While reports of 25% office vacancies in Los Angeles and similar figures in other rental markets around the US have dominated real estate news for several months and led some observers to describe a ‘collapse’ of the office rental market, not all prospects are doom and gloom.
Space planners and tenants alike are devising creative ways to weather the biggest slump in a decade, while some law ﬁrms are embarking on space expansions. Is there an identiﬁable trend in the ofﬁce space rental market?
Necessity is the Mother of Efﬁciency
There is no denying that the COVID-19 pandemic has brought about a radical shift in how ofﬁce space is to be utilized, at least until both employers and employees feel that it is ‘safe to go back in the water.’ From increased ﬂextime arrangements to staggered shifts, to full remote work-from-home adaptations—and hybrids of all three—the ‘workplace’ no longer means a 9-5 stretch at a tower in the sky for many workers. And, as might be assumed, the impact on the ofﬁce leasing industry has been profound.
From the perspective of law ﬁrm COOs and ofﬁce managers, the challenge has been to deal with balancing a reduced square-footage requirement while maintaining a particular ﬁrm culture, both to attract and keep associates and partners and to meet client expectations. And it is this necessity that has spawned a variety of creative uses of space never considered before.
The End of the Corner Ofﬁce?
Among the space planning initiatives adopted by an increasing number of law ﬁrms, the concept of ‘Open Space’ ﬂoor plans that make little use of walled-off ofﬁce spaces is growing in popularity. The pressures on law ﬁrms to make more efﬁcient use of the space they are paying for has led to something of a revolution in traditional ‘ofﬁce space hierarchy’. In this scenario, preferred ofﬁce spaces went to valuable partners, with the coveted corner ofﬁce reserved for senior partners.
Creative, ﬂexible ofﬁce designs accommodate not only secretaries and law clerks in open-space settings but associates as well. In some cases, partners are giving up their walled-off spaces to relieve pressure on the cost of occupancy—the number two expense after attorney salaries, beneﬁts, and bonus awards. In general, though, partners view their corner ofﬁce as fair compensation for having put in years of hard work, sometimes at the expense of the oft-touted yet rarely enjoyed work-life balance. Despite this resistance to such new concepts in square-footage usage, for the cost-conscious, competitive law ﬁrm, the on-average 15%-25% reduction in occupancy costs has swayed the argument. On the other hand, millennials welcome the integration of ﬁrm-wide staff into a more communal setting as creating a more ‘democratic’ workspace, not unlike that enjoyed at Big Tech ﬁrms like Amazon and Google.
Despite achieving team collaboration via Zoom, Microsoft Teams, and similar peer-to-peer teleconferencing tools, sooner or later, most work-from-home employees need to sit in person with their colleagues ‘at the ofﬁce’. But rather than committing an otherwise ‘empty’ space to such infrequent use, contemporary ofﬁce planners are incorporating collaborative, ﬂexible ‘touchdown’ ofﬁces for temporary or sporadic use. With proper scheduling of in-house meetings, these spaces never sit idle. This prevents the wastage of precious rental dollars.
With other professional practitioners facing the same rental dilemma as lawyers, one obvious solution would be to partner with an accounting ﬁrm or consultancy to further enhance occupancy cost savings. However, several ethical obligations must be considered by the lawyer who is contemplating doing so. For example, while many states allow a lawyer to practice out of a non-legal business ofﬁce, there must be a separate, distinct ofﬁce space for the non-lawyer. Some rulings allow a common entrance and reception area but not the sharing of any common expenses. However, accomplishing this in reality can be tricky.
The ﬁnancial attractiveness of such arrangements must be considered in light of the risks posed to client privacy and conﬁdentiality. Even if communication is preserved as conﬁdential, just the visibility of Client Jones arriving for an appointment with a law ﬁrm can raise the specter of an ethics concern or even a violation.
Not all Footprints are Shrinking
Despite the changing real estate rental market, at some ﬁrms, the trend is just the opposite – there’s an overall reduction in occupancy by many law ﬁrms due to the practicality and safety of more remote work. A New York ﬁrm has re-signed its 400,000 sq. ft. lease at 1 New York Plaza, while another has reduced its prime Manhattan square footage to expand in Westchester County, and open additional ofﬁces in Long Island.
For some, the pandemic has presented a golden ‘futures’ opportunity, as they proceed to lease extra space now at the lowest rates in years, to be well-positioned to save money in the future, as their ﬁrm’s expansion plans continue on target.
Some expansions have little to do with a law ﬁrm’s operational needs per se. Instead, they enhance the attractiveness of the ﬁrm for associates and cross-over partners who may be tempted by elegant dining facilities, state-of-the-art ﬁtness installations, and other high-end amenities.
Maintaining a certain ﬁrm culture via presentable and functional space while simultaneously maintaining a viable bottom line has challenged law ﬁrms for years. However, during the
COVID-19 pandemic, that challenge
has now ‘gone viral’.
“PARALEGALS ARE OFTEN HIRED FOR INTENSIVE SUPPORT ROLES WITHIN AN ATTORNEY’S CASELOAD….
…A WIDE RANGE OF TRULY SUBSTANTIVE LEGAL WORK CAN NOW BE LAWFULLY ASSIGNED TO A PARALEGAL”
1. The Issue
COVID-19 has led to the proverbial ‘death’ of the traditional ofﬁce space, with Work From Home – or ‘WFH’ as it is notoriously known now, or hybrid work arrangements dominating the conversation during many interviews, offer negotiations, and organizational planning efforts.
Necessity was the original cause of this change. And the global pandemic required all businesses to adjust to the new world order. Three calendar years into the pandemic, this reduced need for ofﬁce space has been fueled by employees’ personal preferences and a reduced reliance on commercial real estate.
3. The Path Forward
Adopting new ways of conceptualizing ‘the ofﬁce’ in the midst of the pandemic and beyond.
1. Determine how reliant your business is on ‘in-person’ work:
Some legal work is incredibly sensitive, requiring the attorneys and their support staff to work in tight chain-of-custody rules in order to limit the leak of information. Other legal work demands face-to-face interactions, such as consoling a grieving family on their estate matters. If your ﬁrm’s matters require in-person work, then perhaps, holding on to an ofﬁce space is a wise option.
2. Differentiate and categorize employee presence based on the ‘essential’ needs of the ﬁrm:
Once the ﬁrm determines who the ‘essential workers’ are, they can better scope the operational needs of the workforce – both physically and virtually.
3. Build, buy, and rent with the assumption that the pandemic is here to stay:
Should we be fortunate enough to live in a world where COVID-19 goes away, then perhaps businesses can consider scaling up their ofﬁce work to larger locations. In the meantime, harness a hybrid or ﬂexible workforce and save property costs by utilizing creative ofﬁce arrangements or smaller workspaces.
4. Accommodate ﬂexibility where possible:
Even if an employee’s presence in the ofﬁce is absolutely essential, it is still important to accommodate ﬂexibility in their schedule where practical. If work can truly be done at home with no risks, a formulaic strictness in workplace attendance may breed resentment among employees towards the ofﬁce.
- https://www.perkinscoie.com/en/news-insights/tammy-baldwin-quoted-in-the-american- lawyerculture-vs-cost-law-ﬁrms-are-taking-diverging-approaches-to-real-estate-in-the- new-normal.html
- https://www.forbes.com/sites/robasghar/2014/01/13/what-millennials-want-in-the- workplace-and-why-you-should-start-giving-it-to-them/?sh=1b64f5f64c40