Leading international law firms are ditching trophy office moves as they look to slash space by as much as 50 per cent because of the shift to remote working as a result of the pandemic.
Global firm Norton Rose Fulbright, listed DWF and London-based Fieldfisher project a reduction in floorspace of between 30 per cent and 50 per cent with workers planning to work more regularly from home. It comes just one year after a clutch of groups signed long-term deals on expensive trophy offices designed to lure graduates and impress high-end clients, which have cost them millions of pounds.
Law firm moves in London rank consistently as some of the largest and most valuable deals, according to property agent Cushman & Wakefield. But after the global pandemic, firms are embracing a permanent shift to homeworking as they seek to downsize, modernise or sublet space.The economic uncertainty and pressure on costs have also led those firms that have not already committed to moves to extend leases at their present bases or scrap relocations to expensive premises.
In December, top UK law firm Slaughter and May renewed its lease at One Bunhill Row in the City of London for 10 years, ending its hunt for a new London location. Paul Stacey, Slaughter and May executive partner, said the firm had “completed an extensive search of potential properties across Central London” but decided the building was “an important part of our identity”.
California-based Cooley also extended its lease at its Moorgate office after the pandemic led to delays to its planned move to 22 Bishopsgate this year, according to an executive at the firm. New York moves have also been put on hold.
Elite “magic circle” firm Allen & Overy extended its lease for five years at the Sixth Avenue skyscraper it shares with peers Mayer Brown and White & Case. It was in the process of moving to 45 Rockefeller Plaza on Fifth Avenue when the pandemic hit, but now wants more time to evaluate the situation, said a partner at the firm.Yet, 2020 was expected to be the busiest since 2015 for law firm office moves, said tenant advisers DeVono Cresa, with at least 15 firms in London poised to take up new space they may no longer need and at a big cost.
International firm Freshfields Bruckhaus Deringer set aside almost £2m for capital expenditure related to its move to City skyscraper 100 Bishopsgate. The 250,000 square feet of space is expected to cost the firm about £16.5m a year. Linklaters also revealed its move to a new tower at 20 Ropemaker Street in the City of London will cost between £308m and £445m on lease payments over a 20-year period. This is for 300,000 sq ft of space.
However, long leases make near-term moves impossible for many law firms. In several cases, they hope to sublet floorspace instead. DWF projected cost savings of £600,000 in its half-year results in December partly through plans to cut floorspace by as much as half in many locations.
Matt Doughty, chief operating officer, told the Financial Times: "Survey results are suggesting people want to work at home three days a week...You've got to find third parties who will take on space from you. There are always businesses bigger than you, so always opportunities." "
Most firms are looking really closely at their footprint,” said Chris Lewis, a director at DeVono Cresa. “You have got to feel exposed if you’ve got a lot of empty space, especially as a law firm and [THE COST]is coming out of partners’ pockets.”
Typical lease lengths for commercial tenants in London are 15 to 20 years, and there are few businesses clamouring for space if law firms try to sublet, said Mr Lewis.But he said landlords would listen to tenants who wanted to extend their leases in exchange for downsizing. “Every owner of a building would want to have certainty and longevity — even over just 70 per cent of the space — rather than have 100 per cent come back in a couple of years.” – Copyright The Financial Times Limited 2021.
