51.1 F
Laguna Hills
Thursday, Mar 28, 2024
-Advertisement-

Legal Challenges: Big Firms Trend Toward Trims on Space

Large law firms have their names on some of Orange County’s most prominent offices, as well as top-floor space in many of the market’s trophy buildings.

Yet they’re taking less office space than they did a few years ago.

“Square footage (for law firms) is contracting—it’s definitely a trend,” said Randall Parker, president of Travers Realty Corp., a tenant brokerage that has offices in Newport Beach.

Law firms leased close to 850 square feet of office space per lawyer in the 1980s, and nearly 750 square feet per lawyer in the 1990s. Now firms are averaging 550 to 650 square feet per attorney, and that figure continues to inch downward, according to figures from Travers Realty, which represents a number of area law firms on their office leases.

Changing Ways

Part of the change reflects changing ways of doing business among law firms—think shrinking on-site law libraries, fewer support staff per attorney, and electronic storage replacing paper files.

“Library rooms are now nearly nonexistent,” Parker said. “And when, maybe before you saw three attorneys for every legal secretary, now it’s closer to four-to-one. They just need less space now.”

The cuts also are partly due to an industry that was slow to “rightsize” office space during the recession, according to a recent national report on law firm office trends from Chicago-based brokerage Jones Lang LaSalle.

That’s changed in the past couple years.

Nationally, 28.6% of all law firm leases of 50,000 square feet or more saw cuts on office space in 2012, according to JLL’s report.

Firms that moved to new offices decreased their space by an average of 15%.

OC’s larger law firms “are still attempting to shed excess shadow space that they have built up as a result of employment cuts and the evolving trend of occupying existing space more efficiently,” the JLL report said.

OC’s 51 largest law firms employed 2,014 lawyers as of the end of 2012, a slight drop from year-ago levels, according to the Business Journal’s Jan. 21 ranking of area firms. It was the first year-over-year decline in attorney count that the county has seen since 2009.

50,000+

The JLL report noted that nine law firms lease more than 50,000 square feet of space in OC. (Knobbe Martens Olson & Bear LLP, the largest law firm here, owns the 2040 Main Street building in Irvine, where its offices are located.)

Three of the nine firms inked new deals in the past quarter—all renewals. Each of the three was among the 10 largest office leases of the past quarter, according to brokerage data (see Office Leases, page 33).

The three deals appear to fall in line with JLL’s national findings:

n Stradling Yocca Carlson & Rauth P.C., OC’s third-largest firm by attorney count, recently inked a new deal for its longtime offices in Newport Center. The new deal is said to run for about 66,000 square feet at 660 Newport Center Drive; the firm’s last-reported lease was for closer to 74,000 square feet, according to Business Journal records.

n Latham & Watkins LLP, Orange County’s fifth-largest law firm, renewed its lease at Center Tower in Costa Mesa last quarter in a 65,000-square-foot lease. The firm was leasing close to 88,000 square feet as of 2007.

n Newmeyer & Dillion LLP, OC’s 11th-largest law firm, also is reported to have inked a new lease for its Newport Beach offices at 895 Dove St. The firm stayed even at 53,000 square feet, according to brokerage data.

Trophy Tenants

The trend of less-is-more among larger firms here isn’t necessarily a welcome one for landlords, who have long leaned on law firms to take up high-end space with leases rates above the market average.

Law firms occupy close to about 16.6% of the class A office space in metro areas across the U.S., according to Jones Lang LaSalle.

The figure is closer to 9% in OC, where monthly lease rates in class A offices average about $2.17 per square foot, with the trophy buildings that many law firms call home typically getting a 25% premium on top of that rate, according to JLL data.

Having a steady base of legal tenants also can provide a premium for landlords looking to sell their buildings, as New York-based Emmes Group of Cos. can attest.

Emmes sold the 19-story, 536,000-square-foot Michelson building—with a tenant roster that includes law firms Gibson, Dunn & Crutcher LLP (OC’s fourth-largest law firm), Jones Day (No. 10), Greenberg Traurig P.A. (No. 18), and Bryan Cave LLP (No. 28)—last summer for $277 million to Toronto-based Manulife Financial Corp.

The sale came to roughly $516 per square foot, setting high-water marks on overall price and price-per-square-foot for a larger-sized office transaction in Orange County.

Emmes bought the building for about $160 million in 2009, when it was less than half-full.

Opportunity to Grow

There’s a silver lining for landlords.

Reductions in space for larger law firms opens the possibility of expansion for smaller firms in the area that are looking for high-end space.

“Small- to mid-sized users are often taking advantage of the tenant-favorable leasing environment that still characterizes the local office market,” JLL’s report said. “It is not uncommon for a firm to take on extra space now for the possibility of future growth.”

Travers Realty’s Parker—whose team represented Stradling Yocca in its recent renewal—said he’s worked on a pair of smaller legal deals that fit that trend as well.

BarthCalderon LLP, which provides financial planning for families and businesses, recently inked a new deal at City Tower in Orange.

At about 9,500 square feet, the new deal is an expansion of “a couple thousand square feet,” Parker said.

Fiore Racobs & Powers is moving to about 6,000 square feet of space at Irvine Co.’s Palm Court office complex in the Irvine Spectrum, making the shift from a nearby location, Parker said.

The new lease is a small increase in space for the firm, which specializes in community association law.

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-