Legal News Analysis: Big Law Firms Flee Midtown Manhattan and Other High-Rent Districts

Topics: Corporate Legal, Law Firm Profitability, Law Firms, Leadership, Legal Innovation

real estate

Real estate is a coveted Big Law asset, but some law firms are now rethinking the need to operate within such expensive real estate. Along with salaries, a firm’s commercial lease obligations are its largest fixed costs, and it does have an impact on profits per equity partner.

Paul Hastings moved from its 240,000 square-foot space in the Park Avenue Tower into 180,000 square feet in the MetLife Building. Skadden Arps, Slate, Meagher & Flom is making plans to depart 4 Times Square before 2020. And Kaye Scholer recently moved into 250,000 square-foot office on West 55th Street, departing 330,000 square feet on Park Avenue.

The trend to move and shrink law offices is not limited to Midtown, New York, however. In the District of Columbia, Arnold & Porter moved into 375,000 square feet on Massachusetts Avenue in the Penn Quarter neighborhood, leaving a 425,000 square-foot space; Nixon Peabody moved locations on Ninth Street, Northwest, but dropped from a 92,000-square foot facility 65,000 square feet. In Chicago, DLA Piper, Seyfarth Shaw, McDermott Will & Emery and Latham & Watkins also recently pared down their offices.


Along with salaries, a firm’s commercial lease obligations are its largest fixed costs, and it does have an impact on profits per equity partner.


According to Keith DeCoster, director of U.S. real estate analytics for Savills Studley, a commercial real estate services firm, by 2017 approximately 21 million square feet of Midtown’s Class A office space, approximately 14% of the market, will be available to lease. Yet some Midtown property owners remain confident in the prevalence of a lessor’s market in Midtown. Andrew Gottesman, vice president of the Avenue of the Americas Association and principal of Edison Properties, believes the virtues that made Midtown office space big and expensive will prevail.

But those virtues may be vices today. At one time, brick-and-mortar offices were a place to go to work; where productivity was measured by the number of employees who walked through the door. Today work is not a location but a vocation and productivity is measured in performance not attendance.

Jeff Lowe, global practice leader for law firm recruiting at Major, Lindsey & Africa, observed that law firms are “spending a tremendous amount of money on real estate that is simply not being used.” Thirty years ago, said Lowe, lawyers were using the library and conference rooms. Today libraries are online and teleconferencing and videoconferencing are the norms in and out of the office.


At one time, brick-and-mortar offices were a place to go to work; where productivity was measured by the number of employees who walked through the door. Today work is not a location but a vocation and productivity is measured in performance not attendance.


“People just don’t feel the need to be at the building anymore,” continued Lowe. “The younger you go the more comfortable people are dealing with virtual communication.”

As more young lawyers enter the legal industry, there will be a reduced emphasis on delivering resources to a physical place and more emphasis on delivering resources where they are needed, on a client site or in court. Eventually, law firms that understand this will lessen their load in leased office space. Those that do not will be saddled with high rents and largely unused space and be forced to rethink, resize and even relocate their office space on a dime.