Law Firm Office Leasing Continues to Rise
By at least three metrics, commitments from the legal sector are moving in positive directions.
Law firm office leasing activity is up, relocations are rising again after toppling in 2023 and lease terms are trending longer, according to Savills’ U.S. law firm activity report for the first quarter of 2024.
In addition to its recent data on law firm office lease transactions of more than 20,000 square feet across major U.S. markets, the report puts the information into the context of legal sector leasing trends going back to 2017 and 2018.
Legal sector leasing activity has begun 2024 robustly, at 1.7 million square feet in the first quarter, somewhat ahead of the quarterly average (1.5 million square feet) since 2020. Savills attributes this strong first quarter mostly to “an overall rise in transaction activity,” rather than a small number of large leases. The report notes that the past quarter saw a 47.6 percent increase, year-over-year, in the number of leases signed.
Relocations totaled 54.1 percent of leasing activity in the first quarter, an increase from 44.0 percent in 2023. The majority of firms that relocated moved to newer buildings, despite what Savills describes as the limited availability of newer, high-quality building options in many office markets.
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Other factors in law firms’ decision process are the significant increase in the cost of tenant improvements over the past three years and many landlords’ debt issues, making improvement capital more difficult to come by.
New confidence?
“There’s a trend toward longer lease terms as firms regain confidence, moving away from the short-term extensions prevalent during the pandemic,” Savills reports.
Savills’ fourth-quarter 2023 law firm leasing report saw a similar trend toward longer lease terms. Thomas Fulcher, Savills vice chairman, Mid-Atlantic region lead & director, told Commercial Property Executive then: “During the pandemic, firms held off on negotiating as they waited to see what the future held. Now that many firms’ workplace strategies are becoming clearer, they are making long-term decisions with more and more confidence.”
The latest report lists Boston, Chicago, Dallas, Los Angeles, San Francisco and Washington, D.C., as cities where lease terms are increasing—and Houston and New York City as markets where lease terms are falling or remaining flat.
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