- Through the 12 months ending November 2020, legal services employment in the U.S. declined 2.8%, a figure significantly lower than the 5.2% legal services job losses resulting from the prior economic downturn. Legal Services’ relatively superior employment protection relates to a variety of factors, most notably a significant reduction in client-entertainment, conference, and travel-related expenses.
- Some law firms are taking a wait-and-see approach to their real estate decisions, as both the length of the economic downturn and post-pandemic office use trends remain uncertain. Across most major U.S. office markets, law firm leasing activity was reduced in 2020 from previous years. In a sample of gateway markets, total gross leasing activity by law firms declined 41% between 2019 and 2020. While it is prudent to make informed real estate decisions, waiting to make a move or renewal could result in a missed opportunity to take advantage of the current tenant-favored market.
- In many U.S. markets, major firms that were already in the process of increasing space efficiency executed long-term leases to capture immediate cost savings, in many cases securing better terms through the negotiation process as asset owners increasingly felt the negative impacts of the pandemic. Other firms have taken advantage of the tenant-favored environment to renegotiate their existing leases and return unused space to the asset owner. In short, many of the transactions that occurred after the pandemic started were driven by opportunism rather than a change in space usage or configuration resulting from a need for social distancing.
- Some firms are considering implementing a more flexible office configuration beyond the single-size offices that had already become a prominent trend. Firms are now considering a continuum of future options ranging from a fully virtual firm to the traditional in-office model that was prevalent pre-pandemic. Most firms, regardless of size or location, are now willing to ask questions and consider new ways of working that would not have been considered prior to the pandemic.
- Another trend that has emerged from opportunism surrounding the pandemic is a significant uptick in law firms placing excess office space on the market for sublease. Many firms had already begun or were planning to downsize their office space footprints pre-pandemic but now have put more sublease space on the market than perhaps they would have had the pandemic not occurred.
- As of early 2021, it is still too soon to have a comprehensive understanding of how the pandemic will impact the future use of space. While some firms are experimenting with more flexible office layouts and some portion of non-dedicated offices, many firms, especially those that are already committed to new space, are awaiting more data before making any major decisions in this regard. Most law firm office market experts consulted for this study predict that if there is an impact on workplace strategy resulting from the pandemic, it is more likely to be a move toward smaller offices and potentially some shared offices; a strong shift toward universal hoteling is unlikely, particularly among AmLaw 100 firms.