Firms Acting on Magnetic Attraction to Austin, but Limited Hiring Pool Can Slow Growth

Firms are falling over each other this year in a rush to open offices in Austin, as they follow  clients—a sure way to have some security before investing in an office—or capitalize on opportunities with businesses moving to the Texas capital city.

Austin has eclipsed Houston and Dallas as the hottest city in Texas for office launches, with Latham & Watkins opening an office this month, following the path of at least seven other firms. And, the year isn’t near over.

The group includes a range of firms, but includes Am Law 100 firms Kirkland & Ellis, Latham & Watkins, O’Melveny & Myers, and Quinn Emanuel Urquhart & Sullivan.

It is getting to the point where “it’s going to be conspicuous” for elite firms to not be in Austin, said Lee Allbritton, an Austin-based principal in Amicus Search Group.

But there’s one hitch, according to recruiters in Texas—there may not be enough lawyers in Austin to staff all of the offices.

“It is a remarkably limited lawyer pool,” Allbritton said.

Robert Croyle, a managing director for Major, Lindsey & Africa in Houston, makes a similar observation.

“There’s only so many people in Austin to have the rates and the clients and the business that could make a move to a Latham or Kirkland or a O’Melveny or somebody like that,” he said.

To counter that small hiring pool, Croyle said firms are moving lawyers from other offices to  Austin. Kirkland & Ellis, which launched its Austin office in April with four partners relocating from other offices, is one example of that strategy for building a new office.

Latham opened its office in Austin on Sept. 1 with DLA Piper partners Sam Zabaneh and Jenifer Smith and Wilson Sonsini Goodrich & Rosati partner Scott Craig, but the firm expects that partners in other offices with strong ties to Texas will either relocate to Austin or spend a significant amount of time there.

Robert Kinney, president of Kinney Recruiting, said it’s not uncommon for firms to add lawyers in Austin by transferring them from other offices, or hiring them from elsewhere.

An Austin office as an advantage for many firms, he said, in particular because it’s very helpful for recruiting associates, especially graduates of the University of Texas School of Law. Even if it takes firms a while to build out an Austin office, because of the smaller market, it can be a worthwhile investment, he said.

“There’s expectations about growth, and a willingness to invest. Frankly, some of these firms have done so well that they can afford to invest, getting positioned for where they need to be,” Kinney said.

Latham, the most recent entrant in the market, initially plans to build its emerging companies, private equity and capital markets practices in Austin.

In the same space, California technology firm Gunderson Dettmer Stough Villeneuve Franklin & Hachigian launched an office in April in Austin, hiring two emerging companies lawyers from Vinson & Elkins.

Gunderson Dettmer’s opening came two decades after the firm closed its Austin office during a tech downturn, but the firm continued to do work in Austin. David Young, Gunderson Dettmer’s managing partner, wrote in a press release in April that the firm has represented companies and venture capitalists in Austin for more than a decade, and has been looking for the right opportunity in Austin for a while.

“Austin’s growth is remarkable and our approach has always been to grow where our clients are,” Young wrote.

That supports Croyle’s assessment that firms are moving into the Austin market, regardless of any staffing challenges, because clients want them there.

“If your client goes to Austin, you go to Austin,” he said.

Croyle said many of the tech and life sciences companies relocating in Texas gravitate to Austin. Some of the companies moving into the Austin market, or expanding in it, include Tesla, Google and Facebook.

Another factor is luring some firms to Austin. The city is located in the Western District of Texas, which has become the nation’s busiest intellectual property litigation venue following Alan Albright’s move to the federal bench in Waco.

Those firms putting down roots in Austin due to their patent litigation practice include Quinn Emanuel and Stradling Yocca Carlson & Rauth.

Other firms that have opened Austin offices in 2021 include global cloud-based firm Rimon P.C.  and Balch & Bingham, a Birmingham, Alabama-based firm that already had an office in Houston.