Law firms starting to downsize

There aren’t many industries that dominate the commercial office space market like law firms.

There aren't many industries that dominate the commercial office space market like law firms. But a recent trend to downsize and forego office expansion has lessened their hold over the commercial real estate market, according to a recent survey.

"Law firms occupy two to three times more square footage per employee than most other industries – banking, insurance, technology and consulting firms," Sherry Cushman told Oregon Live. "Other industries might have a one or two percent difference between firms in their real estate spending as a percentage of revenue. The legal industry is all over the place. Of all law firms, 12.2 percent are spending more than 9 percent of their revenue on real estate, and 12.6 percent are spending less than 4 percent."

Cushman shared the results of a Cushman & Wakefield survey of 286 law firms around the nation. Sherry Cushman is of no relation to Cushman & Wakefield founder J. Clydesdale Cushman, according to Oregon Live.

Law firms in Portland
In Portland, Ore., the 25 largest law firms combine to occupy 1 million of the 12 million square feet available in downtown top-tier office buildings, according to OregonLive.
While that might seem extraordinarily high, it's actually around 10 percent less than what Portland's top 25 law firms occupied five years ago.

"Law firms are in a downsizing mode, but it's not necessarily because they have fewer attorneys," Cushman told OregonLive. "It's really because they've had an overabundance of real estate. Law firms used to be driven by wanting the best building, the best views. It was really driven by ego."

Cushman noted that law firms use to select the largest offices they could fit into their budget. That's no longer the case as competition continues to rise.

"What you're seeing now is competitive bidding," Cushman explained. "Now the company comes in and says, "We've got this litigation and we don't know which way it's going. We want to know your fixed fee to litigate." The question is, how can you run a business when there are fixed fees and you can't bill every hour?"

Cushman said that other than salaries, the largest fix cost for a law firm was real estate - hence the cutback on office expansion.

Commercial expectations in nearby Seattle
Cushman & Wakefield's Global Office Forecast said Seattle is showing strong signs of recovery after its 2009 downturn. Vacancies are expected to drop slightly and asking prices are predicted to average more than 5 percent growth per year through 2015.

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