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Acres of empty office space in Northern Virginia and a soft real estate market in the District of Columbia have some law firms on the move — and others nervous. In the Central Business District, the vacancy rate is 8 percent. In the Dulles Corridor, where many firms hoped to capitalize on the region’s technology boom, vacancies are at a staggering 23.3 percent, according to the CoStar Group Inc., a Bethesda, Md.-based real estate research firm. And law firms have taken on an even more important role as tenants. Although times have been tough in the legal business, three of the 10 largest leases brokered in the District last year and the biggest private lease in the city’s history — the 644,000-square-foot deal inked last month by Wilmer, Cutler & Pickering — were all signed by law firms. In Northern Virginia, inexpensive commercial sublets abound — many of them the result of tech-sector gambles that didn’t pan out. But behind the striking numbers is another story. While firms are landing big leases, they are doing it as frugally and efficiently as possible. “The objective is to have a sharp-looking space, but not one so over the top that clients would wonder what they’re paying for,” says Alan Parver, D.C. managing partner at Powell, Goldstein, Frazer & Murphy. The firm has signed a letter of intent to move into offices in the 530,000-square-foot building under construction at 901 New York Ave. With the move, the firm’s 80-lawyer office hopes to shave at least 200 square feet per lawyer off its current allotment of about 900 square feet per attorney, Parver says. In its planned July move from 555 13th St. to 1625 I St., O’Melveny & Myers downsized partner offices by 75 square feet and added a dozen square feet to associates’ quarters. D.C. managing partner Ira Ralphaelson says the firm will get more usable space per square foot with the new layout. The 125,000-square-foot I Street office can accommodate up to 190 lawyers, compared with the firm’s current 75,000-square-foot office, which is designed for only 90 lawyers and houses 130. Joseph Altonji, a Chicago-based management services consultant for Hildebrandt International, says major firms were routinely taking up to 1,200 square feet of office space for each lawyer when the leases now coming up for renewal were signed in the late 1980s. “The average has come down dramatically,” Altonji says. “It’s a radical difference.” Now some firms are designing offices that, including room for secretaries, storage, and conferences, average only 500 to 550 square feet per lawyer. Despite higher than average vacancy rates, rental costs for premium office space in downtown D.C. have fallen by only about a dollar from last year. The current going rate, averaging $43.50 per square foot, can range as high as $60 per square foot. But in Reston, rent can go as low as $20 per square foot, down from a high of $31.50 per square foot in 2000. According to the CoStar Group, there are 750 law firm tenants in the District leasing a total of 15.9 million square feet of office space; 505 in Northern Virginia occupying 2.7 million square feet; and 373 in suburban Maryland leasing 1.1 million square feet. At the end of the first quarter in 2001, commercial vacancy rates were 6.4 percent in downtown D.C. and 12.9 percent in the Dulles Corridor. Josh Gurland, CoStar’s director of tenant research, says well-established law firms in the Washington metropolitan area are acting aggressively to secure large blocks of premium space in the Central Business District and along New York Avenue near the new convention center. Firms are negotiating leases two or more years in advance of anticipated move-in dates, and are seeking future expansion options. Building owners are scrambling to make themselves appealing as they compete with buildings scheduled to deliver in the last half of 2003 and first half of 2004. Finnegan, Henderson, Farabow, Garrett & Dunner, which signed last year’s third largest private lease in the District, will go from 1,000 square feet per lawyer to about 900 square feet per attorney in its new office at 901 New York Ave. Finnegan’s managing partner, Christopher Foley, says his firm’s current offices were built to the efficiencies of the “1990s legal market” — which is to say, they aren’t very efficient at all. With reception areas and lobbies on every floor, Finnegan Henderson’s offices are designed to be occupied by a hefty roster of administrative and security personnel. The firm doesn’t staff those areas, Foley says, and what results is a lot of unused lobby space. In its new offices, Finnegan will dedicate more room to offices and less to countless foyers — translating into a drop in cost per attorney. Washington’s largest private lease, signed by Wilmer Cutler in February, gives the firm 524,000 square feet and the option to occupy 120,000 more on Pennsylvania Avenue, across from the World Bank. The new offices, which will consist of connected space in three buildings, will be more “logical and integrated” than the firm’s current location at 2445 M St., says administrative partner Carol Clayton. “Modern law firm design is far advanced beyond what it was in the early ’80s,” Clayton says, noting that the firm’s new offices will feature more conference and training rooms and average 225 square feet for partner offices and 150 square feet for associates. Paul, Hastings, Janofsky & Walker will reduce its square feet per attorney, but not office sizes, says D.C. managing partner Barbara Brown. In 2005, the 71 lawyers in the Washington branch of the Los Angeles-based firm will move from 1299 Pennsylvania Ave., where the firm has 58,000 square feet, to 70,000 square feet at 875 15th St. But when it comes to leases, even though a soft commercial real estate market can mean concessions from landlords and lower rents, Brown is proceeding cautiously. “Obviously, it’s always better to be a little crowded and a little cozy than to find yourself with a lot of empty space,” she says. BACK TO NORTHERN VA. Crowded isn’t what some lawyers in Northern Virginia are feeling these days. In fall 2000, Piper Rudnick announced it had leased 75,000 square feet in Reston that would allow the firm’s new Northern Virginia office to grow from 15 lawyers to 100 over the next few years. Almost three years later, there are 25 lawyers and enough room for turning a few cartwheels. Jay Epstien, co-managing partner of the firm’s D.C. office, says that rather than sublease the Reston space, Piper Rudnick will transplant more lawyers from its downtown office to the now-sluggish tech corridor. The moves make sense, Epstien says, given that Piper is consolidating its offices downtown with those of Verner, Liipfert, Bernhard, McPherson and Hand, the firm it acquired last year. Labor lawyers and a group of bankruptcy attorneys have already made the move, Epstien says, adding that the shift offers a more convenient commute for lawyers who live in Northern Virginia. More important, he says, it also provides a solution to the space glut west of the Potomac. Pillsbury Winthrop is another firm making the pieces of a merger and a huge space commitment in Northern Virginia fit together. In late 2000, the firm then known as Pillsbury Madison & Sutro locked in 83,000 square feet in a 14-story building at 1600 Tysons Blvd. in McLean, Va. After merging with Winthrop, Stimson, Putnam & Roberts, the newly combined firm relocated its IP lawyers to McLean from downtown D.C., where it now has 31 lawyers in a Connecticut Avenue office. There is still more than enough breathing room in the McLean office, which in December 2001 had 71 lawyers and now has 55 attorneys, says McLean managing partner William Atkins, adding that he hopes to hire more lawyers in the near future. Cut-rate sublets in Northern Virginia’s tech corridor have caused some downtown firms to take a second look at possible cost savings in the suburbs, says Thomas Fulcher Jr., executive vice president of commercial real estate adviser Julien J. Studley Inc. “Firms currently looking are saying, ‘Gosh, it’s so cheap out there, how can we avoid even looking at it?’ ” Fulcher says. “ We’ll see how much of that actually happens.” Rental costs in Reston can be as little as one-third of those downtown, he notes. Finnegan Henderson couldn’t resist those prices and last August leased 94,000 square feet in Reston Town Center for 42 attorneys. STAYING PUT Despite the lure of moving into a more favorable lease agreement, some firms are opting to expand in their present space. When 45-lawyer Dyer Ellis & Joseph merged with Philadelphia’s Blank Rome in January, the combined firm decided to take more space in Dyer Ellis’ original offices in the Watergate complex, which Dyer Ellis first leased in 1986. The newly integrated firm will have more than 70,000 square feet that can accommodate up to 100 lawyers, and has the option to lease additional offices as needed, says D.C. managing partner Thomas Dyer. The firm will not make many changes to the office layout in the Watergate, except to install a stairwell between two floors to facilitate traffic flow and communication. It might be pricier than the nearby Virginia suburbs, but perched next to the Potomac and a short cab ride to downtown, Dyer says, the Watergate complex offers a location that pleases both attorneys and clients. With a lease that doesn’t run out until 2018, the firm plans to stay in the Watergate — if the building continues to suit its needs. But like other firm managers, Dyer knows that in this market, as a tenant he has room to maneuver.

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