Leases  ·  Office

Office Leasing by Law Firms Ticks Up to Exceed Heavy 2023 Levels

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Law firms aren’t merely maintaining 2023’s leasing momentum, but exceeding it.

The first quarter of 2024 ended with law firms leasing roughly 1.7 million square feet across the country, according to SavillsU.S. Law Firm Activity Report, which tracks leasing activity for offices that exceed 20,000 square feet. That’s an increase of 47.6 percent compared to the first quarter of 2023.

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Leasing activity increased from a quarterly average of 1.5 million square feet recorded between 2020 and 2023 to the new quarterly average of 2 million square feet in 2023 and 2024, the report found. This uptick edges law firm leasing activity above pre-pandemic numbers from 2018 to 2019 when the quarterly average was 1.8 million square feet. 

“Our sense is that we are deep into the ‘new normal’ with law firms making real estate decisions, for the most part, as they did prior to the pandemic,” Tom Fulcher, chair of Savills’ legal tenant practice group, told Commercial Observer via email. They are committed to office space as integral to their long-term health as organizations and, as leases expire, are making long-term occupancy decisions.” 

Law firms have become a bright spot in leasing activity as they tend to be a bit more “office-centric” than other industries and have constantly been on the hunt for “really high-quality space,” Cushman & Wakefield (CWK)’s David Smith previously told CO. Last year, legal eagles clocked roughly 12 million square feet of space nationwide, according to the report.

The numbers continuing to rise in 2024 have multiple causes, with the report highlighting a number of notable office leases rather than any one large transaction. 

Finnegan, Henderson, Farabow, Garrett & Dunner signed the most notable law firm lease so far in 2024 by renewing its 214,408 square feet at 901 New York Avenue NW in Washington, D.C., according to the report. However, the firm downsized by 38,000 square feet in the process. 

New York, however, continued to dominate in law firm leases, according to the report. King & Spalding, for instance, signed a new lease for 175,514 square feet at Manhattan’s 1290 Avenue of the Americas and will soon move its New York offices five blocks north. 

Additional legal firm leases in Dallas, San Francisco, Chicago and Los Angeles rounded off Savills’ list of notable transactions last quarter. 

While the amount of square footage law firms took has been growing so far this year, the amount of relocations have started to slow, according to the report.

Relocations accounted for 54.1 percent of leases signed in the first quarter, according to the report. Yet, the numbers still trail behind previous relocation activity levels.

In 2022, relocations accounted for 66.1 percent of total leases signed, while in the pre-pandemic years of 2018 and 2019 relocations accounted for 66.9 percent and 57.5 percent of total leases, respectively, according to the report. Only 30.3 percent of law firm leases in 2020 were relocations. 

The report said it’s still too early to gauge whether new leases will continue to surpass renewed ones for the remainder of the year. Part of the issue has been an increasingly limited option for new, high-quality buildings for law firms to move into. Of the first-quarter relocations, 73.7 percent were in newer buildings. (Savills defines newer buildings as office relocations younger than a law firm’s original lease.)

Aside from that, rising expenses for tenant improvements and landlord debt issues are considerations in whether a law firm relocates or renews a lease, the report found.

It might not all be bad, since the first quarter of 2023 also saw fewer relocations, accounting for around 44 percent of all leasing activity last year, according to the report. 

“We have been watching the move-versus-stay trends and, given how little new development is out there, expected to see more stay than move, but this quarter flipped that expectation,” said Fulcher, who expects to see a similar amount of law firm leasing activity for the duration of the year.

This year’s lease terms have also experienced a rise, signifying yet another transition from the pandemic years. Longer-term leases are back in style in Washington, D.C., Chicago, Dallas, San Francisco, Boston and Los Angeles. However, lease lengths are stagnant or declining in New York and Houston.

Update: This story has been updated to include a comment from Savills’ Tom Fulcher.

Anna Staropoli can be reached at astaropoli@commercialobserver.com