How Much Real Estate Are You Paying Your Lawyer For?

It’s not surprising that lawyers and their firms spend most of their overhead, after salaries, on their offices, fancy or otherwise.

But after years of slashing staffs, the profession is still well behind other businesses on efficiently using space, according to a recent report by Cushman & Wakefield.

The implications of the study of 286 responding firms, 20% of which were among the top 200 U.S. firms, is that bloated firms could use some space efficiency lessons. Cushman & Wakefield also held roundtables with “more than 100 key law firm decision makers” in preparing the study.

The new study’s operational conclusion is that the legal profession “has experienced a great stress on space efficiencies, reduced square footage per attorney ratios, space flexibility, and long-term space densification to adapt to the ever-changing marketplace” over the past five years.

And the focus hasn’t worked. While firms nationwide have been decimating headcount, the study found that “the legal industry occupies on average two to three times the square footage per employee than the banking, finance, insurance and technology industries.”

Cushman & Wakefield calls the too-big attorney office footprints a “key metric benchmarked in the survey,” and says it is “driving competition among law firms.”

Perhaps not enough. The international real estate management and services firms says that stresses on law firms haven’t been “due to the desire to simply downsize—rather it has been due to the financial pressures to maintain profits, decrease occupancy and operational costs, as well as to be more in line with other industries.”

Cushman & Wakefield’s report was released to drum up law firm business in its Legal Sector Advisory Group, which simultaneously announced 14 “informational symposiums” nationwide over the next 60 days, targeted to matching C&W’s local C&W with prospective law firm clients looking to reassess their office situations.

The study’s confirmed that the lease/property is the law firm’s biggest expense after paying people, even though there has been clear attention to the issue: The 6.2% of revenue spent on real estate was a 2%-4% reduction from a decade ago, Cushman & Wakefield reports, but is in line with 1990s studies by legal consultant Altman & Weil that firms spend about 8% of “gross income” on property costs, and that a range of 7% to 10% “is by no means unreasonable.”

“Future target percentages will continue to reduce real estate occupancy costs through careful evaluation of operational issues and workplace strategies,” Cushman & Wakefield says.

It notes in its operational conclusions that “[o]ver the past five years, the legal industry has experienced a great stress on space efficiencies, reduced square footage per attorney ratios, space flexibility, and long-term space densification to adapt to the ever-changing marketplace.”

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