Managing the delicate balance of law firm economics has always been a challenge. In serving any particular market (practice type and geography), firms struggle to find that sweet spot — the perfect formula of rates/pricing, productivity, cost, and resulting profits. Should any one of the particulars get far out of equilibrium, the consequences can be stressful
For the majority of law firms, one of the most significant areas of cost is office space. As a result of COVID, firms closing offices and adjusting to working from home, many firms are considering whether there is an opportunity for a triple win — to decrease costs and make positive strides on issues related to satisfaction in the workplace while maintaining or even improving productivity.
There are a growing number of examples of firms seizing this opportunity. This article’s title sums up the state of thinking pretty well — COVID-19 Shutdowns Have Law Firms Wondering How Much Real Estate They Really Need.
Another good example of the evolving thinking is reflected in this quote from senior partner Louis Miller of Miller Barondess “Even after our office opens up,” Miller said, “I’m going to make it optional. (The firm’s attorneys) don’t have to come in if they don’t want to. As long as they do the work, I don’t care where they are.” (Read this interesting article here). The same is true in cities throughout the country.
The impact of firms rethinking their space needs is reflected in the sharp decline in law firm office leasing. According to this article, New York City law firm office space leasing is down 45% from last year as firms defer leasing decisions while they contemplate how to respond to COVID-19 challenges.
Some firms have taken decisive action, downsizing their space commitment. In the process, we know of several firms who have been proactive in renegotiating their lease as they decrease their commitment to space (see Burnham Brown restructuring to 20% less pace and Greenspoon Marker Shrinks Footprint…) while others are still considering their space options.
The issue of how much office space is actually required for service providers is not new, or unique to law firms. The public accounting profession has operated with a different and more efficient space model for many years. As firms realize that their space needs aren’t what they once thought they were, options like hoteling, shared offices and working at home permanently are being and should be considered.
What are your firm’s plans for space?