Editor’s note: This is the second in a series of articles examining how law firms are thinking smaller when it comes to the space they need, the costs they pay for labor and the nonlegal services they handle.
The recession combined with the growing use of technology has left large law firms with fewer associates, and even fewer legal secretaries.
The shrinking of law firm staff has also meant the shrinking of law firm space as the nation’s largest firms slash the amount of office space they lease and revamp the way they organize staff, conference rooms, attorney offices and reception areas.
"Any large law firm who’s been in their space for 10 years or more, it’s largely obsolete in a lot of ways," said Glenn D. Blumenfeld of Tactix Real Estate Advisors in Philadelphia. "I think you can tell that by the number of law firms who have recently moved or done substantial renovations to their space, which is virtually all of them."
The leverage model of partners to associates and secretaries to attorneys have both been reduced. There aren’t as many associates in law firms as there once was and the younger associates who are there are relying on secretaries much less.
Now when walking around in law firm offices, there is "a sea of empty secretarial stations that are really spaces to store empty filing boxes," Blumenfeld said.
In the "old days." partners were given three-window offices and associates got two windows. Everything else was put in the interior space — libraries, secretaries outside each lawyer’s office, filing rooms, paralegals and conference rooms. Partners had conference tables in their offices and that is where client meetings were held, he said.
Now, attorney offices are shrinking, though firms haven’t yet made the leap to moving lawyers into interior space. And firms are figuring out what to do with the middle portions of their buildings. Many are creating secretary "pods," Blumenfeld said, in which secretaries sit in groups at each corner of a floor and assist a pool of attorneys.
And rather than putting money into sprucing up all of the floors a law firm occupies, firms are often focusing their dollars on a single floor for reception and conference areas — the only place clients will see, Blumenfeld said. The goal for law firms is to find narrow, rectangular buildings that maximize perimeter space and minimize the core area, he said.
Mary Ashenbrenner of Wells Fargo’s legal specialty group in Pennsylvania said that while it might not make sense for Pennsylvania firms to save money through moving back-office operations to cheaper locales, they should be looking at how to save money on rent in the state.
"When firms have the opportunity to renegotiate their leases or give back a floor, they are absolutely taking advantage of those opportunities," Ashenbrenner said. "Firms are always looking at their space to see how they can do more with less space."
That is exactly what firms like Drinker Biddle & Reath, Ballard Spahr and Reed Smith have done. All three firms recently renegotiated their current leases or signed on for a move to a new building in Philadelphia and all three gave up a couple of floors of office space in the process.
Drinker Biddle Executive Partner Andrew C. Kassner said the firm’s space at One Logan Square in Philadelphia was designed 10 years ago and is "extremely inefficient." Law firms don’t need large libraries, fax rooms and "cavernous" document support areas, Kassner said.
"It’s just a waste of a lot of space," Kassner said. "The way all law firms are using space under their current designs is just 10 years past due."
Drinker Biddle hired an architect, created a team to review possible real estate options and organized a team to detail what it would want from new space, all with the goal of reducing its space by 25 to 30 percent. The firm ultimately decided to stay in its existing location but downsized from 10 floors to seven and a half. Kassner said that while the firm is reducing space, the new design will allow for it to house more lawyers than it currently has.
Kassner said Drinker Biddle has poured "millions of dollars" into technology through a three-year capital plan to make sure that the firm’s technology is able to meet client needs. The firm might not have fewer secretaries because of the increased use of technology, but they will be doing different things, Kassner said.
Secretaries will be put in one area and work in a more collaborative environment, he said. Walls will be taken down and offices will have glass doors to let more light in. Conference rooms will be redesigned to better meet the needs of the attorneys using them.
Kassner said Drinker Biddle is still deciding how its attorneys will be placed in the new design. Practice groups may be placed in their own areas or attorneys may be mixed up to promote cross-selling, he said. These are decisions that will be made over the next year or so as the firm finishes out its design plans. The new lease begins in June 2014 and goes through 2029.
Reed Smith will move from its long-held offices in One Liberty Place to Three Logan Square at 1717 Arch St. in 2014. The move will reduce the firm’s space in Philadelphia by more than 25 percent and reduce the square foot per attorney by 21 percent while still allowing for increased attorney headcount, the firm said.
The reduction of space is a recognition that the firm’s employees are "highly mobile, flexible and ever-changing," said Pat Hiltibidal, Reed Smith’s chief of office services, in a statement.
"The focus on the design and development has been to create client facing spaces which facilitate high touch meetings with enhanced technology as well as collaboration spaces for our attorneys which encourage teamwork and idea exchanges. We will create the space for areas like our new café with a barista and even the clustering of secretarial and staff work groups," she said.
Cozen O’Connor will be moving from 1900 Market St. to Reed Smith’s vacated space at One Liberty Place in 2015. The firm isn’t reducing its overall square footage but it will be redesigning the space to better utilize technology and reduce the need for areas like library space, Chief Executive Officer Michael Heller said.
Video conferencing will be updated and every lawyer will have a camera installed on his or her computer to allow for attorneys to quickly communicate with one another across offices.
Heller said the firm will create more open space for attorneys to congregate and collaborate. And while Cozen O’Connor hasn’t had to think just yet about reducing headcount, Heller did note that Blank Rome’s recent push to adjust its attorney-to-secretary ratio to better match the needs of younger attorneys is something that is on the horizon for other firms. Heller said one secretary may be assigned to six junior attorneys who rely less on technical assistance than do more senior attorneys who may still need their own secretary.
Heller said it is fair to say that the changes to law firm space have not had a dramatic impact on attorneys. He said the biggest change on that front has been shrinking partner offices to free up more money for conference room floors.
A recent report by real estate firm Jones Lang LaSalle found the market in many cities still favors law firms when it comes to lease negotiations.
The report found law firms are downsizing space, but not people.
"Law firms are lowering their overall space needs by reducing the size of perimeter offices — but also in creative ways by transforming empty interior support spaces and secretarial carrels into flexible work spaces and associate offices," said Elizabeth Cooper, Jones Lang LaSalle international director and co-chair of the firm’s law firm practice, in a statement. "In 2012, 29 percent of all large (more than 50,000-square-foot) law firm leases involved rightsizing."
When relocating to a new space, law firms are cutting approximately 14.8 percent of their space due to increased efficiencies, the report found.
Jones Lang LaSalle did a detailed analysis of several major markets across the country, including Philadelphia, although not Pittsburgh. The company ranked Philadelphia eighth among the top 10 cities that are favorable markets for law firms to renegotiate space. According to the report, most large Philadelphia firms have made their latest round of leasing decisions. That has left mainly smaller firms looking for space in the market.
The average class A rent per square foot is $27.92 in Philadelphia, JLL said.
If firms have the ability and desire to start renegotiating space, they may want to start sooner rather than later. According to JLL’s report, the majority of class A markets across the country will turn to the landlords’ favor by 2015.
The next installment of the Thinking Small series is set to run February 26 and focus on outsourcing administrative functions.