Law firms this year are leasing on average far less office space than at any time since the commercial real estate recovery took hold in 2009.
The trend reflects seven years of rising office rents in the U.S. commercial real estate market – one that includes Philly office space, Philly retail space and Philly industrial space — coupled with a slowdown in legal services employment growth, which has averaged less than a half a percent each year since 2008, according to the Bureau of Labor Statistics.
This report on law firm office space, in relation to national and Philadelphia commercial properties, was made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
So far this year, the average square footage of space leased by law firms both in the U.S. and Philadelphia commercial real estate markets that measures more than 5,000 square feet had, in the past, been 18,600 square feet, according to CoStar data, down from an average of 22,795 square feet in 2014.
Gross asking rents for U.S. and Philadelphia commercial real estate properties leased by law firms have risen from about $32/square foot on average in 2009, to $40.30 this year – an increase of 26%.
Faced with the pressure of high rents, declining fees and stagnant headcount growth, many of the nation’s largest law firms are continuing to downsize their office space, paring back the perk of corner offices, according to a number of real estate services firms recently interviewed on this particular topic of change involving a combination of national and Philadelphia commercial real estate listings.
As law firms continue to look for ways to reduce expenses, many are considering switching to universal or standard-size offices when it comes to new space in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space. Along this trend, many law firms are reducing the super-sized corner office in favor of standardized spaces measuring 150 to 165 square feet for associate and partner alike.
Moreover, in addition to reducing upfront costs by allocating fewer square feet to each attorney, universal office sizes also mean lower transition costs since offices no longer need to be reconfigured to make room for a newly-promoted partner, for example.
While many firms have reduced their space in both U.S. and Philadelphia commercial real estate listings over time, some of the largest reductions of space occur when firms move to more efficient construction in new buildings. For example: In San Francisco this summer, one firm signed a new lease at 101 California St. for 40,000 square feet, downsizing from approximately 70,000 square feet at 55 2nd St.
In New York City earlier this, another firm renewed 200,000 square feet but shed approximately 40,000 square feet at its 1251 Avenue of the Americas location by giving back a floor.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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