Reports vary on the degree to which the business of law is recovering or improving; but few question the fact that competitive pressures are growing, thanks to:
- Decreased demand due to more matters being kept in-house,
- Increased pricing pressure,
- Outsourcing of routine tasks to low-cost providers half-way around the world; and,
- Increased competition from non-law firm enterprises like the Big 4 and technology based service providers.
General industry conditions notwithstanding, as we near the end of 2014, conditions for some law firms are better; for others, not so much. For all but the strongest and best positioned, the focus as we plan for 2015 continues to be on how we manage the business side of our firms, and decrease the risk of critical stress. Or failure.
A Closer Look At The Question Of Office Space
The cost associated with housing a law firm is one of the two or three largest and fixed expenses for most firms. If your firm is considering the issue — renewing a lease, renovating, or relocating and upgrading your space in the coming months, this post is for you.
There are, of course, two key drivers in this discussion — the amount of space, and the cost per square foot.
On the first count, in recent years firms have found ways to decrease the amount of space they occupy. Some of the efficiencies offered by technology combined with less spacious partner offices are among the big factors here. Reports suggest that over the last decade or so benchmarks for space have dropped from 900 square feet per lawyer to closer to 600. Significant progress indeed.
But what about the cost per square foot? Thanks to landlords, this one is out of our control — right? Or is it?
There continues to be what I suggest is a false perception that firms need to be located in the very areas where rates tend to be highest. The inclination remains to lease space in the heart of the central business district, or the hottest new area of town in the newest building.
While many law firm leaders tend to view the cost of premium space as a cost of doing business, the increasing reality is that this space is of no relevance to virtually any clients.
As is the case for almost all of us at a personal level — where we balance the desire for large new homes and luxury cars with long-term financial security — law firms face the same trade-off.
A striking similarity between almost every firm that has run head-long into unsurmountable stress — and many who find themselves on the cusp of crisis today — is a top-of-the-market lease, an unnecessary luxury.
On the other hand, a few firms have found clients actually appreciate the kind of management that is demonstrated in prudent office space decisions.
The profession is going to undoubtedly get even more competitive. For those firms wrestling with economics and performing below average, the future is (or should be) scary. If your firm is not in the top quartile of performance you should be considering the trade-offs that will better secure your future.
How is your firm managing space cost.