What happens when three equity partners and a junior associate in a law firm walk into a conference room? They leave with a renewed appreciation for the office.
At least, that was the experience of Phil Appenzeller, CEO of Dallas-based firm Munsch Hardt Kopf & Harr. That moment, which was before his firm mandated a companywide return, crystallized why he feels in-person work is still critical for lawyers, even in the era of work-from-home.
“One of our first-year lawyers was here, and one of my partners came down and said, ‘Hey, I’ve got a problem. Can we go into this conference room?’” Appenzeller said. “For [a first-year associate]being able to sit and watch how we work through things, I think in person was much better than it would be if he was trying to watch it over Zoom or on the phone.”
Law firms are eager to return to the office, and they are doing so much more than their neighbors, data suggests.
As hybrid work has taken hold of the corporate world, the legal industry has returned to its offices in larger numbers than other white-collar sectors, like technology and finance. Law firm leaders who spoke to Bisnow said the nature of the profession — with long hours, intense, extended periods of collaboration and mountains of paperwork — has kept law offices occupied.
Across the country, law firms are returning to the office at a rate 12 percentage points higher than the average office tenant, according to data from Castle Systems. While some firms feel the pressure to maintain a hybrid schedule in order to recruit attorneys and office staff, the legal sector’s strong reliance on in-person collaboration has fueled their return-to-office plans and made the sector an attractive tenant class for landlords.
“Every market in the country right now is offering unique packages to attract and keep tenants in the building,” said Cushman & Wakefield Vice Chair Sherry Cushman, founder and co-leader of the firm’s Legal Sector Advisory Group. “Landlords are doing everything in their power to keep their law firm tenants.”
Law firm offices in the seven largest US cities for the sector are at about 55.6% of their pre-pandemic average, compared with 43.5% occupancy across all industries. In Los Angeles and Chicago, law firm offices were about 20% more occupied than those in other sectors, according to Kastle data shared with Bisnow. In New York and DC, two of the hubs of the legal industry, the difference is smaller, but still significant.
Courtesy of Kastle Systems
Card swipe data from Kastle shows legal office tenants are returning to in-person work much more than the average office worker and have been for much of the pandemic.
Law firms that spoke with Bisnow all mentioned the need for collaboration as a key factor behind their elevated return. But other, more endemic considerations, like access to high-volume printers and a safe place to review sensitive documents, are also likely fueling the trend, Cox, Castle & Nicholson partner Alicia Vaz said.
Vaz said the legal profession often requires long hours from its workers, and having the firm separation between office life and home life is better for attorneys’ mental health. She also found that her own mentees were much more likely to seek her out for a quick chat when she was in office than if she was a phone call away, and has tried to show up in person more as a result.
“The free-flowing conversation and the brainstorming that can happen in person, it’s not note doable,” Vaz said. “But it’s much more difficult to sit on a phone call or Zoom call for eight hours than to sit in a conference room for eight hours.”
Cushman said that while the return is more prominent in some markets than others, law firms are getting more comfortable making long-term real estate decisions again as they get a better handle on their return-to-office protocols.
“The sector seems to be coming out of gridlock,” Cushman said. “We’re seeing more and more leasing activity, we’re seeing more law firms that put things on hold get ready to make decisions.”
While law firms have been downsizing their footprint for a decade or more as they digitize their substantial libraries, that trend has fused with the longstanding flight to quality, resulting in a shift in thinking for law firms looking to sign their leases.
Cushman expects the number of square feet per attorney, which has been dropping since before the pandemic, to continue to shrink somewhat as law firms sign new leases. But while some firms may start implementing a shared desk strategy, she still anticipates hybrid work schedules in isolation will have a limited impact on square footage.
“If everyone’s coming in Tuesday-Wednesday-Thursday, how are you going to reduce your square footprint?” Cushman said. “You can’t.”
Relocations have made up 63% of law firm leases so far this year, up from 51% last year and 30% in 2020. The proportion of firms on the move is now in line with pre-pandemic trends, when relocations made up about 62 % of leases, according to Savills’ Law Firm Activity report for the second quarter of this year.
The legal sector, and in particular the industry’s largest firms, saw record profits in 2020, and that has set many firms on a hunt for talent and expansion, said Devon Munos, a senior director and head of research platform initiatives at Savills.
“We saw a pickup in relocations before the pandemic and we’re seeing a similar pickup now and it goes back to the low unemployment levels that we’re seeing,” Munos said. “There’s a huge amenity war going on right now, and law firms are aware of that and want to be in the best buildings.”
Block 162, a 595K SF office building located at 675 15th St. in Denver.
Certain landlords are benefiting from that shift more than others. In Denver, Patrinely Group’s 595K SF Block 162 office building has seen a significant portion of its space get leased to law tenants — roughly a third of the building is leased to law offices, with another 15% leased to other sectors.
“Law firms in any given city, they often take some of the highest visibility space, some of the highest-quality space, and literally sometimes the highest space in the buildings,” said David Haltom, senior vice president of development at Patrinely. “Those law firms risked finding themselves at a real competitive disadvantage to their peer groups.”
Haltom said he isn’t surprised law firms are returning to the office more often, especially those that are shelling out for the newest high-end space. He said the firms are using the upgraded office as a pitch to get employees back in the office, and has seen anecdotal evidence it’s working.
“We’ve had at least one of our first significant law firm tenants who have actually occupied in the building communicate to us that they’ve seen a higher-than-expected uptake of their own return to office,” Haltom said. “That’s a really positive signal [for those] who have high-quality space and who are making big moves.”
Return-to-office plans vary in the industry, just as they do nationwide. Lathrop GPM, one of the law firms in Block 162, has shifted its policy over time as new coronavirus variants arise but will start mandating one day a week in-office to bring its workers together. Cox, Castle & Nicholson, which is based in Los Angeles, has allowed employees to make their own decisions in many cases, leading to a hybrid environment.
Munsch Hardt Kopf & Harr, which is based in Dallas, has essentially called workers back in-office 100% of the time, which Appenzeller said initially “shocked” employees but has since been better-received.
“Our attorneys, the way we treat them is, ‘You’re a professional, if you need to work from home, do.’ We don’t take roll,” Appenzeller said. “[But,] on any given day, we’re back in at 2019 levels.”
Appenzeller’s firm has worked to make that return worthwhile, most recently in the Houston office where it nearly doubled its space this year.
The new build-out includes a private café area for employees, and Appenzeller said he’s seen his Houston staff take advantage of the space for informal conversations. The firm recently renegotiated its lease for its main office in Dallas, and Appenzeller said he wants the latest amenities his colleagues in Houston are getting.
“What I said was, ‘Let’s see if we can create a fun space that people want to hang out in,’ and it’s worked out fantastic,” Appenzeller said. “We’re going to duplicate it in Dallas.”