Is US law firm leasing rebounding post-pandemic?
Commercial real estate has suffered in traditionally in-demand places like Manhattan. (Photo by Lindsey Nicholson/UCG/Universal Images Group via Getty Images)
Law firm leasing in the United States for the first half of 2023 is the strongest on record since the beginning of the COVID-19 pandemic three years ago, according to a new report from commercial real estate brokerage firm Savills.
The Savills U.S. Law Firm Activity Report Q2 2023 shows law firms leased 3.3 million square feet in the first six months of this year, which is up about 22% compared to the first six months of 2022. The 1.6 million square feet leased in the second quarter is also well above the 1.4 million square feet quarterly average since the start of the pandemic.
“Law firm leasing volume is beginning to normalize as law firms appear to be committed to the long-term need for office space and are increasingly confident with moving forward with leasing decisions,” according to the report.
Tom Fulcher, chair of Savills’ legal tenant practice group, told the American Lawyer that law firms feel confident they will need more office space despite many employees’ desire to continue working remotely.
“Earlier on people were gently suggesting, but now there are mandates, now it’ll affect compensation,” Fulcher said. “Firm management is saying let’s get people back.”
Savills’ report highlights five significant leases—including three in New York—for more than 100,000 square feet in the second quarter. The other two were in Washington, D.C. Los Angeles, Philadelphia and Houston were among other markets that saw multiple deals for more than 20,000 square feet during this time period.
So far in 2023, 69% of law firms’ leases for more than 20,000 square feet were transactions to stay in place, while 31% were relocations or new office leases, according to the report. It also shows that 42.5% of relocations and renewals were expansions.
Fulcher told the American Lawyer this also indicates law firms are planning for attorneys to be in the office at least three days a week.
“That means pretty much full occupancy, because everyone will be in Tuesday, Wednesday, Thursday,” he said.
Fulcher added that the increase in stay-in-place transactions, which were only 34% of law firm leases in 2022, could reflect the lack of available office space as well as ongoing construction delays due to the pandemic.
“It’s starting to feel like a trend,” he told the American Lawyer.