X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Times are good. The hot U.S. real estate market has given law firms more choices for expansion and relocation. But at the same time, it’s essential that firm leaders remain focused on making smart leasing and design decisions, or they could face a much larger problem when the market cools off. This is critical because for most law firms, real estate expenses are second only to the costs of salaries and benefits. If a firm doesn’t plan carefully, some contributors to high real estate costs are space inefficiencies, high square-footage-per-attorney ratios, poor document management policies and high office vacancy rates. Successfully managing a law firm of any size requires taking the time to determine if space is being used efficiently and planning appropriately for future space needs. The first step towards effective space management is to understand your current space utilization and whether it falls within industry standards. For most firms, achieving a 700 to 750 square-feet-per-attorney ratio is optimal. This includes allocations for attorney office space, legal support, meeting spaces, etc. This metric will vary depending upon a variety of conditions such as primary practice groups, support ratios and attorney office sizes. It is relatively easy for general practice firms to maintain the 700-square-feet-per-attorney benchmark. However, many boutique practices require special support spaces, which often drive the total per-attorney space needs above 750 square feet. For instance, litigation practices will typically require more space for additional files and case rooms. Similarly, patent and trademark practices generally require more space for docket and file rooms, as well as for clerks and paralegals. Overall square footage is also dependent upon the ratio of timekeepers to support staff at a firm. On average, most law firms have one secretary serving three or more timekeepers. Firms with tech-savvy younger attorneys typically require fewer secretaries and are realizing the savings not only in salaries but in reduced real estate costs as well. OFFICE SIZE AND FURNISHINGS As you would expect, the size of your attorneys’ offices will have the greatest impact on the overall square footage ratio. Traditionally, firms have housed their attorneys in two or more office sizes (e.g., partners might occupy 225 square feet or more while associates are typically housed in 150 square feet). Paring down the oversized attorney offices to 150 or 225 square feet not only reduces the overall space needs, but also can add flexibility to the design. For instance, many firms are unable to predict long-term needs for partner and associate offices. Pairing two partner offices in a floor plan allows for easy conversion into three associate offices with limited disruption and cost should the need arise. Law firms that have implemented single-sized offices, in the 150 square foot to 180 square foot range, are seeing the greatest savings. Using one standard also allows a firm to maximize the use of its external window line — leaving the interior space for support spaces. In many cases this strategy also allows for consultants, paralegals and administrative staff to enjoy natural daylight and views. Offices — including their natural light and views — are important factors in recruiting and retaining talent in a highly competitive labor market. The transition to using just one or two standard sizes for attorney offices requires firms to consider furnishing that can help maximize the workspace and storage capacity. Today, more firms are considering investing in furniture, typically an expense, versus investing in built-in millwork, usually considered a capital cost during tax preparation. Capital costs require a longer write-off period, typically 39 1/2 years, far longer than a firm’s lease term — while expenses can typically be written off in a seven-year time frame. The tax incentive is one reason to consider this strategy. But there are more basic reasons, e.g., furniture can be more ergonomic and can be relocated if the firm relocates. DOCUMENT MANAGEMENT Most law firms have records retention policies, but few have document management strategies. Being able to wean attorneys from their reliance upon immediate access to any and all paperwork is critical. Files and boxes can easily smother a firm. A successful strategy starts by understanding the timeliness within which documents need to be retrieved. Strategies should include multiple storage types and locations such as scanning; high density filing; case rooms and file rooms within the leased premises; storage space on lower levels within the building; and off-site storage. When planning for off-site storage, it is important to consider how often files are being retrieved and the associated cost. Some firms spend more money retrieving files than they do leasing additional space. LIBRARIES Firm libraries are being scaled down but they have not disappeared. Today, law libraries are less of a research environment and more of an archive for important collections that may or may not be available online. Many firms are managing their libraries using the same principles they apply to document retention. Frequently used collections may be dispersed throughout the corridors or placed in a dedicated conference room. Archived collections can be placed in conditioned lower level space. However, even though the collections are dwindling it is still important to have a quiet place for attorneys to retreat from their offices, e-mail and the telephone. PLANNING FOR GROWTH The most costly and apparent inefficiency in firms is vacant workspace. This is largely caused by an inability to predict growth. Accurately predicting growth is impossible; however, thoughtful scenarios can be developed to better understand how much space should be leased. All law firms should model their projected growth, but a small firm that ignores the analysis could be more adversely affected. One should start by understanding the impact of historical trends and economic effects on practice groups. For example, why has your firm grown or reduced in size in years past? Or as legal needs have changed, what new practices have emerged? Also, consider whether your firm is likely to acquire a lateral partner or practice group, or merge with another firm. If your firm is multi-disciplined, projecting its future growth by examining individual practice group can be one of most accurate predictors. As a whole, the CB Richard Ellis/Association of Legal Administrators 2005 Law Firm Survey found that most firms (of any size) grow from 1 percent to 10 percent annually. With a better understanding of your firm’s expected growth and its timing you can more carefully manage vacant space. Many firms are demanding flexible lease clauses with the option to get additional space in three- to five-year increments. At a minimum, your firm should initially lease enough space to accommodate three years of growth. If your firm has found its growth predictions to be inaccurate, consider reducing the vacancy by subletting for a short term. Understanding space utilization is the first step in making informed real estate decisions. Sound planning strategy looks at multiple objectives such as growth, productivity, employee satisfaction and retention. Though metrics and benchmarking can be reliable indicators, they should not be viewed as the gospel. Management knows the firm’s operations and practice best. Skimping and under-investing in space to save a few rental dollars will yield a weak return on your most valuable resource: your staff. Sally Wilson is the director of advisory services for the law firm practice group of real estate consultant CB Richard Ellis in Washington, D.C. E-mail: [email protected].

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.