There is no question that law firms, like other small and medium-sized businesses, are holding back on expanding their business leases. In fact, in a recent survey reported on Looper.net, office leasing volume, in general, is down 34 percent since the CoVID-19 pandemic burst into prominence.
In the case of law firms, according to Law.com, that rate has risen to 50 percent.
Frank Marsalisi, a Largo car accident lawyer, hit the nail on the head for many legal firms when it called the current state of finances within law firms “legal limbo.”
While a few law firms, notably insurance attorneys and employment attorneys are actually prospering during the pandemic as employers seek to acquire their expertise about how to handle COVID layoffs, the vast majority of law firms from June or July of last year began to hunker down.
Many associates were laid off as courts were frequently closed, litigants, seeing as to how courts were closed or operating at a snail’s pace, felt no need to settle cases, and those involved in mergers and acquisitions found that companies elected to delay mergers and acquisitions until next year.
Law firms began to put the hammer down on all but absolutely necessary travel. Sessions by video conferencing replaced face-to-face meetings. Some attorneys began to work the vast majority of their hours from home. Partners met with banks to extend lines of credit. In a few law firms, they are even shifting internet providers who offer a cheaper deal.
Downsizing
One of the major expenses of a law firm is in leasing their office space. According to 2Civility.org a typical law firm will spend between 4 and 14 percent of their total expenses on office space.
This can be a huge expense, and it should be noted that even before the pandemic, many law firms in 2019 have considered downsizing their office space as well as finding collaborative office spaces.
Rethinking office space
As a result of so many attorneys working from home, there is also a serious rethinking of the need for so much office space at all.
According to the American Lawyer, it is estimated that firms spend around $30,000 per attorney on office space, a figure which you can imagine is a tempting target for the budget-cutting committee within the firm.
Hunkering down
The vast majority of firms are currently hunkering down.
According to Cushman & Wakefield, a major commercial real estate firm, the vast majority of law firms are electing to hunker down in the pandemic by signing renewal leases of 1 to 3 years.
These law firms want to see if and when there will be a major economic recovery before even considering expanding their existing law office space.
And with an average vacancy rate as high as 25 percent, the vast majority of commercial lessors would prefer a company to stay even on a short-term contract of 1 year than lose the business entirely, realizing it may be 8 months before they can get another client to step in.
For longer terms leases of 3 to 5 years or so, many law firms are now able to get substantial concessions from commercial lessors, particularly if they are satisfied with their current office space.
Now, more than ever, law firms, rather than lessors, may possibly be in the catbird seat.
And some law firms, unsatisfied with their present office space, may possibly get into a premium location that has already been vacated at a discount price.
Like every other business, law firms do remain very much in limbo to wait out the pandemic in the best possible way, and that takes careful planning and negotiating when it comes to office space.
