Covington & Burling’s old Washington, D.C. offices on Pennsylvania Avenue. Covington moved out in 2015.(Photo: Diego M. Radzinschi/ALM)
The ghosts of Washington’s law firm offices may take years to vanish.
That’s because office space in the city is at its highest vacancy rate in 25 years, a chronic oversupply that has left massive office buildings—including many formerly occupied by large law firms—dark and deserted.
As of last month, 6.5 million square feet of new or renovated office space sits open in D.C.’s downtown and in the city center’s East End, the two neighborhoods firms most often haunt, according to consulting reports from the real estate brokerage firm CBRE Inc. Much of that space was once home to law firm tenants.
Prominent former law firm buildings that now sit mostly empty include those that hosted Arnold & Porter, Venable, Pillsbury Winthrop Shaw Pittman and Dentons. Those firms have moved to new spaces in the past few years.
Covington & Burling left behind one of the biggest buildings in town, at 1201 Pennsylvania Ave. N.W. The firm vacated more than 232,000 square feet in the building when it moved to City Center DC in 2015. More than two years later, many of the floors remain dark and the main lobby is now under construction. At least one group, the think tank Hudson Institute, announced plans to move into parts of the space.
“It’s kind of like a house that’s been on the market for three years. You wonder, ‘Why hasn’t anyone bought this’?” said Sherry Cushman, head of the law firm brokerage group at Cushman & Wakefield.
The vacancies persist as law firms continue to shrink by shedding floors they once sprawled across and renovating into more efficient footprints.
The “densification,” as CBRE dubs it, began in 2013. About 40 percent of Am Law 100 firms in the city have adjusted the space they need, the brokers said.
Downsizing and consolidation have gone hand in hand in the industry, even as many firms have grown larger overall.
Mergers between Norton Rose Fulbright and Chadbourne & Parke; Blank Rome and Dickstein Shapiro; Dentons and McKenna Long & Aldridge; and Morgan, Lewis & Bockius and Bingham McCutchen, among others, further shrunk the office space those firms needed. In almost all cases, the smaller D.C. firm office moved into its larger merger partners’ digs.
A collective contraction like this is particularly hard for D.C., compared to other cities, because law firms take up almost half of all top-flight commercial building spaces across town. Top floors of buildings, with their rooftop decks and views of the monuments, are nearly mandatory to impress clients and recruits. And developers continue to build new trophy spaces to attract top-paying companies, including the law firms.
“All law firms are looking at using real estate to become more competitive,” Lou Christopher, a CBRE vice chairman in D.C., said. “They look at those old buildings, and they don’t do anything for their brand.”
Christopher compared law firms’ opinions about moving in to another firm’s former building to that of a Burger King moving into a shuttered McDonald’s. His point: The competitors wouldn’t do it.
Some of the space left behind by law firms has attracted new tenants from the nonprofit world, technology and business services companies and co-working spaces. Often, those organizations move into just a sliver of a former law firm’s space.
Plus, the city doesn’t have robust businesses in industries like health care and finance, which inhabit much of the corporate office space in cities like New York, Boston and Houston.
It’s rare for newly vacated law firm offices to rent again to a different law firm, CBRE’s reports said. (Though it’s not unheard of: Cozen O’Connor moved into Squire Sanders’ old home in 2015 after the latter merged with Patton Boggs.)
The forecast for the city’s office buildings does have a sunnier side.
Eleven Am Law 100 firms in the city expanded their footprints in the past year, including Kirkland & Ellis, Cleary Gottlieb Steen & Hamilton, Venable and Boies Schiller Flexner.
And CBRE analysts described a possible coming “Trump bump,” with more legal work flooding into D.C. because of federal policy changes. The company expects 67 Washington law offices to make decisions to either renovate or move their offices in the city in the next seven years.