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When a law firm considers relocating to new space, it is usually a very significant event in the firm’s history. Naturally, many of the decisions made in this process are economic, but a number of considerations involve another issue of tremendous importance — the firm’s vision of its future. Powell, Goldstein, Frazer & Murphy looked at the expiration of its current lease in Washington at the end of 2004 as an opportunity to determine what precisely its D.C. office should be in the coming years. The office began as a two-person operation in 1977, grew to as many as 115 attorneys, and now has approximately 85 lawyers. Last year, the office had the most profitable year in its history, and many of its practice groups — tax, health care, and litigation, among others — are doing well and looking to grow in size and scope. The Washington office’s lease became part of the ongoing strategic planning process the firm had instituted in 1999. Many issues were aired in this process, including the types of investments the firm was prepared to make in the Washington market. In 2001, we began looking in earnest at our space options. Ultimately, Powell, Goldstein’s leadership unanimously endorsed the twin goals of continuing to build the core practice areas in the office as well as attracting new, regulatory-based practices. It is with this understanding and mandate in hand that the Washington office began to consider its space needs for the future. A number of commentators have calculated that rent typically constitutes about 8 percent of a Washington law firm’s operating costs. Thus when the firm’s lease at 1001 Pennsylvania Ave., N.W., was within two years of its expiration, the firm began an analysis of how it could control its significant fixed costs and provide for its anticipated fast-paced expansion. The firm’s Washington office has been based at 1001 Pennsylvania Ave. since 1987 and has undergone five expansions in the succeeding years. While the building offers a large floor plate, it has an interior atrium that has provided certain challenges when it comes to layout and efficiency. The large floor plate and greater than normal interior space combined to produce an exceedingly high square feet per attorney ratio. Currently, the firm has approximately 1,000 square feet per lawyer at a time when other firms are trending toward 750 square feet per lawyer. We concluded early in the process that this ratio needed to change significantly, whether the Washington office moved to a new location or not. Because of its central location, 1001 Pennsylvania Ave. is home to several other law firms and businesses, all of which were growing rapidly as well. As a result, expansion opportunities for Powell, Goldstein in the building were few or none. Further complicating the process was the fact that the firm planned to move its Atlanta office at the same time. With this in mind, the firm decided to select a single real estate brokerage firm that could grasp the complete picture and represent it in both markets. The firm chose CB Richard Ellis, which began the process of learning how Powell, Goldstein works, its future growth plans, and its likes and dislikes about its existing space. CB Richard Ellis then submitted a list of 10 sites in the Washington market for the firm’s consideration. The Washington office appointed a 10-person space committee comprising partners, associates, and administrative staff. The committee narrowed the site list, began to tour the selected sites, and compared the economics of the proposed deals. The firm’s final prospects included Boston Properties’ new building at 901 New York Ave., Tishman Speyer Properties’ development over the Hecht’s Department Store at 13th and G streets, and the Bowen Building on 15th Street being developed by the Kaempfer Co. The building management at 1001 Pennsylvania Ave. did not submit a competitive proposal. The firm initially chose 801 17th Street, a 1960′s building housing the Federal Deposit Insurance Corp. that was slated for a complete facelift and renovation down to the slab. A complex lease negotiation ensued but ultimately fell through when the building’s owners decided to postpone the renovation and renew the FDIC’s lease. The space committee went back to the drawing board in June 2002 with the planners and designers to analyze the prior choices and consider several new opportunities. The committee identified several specific goals to guide its analysis of the options, including: • No more than 800 square feet per lawyer. • The opportunity for periodic expansion — but without having to become a landlord and get deeply involved in the subletting business. • A distinctive building that would be well-known as a result of its attractive architecture and location. • A location in an exciting part of the city, easily accessible by Metro and car. • State-of-the-art security, and a tenant improvement allowance from the landlord sufficient to cover most of the hard and soft build-out costs. • Favorable long-term base rent. In the meantime, the D.C. office market had softened considerably, and after further test fits, the firm chose 901 New York Ave., where it initially leased 85,226 square feet, with a series of options to take additional space. The new space is in the city’s East End, a rapidly developing part of town close to the new convention center as well as the old one. The other tenants in the building are all law firms, and Powell, Goldstein recognized that we were getting into the neighborhood ahead of the real estate curve. In coming years, we expect the East End to continue to grow, becoming an increasingly popular and desirable part of the city. The firm selected Hitt Construction to build out the space, and Karchem Associates as construction manager. The process of designing the interior space then began. The firm needed more efficient space — no more walking an entire city block to get to offices on the other side of the building. The new space has a smaller footprint, which will be more conducive to a sense of community. The firm also wanted conference facilities and the ability to physically align certain practices so that they could easily work together as client teams. Aesthetically, the firm sought a very contemporary look with cherry wood and steel and an extensive use of natural light. Exterior offices will have interior walls with three-foot windows along the ceiling to allow for natural light to filter in to the interior spaces. While it is certainly a tremendous undertaking to relocate an entire firm in two separate cities at the same time, Powell, Goldstein was able to use the situation, as well as the favorable market conditions, to its advantage. As a reward for years of thoughtful planning and careful attention to detail, in just a few months, the Washington office will move to its new home — an exciting new building in a new and growing neighborhood that will allow the firm to serve its clients and meet its growth goals for years to come. Alan K. Parver is managing partner of Powell, Goldstein, Frazer & Murphy’s Washington office. He can be reached at [email protected]. Peter W. Segal is a partner in the firm’s real estate practice who handled the real estate components of the relocation effort. He can be reached at [email protected].

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