s.f.)**
Reed Smith
80,000
Proskauer
75,000
OUTLOOK
2.3%
Class A asking rent ($ p.s.f)
260,000
10/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Quality existing blocks of space are dwindling and the under construction pipeline is
75.0 percent preleased.
• Prime locations for new developments are largely unavailable, so relocations to new
construction may require being located farther off-Metro in a fringe location.
• Potential for rent increases exists once the current oversupply in the market
is reduced.
Opportunities for law firms
• Competition in the marketplace is low given a finite number of near-term lease
expirations and limited organic growth in the broader market.
• Concession packages remain at all-time highs and generous free rent and tenant
improvement allowances have driven net effective rents down approximately 8.0
percent from their 2008 peak.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
49 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
White Plains, NY
Locational preference: The majority of law firms and practices are concentrated in the White Plains CBD/Railroad
submarket, which has a substantial government presence and direct transit access. Firms are also located in the White Plains East
submarket and along the Eastern portion of the I-287 Corridor, where many high quality assets are located in more suburban officepark environments.
12.0% 11.1%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
Law firms are one of the primary sources of office space demand in Westchester.
Slow local economic growth and tepid office market conditions continue to lead
many of these tenants to extend or sign renewals. Three-quarters of law firm leases
signed during the first six months of 2013 were renewals. New activity is isolated to
the White Plains CBD/Railroad where high-quality space close to transit is limited.
2
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Kaufman Borgeest & Ryan
200 Summit Lake Drive
6,565 s.f.
Expansion
A handful of requirements are out in the market, led by Jackson Lewis, out for two
blocks of space totaling approximately 75,000 square feet and Bleakley, Platt &
Schmidt for about 32,000 square feet. Jackson Lewis is strategizing their relocation
in two parts – putting their attorneys close to transit, while locating their support staff
in a periphery submarket to better manage costs.
Merger and acquisition activity is also emerging and impacting the local economic
fabric. Recently, a few small, private attorneys have joined forces to better utilize
resources and space. There has also been merger talk between larger local firms.
This activity comes at a time when the county government – historically a mainstay
of office space and professional service demand – is contracting. Without this piece
of demand, the business outlook for law firms is less optimistic, hampering their
ability to take advantage of tenant-favorable office market conditions. Yet, while law
firms are not growing, a substantial federal government presence in White Plains will
help law firms maintain their existing footprints.
2
LNK Partners
81 Main Street
5,185 s.f.
Renewal
Bowler & Gaynor
10 Bank Street
3,279 s.f.
Relocation
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Jackson Lewis
75,000
Bleakley Platt & Schmidt
32,000
Cerussi & Spring
PRICING AND INCENTIVE AVERAGES
$28.49
OUTLOOK
$0.75
Class A asking rent ($ p.s.f)
Class A annual escalation
15.8%
1.7%
12.2%
Premium for
Trophy space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$29.00/$15.00
TI allowance ($ p.s.f.)**
8,000
5/3
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• Much of the office product in the market is aging or functionally obsolete, limiting
location choice.
• The county government is downsizing and this is a direct driver for local legal
services demand.
• The area struggles to attract and retain workers, particularly young talent, because
of a high cost of living.
Opportunities for law firms
• There are limited requirements in the market, creating more negotiating room for
law firms.
• Large sublease blocks on the market continue to put downward pricing pressure
on landlords.
• Higher-education institutions and law schools have a strong presence in the
market, creating a labor pool suitable for recruitment.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
50 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Wilmington, DE
Locational preference: Law firms have historically concentrated in downtown Wilmington proximate to Rodney Square
and the downtown courthouses, which notably include the Delaware Court of Chancery–one of three constitutional courts, U.S. Bankruptcy
Court and New Castle County Courthouse. Given Wilmington’s strategic presence for corporate litigation and bankruptcy law, law firms
will continue to make location decisions based on proximity to its courthouses. However, law firms are more willing to migrate to Delaware
Avenue, a shift away from the North King Street corridor.
25.7% 38.4%
Percent of law firms comprising
active tenants in the market
Percent of Class A market
occupied by law firms
With little large law firm rollover in the near term, small- to mid-sized users are
driving market activity, capitalizing on opportunities for a flight to quality at top-tier
Class A assets. Eckert Seamans and Campbell & Levine secured leases to relocate
to 222 Delaware Avenue from Class B buildings in the beginning of 2013, and
following M&T Bank’s consolidation at 1100 N Market Street, Drinker Biddle
entered the market for 14,000 square feet, looking to similarly relocate to a higher
quality asset.
Wilmington’s reputation as the corporate capital of the United States is attracting
new law firm occupiers, focused on growing corporate litigation and bankruptcy
practices. Following an acquisition-driven entrance via new partners from the firm
Edwards Angell Palmer & Dodge, DLA Piper signed a 17,000-square-foot lease to
relocate with expansion to 1201 N Market Street, securing one of few remaining
Downtown, Class A+ blocks of this size. Wilson Sonsini additionally entered the
Wilmington market for a new, 8,000-square-foot location. New market entrants
are also migrating from temporary Regus space into permanent offices: Barnes &
Thornburg relocated into 8,797 square feet at the Brandywine Building and K&L
Gates leased 7,857 square feet at Renaissance Centre. While positive for market
absorption, select local firms are faced with difficult real estate decisions given risks
associated with partner acquisitions by new market entrants.
PRICING AND INCENTIVE AVERAGES
$30.20
Class A annual escalation
35.7%
10.0%
37.2%
Premium for
Class A+ space*
Discount for
negotiated rent*
Discount for
sublease space*
*rent difference from Class A average
$40.00/$20.00
TI allowance ($ p.s.f.)**
19
Number of AmLaw 100 firms with
offices locally
Number of law firms occupying
greater than 50,000 s.f.
2013 LAW FIRM COMPLETED TRANSACTIONS
Novak Druce (formerly Connolly Bove)
1007 N Orange Street
60,000 s.f.
Renewal with contraction
Eckert Seamans
222 Delaware Avenue
24,384 s.f.
Relocation
Fox Rothschild
919 N Market Street
18,500 s.f.
Relocation (in building)
ACTIVE LAW FIRM REQUIREMENTS IN THE MARKET (s.f.)
Skadden
60,000
Wilson Sonsini
8,000
Reger Rizzo
5,500
OUTLOOK
$0.50
Class A asking rent ($ p.s.f)
7
12/5
Free rent (months)**
**averages on 10-year new/renewal transactions
Challenges for law firms
• There are limited available quality blocks greater than 25,000 square feet and
proximate to courthouses.
• Flight to quality driving occupancy gains and rent growth at top-tier product.
• Law firms sensitive to high costs associated with implementing a modern
workplace environment.
Opportunities for law firms
• Class A landlords are repositioning assets.
• There is limited competition in the market for law firm quality, Class A space.
• A tepid recovery is preventing future concession compression.
2013
2014
2015
2016
2017
Tenant-favorable market
Neutral market
Landlord-favorable market
51 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Appendix
Law firm and overall office-using employment statistics
2013 law firm lease transactions > 50,000 s.f.
Active law firm active requirements > 50,000 s.f.
Law firms’ emphasis on efficiency
Law firm concentration
Class A asking rents, tenant improvement allowances and free rent
Market outlook favorability for law firm-concentrated submarkets
52 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Law firm and overall office-using employment statistics
Total nonfarm jobs
12-month
net change
(000's)
Total nonfarm jobs
12-month
percent
change
Office jobs
12-month
net change
(000's)
Office jobs
12-month
percent
change
Legal
services
12-month
net change
(000's)
Legal
services
12-month
percent
change
73.7
27.0
20.2
45.3
18.6
66.6
13.0
-9.4
14.7
108.4
3.1%
3.3%
1.5%
1.8%
2.2%
1.5%
1.3%
-0.9%
1.5%
3.6%
30.1
9.0
10.3
18.8
0.9
41.7
9.8
-3.9
2.7
40.7
4.6%
4.7%
3.4%
2.8%
0.4%
3.7%
4.1%
-1.7%
1.1%
6.5%
1.0
0.1
0.6
0.3
0.3
0.2
0.2
-0.6
-0.2
0.8
4.3%
1.4%
4.8%
1.2%
4.8%
0.4%
2.7%
-5.4%
-2.8%
3.1%
1.0%
0.9%
1.0%
1.0%
1.0%
1.1%
0.8%
1.1%
0.7%
0.9%
3.6%
3.7%
4.3%
3.6%
2.7%
4.1%
3.1%
4.8%
3.0%
4.0%
Denver
35.1
2.8%
15.7
4.3%
0.8
5.8%
1.1%
3.9%
Detroit
Fairfield Co. (Stamford, CT)
Fort Lauderdale
Houston
Indianapolis
Los Angeles
Miami
Milwaukee
Minneapolis
New Jersey
New York
Oakland-East Bay
Orange County
Orlando
Philadelphia
Phoenix
Pittsburgh
Portland
Raleigh-Durham
Richmond
9.5
7.1
15.5
96.1
15.9
57.6
6.9
7.4
49.6
75.5
71.3
8.7
25.4
24.4
27.6
40.6
15.7
22.6
4.9
3.6
0.5%
1.7%
2.1%
3.6%
1.7%
1.5%
0.7%
0.9%
2.8%
1.9%
1.8%
0.9%
1.8%
2.3%
1.1%
2.3%
1.4%
2.2%
0.9%
0.6%
0.2
1.9
3.1
16.5
4.9
26.1
3.8
3.8
14.3
18.4
0.3
-0.1
7.8
5.1
10.7
11.1
11.4
8.7
1.9
-4.3
0.0%
1.6%
1.6%
2.8%
2.3%
2.7%
1.7%
2.0%
3.1%
2.0%
0.0%
0.0%
2.0%
2.0%
1.6%
2.4%
4.3%
3.8%
1.3%
-2.7%
0.6
0.1
0.2
0.2
0.0
-0.3
-0.6
0.1
0.1
-0.5
-1.2
0.2
0.0
0.0
-0.1
0.2
1.2
0.1
0.1
-0.3
3.3%
2.8%
1.4%
0.8%
0.0%
-0.6%
-2.8%
1.4%
0.6%
-1.3%
-1.5%
3.2%
0.0%
0.0%
-0.4%
1.5%
9.0%
1.2%
2.3%
-4.8%
1.0%
0.9%
2.0%
0.9%
0.8%
1.2%
2.0%
0.9%
0.9%
0.1%
2.0%
0.7%
1.1%
1.2%
0.9%
0.7%
1.2%
0.8%
0.9%
0.9%
4.0%
2.9%
7.5%
4.0%
3.4%
4.8%
9.1%
3.9%
3.4%
4.0%
6.1%
2.7%
3.9%
4.7%
3.8%
2.8%
5.2%
3.5%
3.1%
3.9%
Sacramento
San Diego
0.9
19.9
0.1%
1.6%
-0.7
6.1
-0.4%
2.0%
0.5
0.1
7.4%
0.8%
0.9%
1.0%
4.1%
3.9%
24.1
48.1
20.7
12.6
42.2
58.3
2.2
2,276.0
2.4%
2.8%
2.3%
1.0%
3.7%
1.9%
0.4%
1.7%
10.9
10.4
14.5
0.2
11.8
16.6
0.3
757.0
3.1%
2.5%
5.4%
0.2%
3.7%
1.8%
0.2%
2.7%
-0.1
0.4
0.6
0.3
0.9
-0.4
0.1
6.3
-0.6%
2.7%
8.5%
2.4%
5.4%
-0.9%
1.9%
0.6%
1.7%
0.9%
0.8%
1.0%
1.5%
1.5%
1.0%
0.8%
4.8%
3.5%
2.7%
4.1%
5.3%
4.8%
4.5%
3.9%
MSA
Atlanta
Austin
Baltimore
Boston
Charlotte
Chicago
Cincinnati
Cleveland
Columbus
Dallas
San Francisco
Seattle-Bellevue
Silicon Valley (Palo Alto)
St. Louis
Tampa
Washington, DC
Westchester Co. (White Plains, NY)
United States
Local market data as of July 2013
United States employment data as of August 2013 using July 2013 revisions
Legal
Legal
services, %
services,
of total non- % of officefarm using jobs
53 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
2013 law firm lease transactions > 50,000 s.f
Law firm
Address
Market
Simpson Thacher
Arnold & Porter
Goodwin Procter
Sidley Austin
Pepper Hamilton
Hunton Williams
McDermott
McGuireWoods
Dentons
Patterson Belknap
Drinker Biddle
Bryan Cave
Porter Wright
Ice Miller
Wilson Sonsini
Bose McKinney & Evans
Gray Plant Mooty
Pillsbury
Quarles & Brady
Dickie Mccamey & Chilcote
Greensfelder
Troutman Saunders
Baker Botts
Foster Pepper
KMK
Michael Best & Friedrich
Miller & Chevalier
Dykema
Simpson Thacher
Pillsbury
BakerHostetler
Lewis & Roca
Hill Ward Henderson
Miller Canfield
Bingham Greenebaum Doll
GrayRobinson
Drinker Biddle
Novak Druce (prev. Connolly Bove)
Sheppard Mullin
Lewis Brisbois
Newmeyer & Dillion
Kegler Brown
Hall & Evans
Gordon & Rees
Dickinson Wright
Johnson & Freedman
Parker Poe
425 Lexington Avenue
601 Massachusetts Avenue, NW
2 Harbor Shore Drive
1501 K Street, NW
Two Logan Square
951 E Byrd Street
444 W Lake Street
800 E Cary Street
233 S Wacker Drive
1133 Avenue of the Americas
One Logan Square
1201 West Peachtree Street
41 S High Street
1 American Square
601 California Avenue
111 Monument Circle
80 South 8th Street
1200 17th Street, NW
2 N Central Avenue
2 PPG Place
10 S. Broadway
1001 Haxall Point
30 Rockefeller Plaza
1111 3rd Avenue
1 E Fourth Street
100 E. Wisconsin
900 16th Street, NW
400 Renaissance Center
2475 Hanover Street
2550 Hanover Street
811 Main Street
201 Washington
101 E Kennedy Boulevard
150 West Jefferson
10 W Market Street
301 East Pine
600 Campus Drive
1007 N Orange Street
2099 Pennsylvania Avenue, NW
550 W Adams Street
895 Dove Street
65 East State Street
1001 17th Street
275 Battery Street
1850 N Central Avenue
1587 Northeast Expressway
301 Fayetteville Street
New York
Washington, DC
Boston
Washington, DC
Philadelphia
Richmond
Chicago
Richmond
Chicago
New York
Philadelphia
Atlanta
Columbus
Indianapolis
Palo Alto
Indianapolis
Minneapolis
Washington, DC
Phoenix
Pittsburgh
St. Louis
Richmond
New York
Seattle-Bellevue
Cincinnati
Milwaukee
Washington, DC
Detroit
Palo Alto
Palo Alto
Houston
Phoenix
Tampa
Detroit
Indianapolis
Orlando
New Jersey
Wilmington, DE
Washington, DC
Chicago
Orange County
Columbus
Denver
San Francisco
Phoenix
Atlanta
Raleigh-Durham
s.f. Transaction type
595,799
375,000
360,000
289,000
268,000
257,349
225,000
217,000
204,705
198,000
155,000
152,383
130,000
127,883
111,653
111,372
109,000
108,000
105,000
105,000
105,000
104,722
104,161
92,671
90,000
89,725
85,600
85,000
83,982
80,000
75,737
73,878
71,576
70,000
70,000
70,000
60,000
60,000
59,000
54,782
53,036
52,000
50,875
50,195
50,119
50,000
50,000
Renewal
Relocation
Relocation
Renewal
Renewal
Renewal
Relocation
Relocation
Relocation (in building)
Renewal
Renewal with contraction
Renewal
Renewal
Renewal with contraction
Renewal
Renewal with contraction
Renewal
Relocation
Renewal with contraction
Renewal
Renewal
Renewal
Renewal
Renewal with expansion
Renewal
Renewal
Relocation
Renewal
Relocation
Relocation
Rellocation
Relocation
Renewal
Renewal
Renewal with contraction
Renewal
Relocation
Renewal with contraction
Relocation
Renewal with expansion
Renewal
Renewal
Relocation
Renewal
Relocation
Renewal
Relocation
Growing, stable
or rightsizing?
Stable
Rightsizing
Rightsizing
Rightsizing
Stable
Stable
Rightsizing
Rightsizing
Rightsizing
Stable
Rightsizing
Stable
Stable
Rightsizing
Stable
Rightsizing
Stable
Rightsizing
Rightsizing
Stable
Stable
Rightsizing
Stable
Growing
Stable
Rightsizing
Growing
Stable
Stable
Stable
Stable
Rightsizing
Growing
Stable
Rightsizing
Growing
Rightsizing
Rightsizing
Rightsizing
Growing
Stable
Stable
Stable
Rightsizing
Stable
Stable
Growing
54 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Active law firm active requirements > 50,000 s.f.
Law firm
Size
Market
Growing, stable or rightsizing
Weil Gotshal
Jones Day
White & Case
Steptoe & Johnson
Sidley Austin
Dorsey
Seyfarth Shaw
Locke Lord
Fenwick & West
Baker Hostetler
Holland & Hart
Cooley
Goulston & Storrs
Stoel Rives
Gardere
Holland & Knight
Polsinelli
Eckert Seamans
Gardere
Briggs & Morgan
Lindquist & Vennum
Wolff & Samson
Whiteford Taylor & Preston
Freeborn & Peters
Godfrey & Kahn
Morrison Foerster
Coblentz Patch Duffy
Jackson Walker
Shutts & Bowen
Sills Cummis & Gross
Morrison Foerster
Folwer White Boggs
Reed Smith
Akin Gump
Nixon Peabody
Womble Carlyle
Trenam Kemker
Proskauer
Connell Foley
Perkins Coie
LeClair Ryan
Butler Pappas
Jackson Walker
Confidential
White & Case
Pond LeHocky
Fenwick & West
Skadden
Sheppard Mullin
Confidential
Greenspoon Marder
White & Case
Sheppard Mullin
Jones Skelton & Hochuli
Morgan Lewis
500,000
400,000
400,000
260,000
250,000
250,000
200,000
160,000
160,000
150,000
150,000
150,000
140,000
130,000
110,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
90,000
90,000
90,000
90,000
85,000
80,000
80,000
80,000
80,000
80,000
80,000
75,000
75,000
75,000
75,000
75,000
70,000
70,000
70,000
65,000
60,000
60,000
60,000
60,000
60,000
60,000
55,000
50,000
50,000
50,000
50,000
50,000
50,000
New York
New York
New York
Washington, DC
Los Angeles
Minneapolis
Chicago
Dallas
Silicon Valley
Cleveland
Denver
San Francisco
Boston
Portland
Dallas
Chicago
Denver
Pittsburgh
Houston
Minneapolis
Minneapolis
New Jersey
Baltimore
Chicago
Milwaukee
Silicon Valley
San Francisco
Dallas
Miami
New Jersey
San Diego
Tampa
Washington, DC
Houston
Los Angeles
Raleigh-Durham
Tampa
Washington, DC
New Jersey
Portland
Richmond
Tampa
Austin
Columbus
Miami
Philadelphia
San Francisco
Wilmington
San Diego
Detroit
Fort Lauderdale
Los Angeles
Orange County
Phoenix
Silicon Valley
Rightsizing
Stable
Stable
Stable
Stable
Rightsizing
Rightsizing
Rightsizing
Stable
Rightsizing
Stable
Stable
Rightsizing
Rightsizing
Rightsizing
Rightsizing
Growing
Stable
Stable
Rightsizing
Rightsizing
Stable
Stable
Rightsizing
Stable
Stable
Stable
Rightsizing
Rightsizing
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Rightsizing
Rightsizing
Stable
Stable
Stable
Stable
Rightsizing
Growing
Stable
Stable
Rightsizing
Stable
Stable
Stable
Rightsizing
Rightsizing
Stable
55 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Law firms’ emphasis on efficiency
Percent of space law firms are shedding when moving to a new space
Dallas
Wilmington
San Diego
Philadelphia
Phoenix
Washington, DC
Tampa
Charlotte
Baltimore
Orange County
New York
New Jersey
Boston
St. Louis
Seattle-Bellevue
Sacramento
Milwaukee
Pittsburgh
Los Angeles
Columbus
Cleveland
Cincinnati
Stamford, CT
Minneapolis
Denver
Oakland-East Bay
Portland
Richmond
Miami
Detroit
Atlanta
Orlando
San Francisco
Indianapolis
Fort Lauderdale
Chicago
Houston
Austin
Raleigh-Durham
Palo Alto
White Plains, NY
0%
5%
10%
15%
20%
25%
30%
35%
56 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Law firm concentration
Number of law firms occupying greater than 50,000 s.f.
New York
Washington, DC
Chicago
Los Angeles
Boston
Houston
Dallas
Philadelphia
Atlanta
New Jersey
San Francisco
Minneapolis
Denver
Detroit
Phoenix
Cleveland
San Diego
Pittsburgh
Charlotte
St. Louis
Orange County
Columbus
Indianapolis
Cincinnati
Baltimore
Austin
Wilmington
Seattle
Milwaukee
Palo Alto
Richmond
Portland
Miami
Orlando
Tampa Bay
Raleigh-Durham
Westchester County
Sacramento
Fairfield County
Oakland-East Bay
Fort Lauderdale
0
20
40
60
80
100
120
140
Percent of Class A core (sub)market occupied by law firms
Washington, DC
Silicon Valley
Austin
Tampa Bay
Fort Lauderdale
Cleveland
Raleigh-Durham
Wilmington, DE
Richmond
Los Angeles
Milwaukee
Miami
Philadelphia
St. Louis
San Diego
Orlando
Minneapolis
Boston
Chicago
Dallas
Houston
Denver
Detroit
Indianapolis
Sacramento
Cincinnati
Seattle-Bellevue
Pittsburgh
Portland
Baltimore
White Plains, NY
New York
Atlanta
Charlotte
Phoenix
Orange County
Oakland-East Bay
San Francisco
Stamford, CT
Columbus
New Jersey
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Number of AmLaw 100 firms with offices locally
New York
Washington, DC
Los Angeles
Houston
San Francisco
Chicago
Boston
Silicon Valley
San Diego
Miami
Dallas
Austin
Wilmington, DE
Orange County
New Jersey
Philadelphia
Sacramento
Seattle-Bellevue
Phoenix
Charlotte
Pittsburgh
Denver
Portland
Minneapolis
Baltimore
Cleveland
Richmond
Atlanta
Columbus
Tampa Bay
St. Louis
Indianapolis
Fort Lauderdale
Raleigh-Durham
Orlando
Stamford, CT
Detroit
White Plains, NY
Cincinnati
Milwaukee
Oakland-East Bay
0
20
40
60
80
100
120
57 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Class A asking rents, tenant improvement
allowances and free rent
Average Class A asking rent ($ p.s.f. full service)
Silicon Valley
New York
Washington, DC
San Francisco
Boston
Stamford, CT
Austin
Los Angeles
Miami
Houston
Chicago
Oakland-East Bay
San Diego
Seattle-Bellevue
Fort Lauderdale
Sacramento
Denver
Wilmington, DE
Minneapolis
Atlanta
White Plains, NY
Pittsburgh
Philadelphia
Portland
New Jersey
Indianapolis
Orange County
Richmond
Columbus
Orlando
Milwaukee
Charlotte
Dallas
Baltimore
Tampa
Raleigh-Durham
Cincinnati
Phoenix
Detroit
Cleveland
St. Louis
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
Average Class A tenant improvement allowance (new deal)
Washington, DC
Seattle-Bellevue
Chicago
New York
Portland
Sacramento
Miami
Baltimore
Los Angeles
Houston
Boston
Atlanta
Cleveland
San Francisco
Orange County
Dallas
Minneapolis
San Diego
Wilmington, DE
St. Louis
Richmond
Philadelphia
Orlando
Indianapolis
Detroit
Denver
Columbus
Cincinnati
New Jersey
Milwaukee
Fort Lauderdale
Stamford, CT
Charlotte
Silicon Valley
Phoenix
Oakland-East Bay
Pittsburgh
White Plains, NY
Tampa
Raleigh-Durham
Austin
$0.00
$10.00
$20.00
$30.00
$40.00
$100.00
Average Class A free rent in months (new deal)
Orlando
Wilmington, DE
Phoenix
Dallas
Baltimore
Atlanta
Tampa
Washington, DC
Sacramento
Orange County
Los Angeles
Indianapolis
Detroit
Cleveland
Chicago
St. Louis
Seattle-Bellevue
Portland
Fort Lauderdale
Columbus
San Diego
Richmond
Raleigh-Durham
New York
Minneapolis
Miami
Charlotte
Philadelphia
Milwaukee
Denver
Cincinnati
White Plains, NY
Silicon Valley
San Francisco
Houston
Boston
Oakland-East Bay
New Jersey
Stamford, CT
Pittsburgh
Austin
0
2
4
6
8
10
12
14
16
58 Law Firm Perspective • United States • 2013
Jones Lang LaSalle
Table of contents
Market outlook favorability for law firmconcentrated submarkets
2013
2014
2015
2016
2017
Austin
Landlord
Landlord
Landlord
Landlord
Landlord
Boston
Landlord
Landlord
Neutral
Neutral
Neutral
Denver
Landlord
Landlord
Landlord
Landlord
Neutral
Houston
Landlord
Landlord
Landlord
Neutral
Neutral
Philadelphia
Landlord
Landlord
Landlord
Neutral
Neutral
Pittsburgh
Landlord
Landlord
Landlord
Landlord
Landlord
San Francisco
Landlord
Landlord
Neutral
Neutral
Neutral
Palo Alto
Landlord
Landlord
Landlord
Neutral
Neutral
Charlotte
Neutral
Landlord
Landlord
Landlord
Neutral
Chicago
Neutral
Landlord
Landlord
Tenant
Tenant
Milwaukee
Neutral
Landlord
Landlord
Landlord
Neutral
Portland
Neutral
Landlord
Landlord
Landlord
Neutral
Seattle-Bellevue
Neutral
Landlord
Landlord
Landlord
Landlord
Columbus
Neutral
Landlord
Landlord
Landlord
Landlord
Atlanta
Neutral
Neutral
Landlord
Landlord
Landlord
Dallas
Neutral
Neutral
Landlord
Landlord
Neutral
Minneapolis
Neutral
Neutral
Landlord
Landlord
Landlord
Raleigh-Durham
Neutral
Neutral
Landlord
Landlord
Landlord
Tampa Bay
Neutral
Neutral
Landlord
Landlord
Landlord
San Diego
Tenant
Neutral
Landlord
Landlord
Landlord
Los Angeles
Tenant
Neutral
Neutral
Landlord
Landlord
Cincinnati
Tenant
Neutral
Neutral
Neutral
Landlord
Indianapolis
Tenant
Neutral
Neutral
Landlord
Landlord
Miami
Tenant
Neutral
Neutral
Landlord
Landlord
Orange County
Tenant
Neutral
Landlord
Landlord
Landlord
Orlando
Tenant
Neutral
Neutral
Landlord
Landlord
Phoenix
Tenant
Neutral
Landlord
Landlord
Landlord
Sacramento
Tenant
Neutral
Neutral
Landlord
Landlord
Stamford, CT
Tenant
Neutral
Neutral
Landlord
Landlord
Baltimore
Tenant
Tenant
Neutral
Neutral
Neutral
Cleveland
Tenant
Tenant
Neutral
Landlord
Landlord
Detroit
Tenant
Tenant
Tenant
Neutral
Neutral
Fort Lauderdale
Tenant
Tenant
Neutral
Landlord
Landlord
New Jersey
Tenant
Tenant
Neutral
Neutral
Neutral
New York
Tenant
Tenant
Neutral
Landlord
Landlord
Oakland-East Bay
Tenant
Tenant
Neutral
Neutral
Neutral
Richmond
Tenant
Tenant
Tenant
Neutral
Neutral
St. Louis
Tenant
Tenant
Neutral
Neutral
Landlord
Washington, DC
Tenant
Tenant
Neutral
Landlord
Landlord
White Plains, NY
Tenant
Tenant
Neutral
Neutral
Landlord
Wilmington, DE
Tenant
Tenant
Tenant
Neutral
Neutral
Jones Lang LaSalle
...
In a market environment that is
largely moving away from law
firms, a significant opportunity
to maintain or potentially cut
real estate costs is for firms to
evaluate how they are utilizing
their space. In studies JLL has
led, 56.5 percent of law firms
larger than 100,000 square feet
have shrunk their occupancy
when relocating offices. Looking
at firms in the 50,000-square-foot
range, 41.7 percent of firms have
given back space when moving
offices. In both of these cases,
firms that moved and downsized,
gave back approximately 15.2
percent of their prior footprint.
Even with the vast majority of
firms still not culturally aligned
with moving associates to the
interior or one-sized offices,
substantial space savings can
be realized that enhances firms’
bottom line.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients
seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70
countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services
to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment
management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information,
visit www.jll.com.
About Jones Lang LaSalle Law Firm Group
Our Law Firm Group’s reach extends around the globe, with knowledge of law firm trends in every major market. With local presence in hundreds
of markets around the world, you can feel confident in hiring a single firm for your real estate needs, while having the advantage of tailored local
market expertise. Our experienced Law Firm Group can oversee your strategy, while giving you access to our integrated network of thought
leaders, leading research analysts and local real estate experts. Moreover, Jones Lang LaSalle’s global platform provides you with comprehensive
solutions and local expertise that matches your long-term objectives across the nation and around the world. At Jones Lang LaSalle, we take a
strategic approach to understanding and solving your challenges and are ready to deliver valuable counsel at every step.
About Jones Lang LaSalle Research
Jones Lang LaSalle’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s
commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our 350 professional researchers track and analyze
economic and property trends and forecast future conditions in over 70 countries, producing unrivalled local and global perspectives. Our research
and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives
successful strategies and optimal real estate decisions.
For more information contact:
Brokerage
Thomas E. Doughty
International Director
[email protected]
+1 202 719 5652
Research
Elizabeth K. Cooper
International Director
[email protected]
+1 202 719 6195
John Sikaitis
Managing Director Americas Office Research
[email protected]
+1 202 719 5839
Lauren Picariello
Vice President Americas Industry Reseach
[email protected]
+1 617 531 4208
www.us.joneslanglasalle.com
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