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Glut of Law Firm Office Space Hits 6 Million Square Feet
The National Law Journal
November 11, 2009
Image: Digital Vision
Looking for some law firm office space?
Well, there's plenty to be had. A recent survey by real estate services firm Jones Lang LaSalle showed that more than 6 million square feet of built-out law firm office space is available throughout the country -- the most vacant space in recent memory.
"I can't recall there ever being this much," said Thomas Doughty, international director at Jones Lang and chairman of its law firm group. "It's a lot of space."
He attributed the glut to several factors, including the shuttering of a number of large firms, shrinking firms eager to unload unneeded space and moves by a number of firms into new buildings.
"It's a good thing if you're in acquisition mode, but it's a bad thing if you are warehousing space or you want to sublet space," Doughty said.
The scale of the surplus varies from city to city, according to the survey. San Francisco has the most, with more than 1.7 million square feet -- more than twice as much as any other U.S. city. Part of that glut owed to the dissolution last year of locally based firms Heller Ehrman and Thelen. Chicago has 859,000 square feet of unused law firm office space, partly because Kirkland & Ellis abandoned its former headquarters in favor of a brand new building where it occupies 650,000 square feet on 24 floors. Washington, D.C., has 750,000 square feet of unused law firm space, while New York and Los Angeles both have 500,000 square feet. Of the 10 large law firm markets surveyed, Boston has the least amount of available space, at 181,730 square feet.
Most of the available law firm office space is rated Class A, a distinction brokers give to the most desirable buildings in terms of location and quality.
Already built-out spaces have become especially attractive because they come with fewer up-front costs. Building out empty office space for law firm use can cost $200 per square foot, Doughty said.
Law firms increasingly are looking to sublet unused space, particularly to smaller firms. Clifford Chance has sublet 82,000 square feet of its New York office to Holland & Knight, for example, while Dallas-based McKool Smith is subletting a floor of Akin Gump Strauss Hauer & Feld's New York office.
The availability of space -- and landlords' eagerness to fill those spaces and hang on to existing tenants -- has led a large number of firms to re-examine their office needs and renegotiate their leases long before they run out, Doughty said. The number of law firm lease renewals during the past year has been higher than normal. Nearly 52 percent of office leases in major markets were renewals, compared to around 30 percent two years ago, Doughty said.
Some firms may want to take advantage of the climate to extend their leases under the lower rents that many landlords are offering, Doughty said.
