Welcome to the Law Firm Office of the Future: Smaller, Higher-Tech and One-Way
As law firms get comfortable with remote work, the likelihood that physical offices will look far different in the future continues to grow.
May 05, 2020 at 01:00 AM
4 minute read
The original version of this story was published on The American Lawyer
Some of the effects of the COVID-19 pandemic on law firms are already clear. Remote working will take off as never before and firms will operate with more prudent and flexible financial models.
But both of these point to a more conspicuous development that will likely take effect once the lockdown ends: the change to law firm offices.
If more people spend time operating at home and law firms are reassessing their fixed costs, then it makes sense for them to question their need for such large, expensive workplaces. Most of the world's top 200 law firms have premises in New York, London and Hong Kong, and often in Singapore and Paris as well. All of these are among the most expensive commercial rental markets in the world.
Is it really worth paying $100 per square foot for a large central London office given the firm operated fairly well while it wasn't being used?
Large institutions are under particular pressure. In April, Morgan Stanley's CEO James Gorman said the investment bank would have "much less real estate" post-pandemic, which is a warning to major international law firms that have historically relied on scale to help protect them from economic downturns. Some now fear having a lot of real estate bills puts them at a disadvantage.
While it would be no surprise to see law firm leaders shrink office space and implement more formalized work-from-home policies, it would also be easy to overestimate this change. Perhaps working from home works best when everyone is doing it. Those operating remotely when half the staff are together in an office still risk missing out on the social interaction and subtle mood cues that come from being in the same location.
But some shift is inevitable. By chance, many firms have a perfect opportunity to make changes in London because many are in the process of reviewing their rental situation.
Freshfields Bruckhaus Deringer, Bryan Cave Leighton Paisner, Cooley and Linklaters all agreed to new premises fairly recently. In some ways the timing could not be worse for them. As pleasant and as space-efficient as their new offices will be, there is probably little doubt they would have been in a stronger negotiating position had they not yet signed their leases.
Others have been more fortunate on timing and will be able to use the pandemic lockdown experience to help calculate how much less space they need. These include Slaughter and May, which is mulling a departure from the premises it has occupied since 2002. Skadden, Arps, Slate, Meagher & Flom, Baker McKenzie and Hogan Lovells are also among the scores of others considering moves. So, too, is Kirkland & Ellis, which is housed in London's iconic "Gherkin" building, although some partners privately say they do not like it there.
Those firms are set to encounter a cheaper office rental market. According to an April report by UBS Asset Management, if things do not return to normal soon, "the damage done to corporate office occupiers may be even more severe than the financial crisis." Property consultants expect lower rents and rent-free periods.
But with that cost savings comes other issues to consider: Will firms implement social distancing setups? What new hygiene measures must they put in place? Will they need to invest in another level of IT security for remote working?
A recent report by real estate services firm Cushman & Wakefield said employers will need to think about measures such as staggered arrival and departure schedules and even one-way walkways. It might sound silly to people who operated just fine before the pandemic, but firms that sign leases in the future will have no excuse for not having considered such things.
It is set to be just the start of a wider revolution in the way firms use office space.
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