Legal Industry Leasing Sinks 44 Percent in Manhattan, but Still Ahead of Rest of US
Even when it’s bad, New York City is still doing better than L.A. in the leasing game, at least for law firms.
The volume of law firm leasing in Manhattan dropped 44 percent annually in 2021, steeper than drops in Los Angeles, Houston, Washington, D.C., and Chicago, according to a report released Monday by Savills.
But while it saw the biggest dip, law firm leasing activity in Manhattan still had the most square feet leased compared to the rest of the country. The legal industry took more than 2.6 million square feet of Manhattan office space by annual average in the two years leading up to the pandemic, and in the two years since leased 1.5 million square feet. Washington, D.C., saw a 10 percent decline while Houston was down 68 percent from about 600,000 square feet. Los Angeles saw a massive 97 percent increase in activity, but it notched much less Manhattan to about 500,000 square feet.
The report, which was compiled by the firm’s legal tenant practice group, shows that law firms across the country have nearly matched the quarterly leasing average from pre-pandemic levels of 1.8 million square feet to now at about 1.4 million.
“For two years there was so much uncertainty about the future of office space that organizations across all sectors, not just legal, held off on making real estate decisions. What we’ve seen from this report — and the one that preceded it — it’s that law firms are committed to the concept of office space as being valuable to their business for the long term,” Tom Fulcher, chair of Savills’ legal tenant practice group, said in a statement.
Los Angeles legal leasing nearly doubled from pre-pandemic to 2021 largely due to a multitude of firms taking space while Chicago’s 32 percent increase was mainly due to Kirkland and Ellis’ 2021 commitment to a new building of more 600,000 square feet that made up 55 percent Chicigo’s total leasing, according to the report.
While the height of the pandemic created uncertainty initially across all industries, average lease terms in the legal industry declined from 110 to 88 months across the top legal sector markets in the report, Savills said.
Forty-five percent of the top 20 leases in 2021, Savills notes, were for tenants that were downsizing while 25 percent of them were expanding their physical footprint. About 30 percent saw negligible change in leasing size. In the two years since the pandemic began, 56 percent of all leases examined in the report were renewals and 34 percent were relocations.
In a previous Savills report, only about 800,000 square feet had been leased by the legal industry in the third quarter of 2021, a 94 percent increase over the second quarter. In the third-quarter report, Los Angeles only had two leases over 75,000 square feet, each only amounting to about 100,000 square feet.
Mark Hallum can be reached at firstname.lastname@example.org.