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Tracking the Trends in Law Firm Real Estate

For most law firms, real estate is a critical piece of the financial picture. Small, strategic changes in how firms use space—from partner offices to imaging centers to war rooms—are affecting how business gets done, client perceptions of the firm and, yes, the bottom line. Can these trends help you reimagine your space?

FROM: April / May 2005, PAGE 36 BY: Randy Lewis

Downward Staffing Needs

The steady decline in the ratio of support staff to lawyers over the past five years has had a direct impact on both the quantity and layout of the space a firm requires. Just a few years ago, a typical law firm had somewhere around 1 secretary for every 1 to 1.5 attorneys. Now, most firms’ ratios are hovering around 1 secretary for every 3 attorneys. This change is also altering the proportion of “window” or executive offices to internal offices. Why the decrease in secretarial staff? Besides the fact that businesses in America are operating more efficiently, the biggest reason seems to be the increased use of technology.

Technology: Lawyers at the Keyboard

One of the reasons firms can hire fewer support staff is that many lawyers (especially the younger set) are using technology to reduce the amount of time it takes to process a client file. Lawyers are using software to dictate directly into the computer or drafting their own documents instead of having their secretary transcribe their notes or dictation. Lawyers are also using software to enter their own time into the firm’s billing system. Secretaries are spending more time proofing, formatting and e-filing documents, and less time creating documents from scratch.

Exceptions to Declining Staff Ratios

Information technology and marketing departments for larger firms seem to be the exceptions in the shrinking of support staff. Most firms are increasing their annual spending on information technology, leading to the requirement of more IT offices, computer rooms and, in some cases, imaging centers. Larger firms are also looking at installing videoconferencing equipment to reduce the amount of travel time to and from remote offices and client locations.

Although this would seem to dictate a consistent increase in IT space, technology is also finding ways to reduce the need for real estate. More firms are beginning to image their hard-copy files, reducing the need for filing cabinets in costly “prime location” real estate. In addition, firms are getting smarter about where they store their paper files. Offsite storage companies have been an alternative for a number of years. Some firms, though, require (or desire) quicker access to their files and have negotiated deals with their landlords to utilize basement or other sub-prime real estate within their own buildings for storage.

Hoteling as Efficient Space Use

Effective use of technology has yet another impact on law firm space utilization. “Hoteling” has been a hot topic in the legal and accounting worlds for a few years now. Hoteling is an office setup in which mobile workers do not have permanent desks or cubicles and so must reserve a workspace when they come into the office. The concept is that a firm could have a portion of its workforce use technology (the Internet, extranets, virtual private networks, PDAs, cellular phones and the like) to operate out of their homes or on the road, while having a shared space in the office only when it is required.

The firms that use hoteling successfully are finding that with an effective IT support process in place, they can have as many as 15 percent of their lawyers working from their homes. Research and communication with the firm is done online. When mobile employees do require a day at the office, they typically utilize a small conference room with a network connection and function as though they were in a standard office. Given this scenario, no additional real estate is needed as excess conference rooms function as the “hotel” suite. Many firms are looking to grow this type of employment offering as a way of attracting high-quality legal professionals who require a more flexible work environment.

The Changing Footprint of the Law Library

The traditional concept of a law firm library (large areas devoted to volumes of bound collections of various legal resources) is going the way of the dinosaurs. With virtually all required legal resources available and searchable online, using prime office space for a traditional law library is a very ineffective use of a firm’s real estate budget. A number of law firms have already downsized their bound library collections or are planning on doing so during their next move or lease renewal. A few have gone so far as to remove their bound law library completely, in favor of an electronic law library.

A Shift in the Lawyer’s Office Size

As law firms reevaluate their real estate needs, they are also looking at the size of the lawyers’ offices and their conference rooms. Historically, lawyers’ private offices have been richly appointed and fairly large in size when compared to a traditional office worker’s. The trend today is a gradual reduction in the overall space given to the lawyers. With the increasing popularity of e-mail, there are fewer face-to-face meetings and more electronic conversations. Some firms are moving toward a “one size fits all” program for their partner and associate offices, in order to achieve flexibility as the partner and associate mix changes.

Changes in Conference Rooms and Common Areas

More and more firms are looking to have their lawyers meet with clients in communal conference facilities. Tenant improvement allowances are being funneled into high-end conference rooms, while lawyer offices are becoming more utilitarian and receiving less of the “improvement allowance pie.” This has caused a shift in the overall layout of law firm space. A few of the larger firms have moved all of their conference rooms to a single floor in order to take full advantage of the highest-quality space in the building. The “image” space within the firm, containing the conference rooms and reception areas, might be finished out with $50 to $60 per-square-foot tenant improvements, while the general office area is given a $25 to $30 allowance.

War Rooms on the March

Litigation firms are also looking to add more “war rooms” than ever before. These spaces, which can be used by lawyers and paralegals while processing a case, are typically interior rooms with a lower-quality finish. War rooms are usually equipped with shelves for documentation relating to the matter, white boards, research computers and general workspace. Some war rooms and conference facilities are being set up to be used as flexible space, with movable walls and modular furniture that can be resized based on the client requirement.

Location Is Still King

A few years ago, there was a lot of talk that with the increased deployment of technology, law firms would flee the central business district and relocate to the less-expensive real estate of the suburbs. What we have found is that the exact opposite has happened. More and more firms are finding that it still makes sense to stay put in the downtown business community.

Randy Lewis ( rlewis@fross.com) is a business-to-business real estate sales professional with Frederick Ross Company in Denver.

This article is an excerpt reprinted with permission from the Rocky Mountain Recorder, the electronic newsletter published by the Mile High Chapter of the Association of Legal Administrators, Winter, 2004. Mile High Chapter ALA retains all rights worldwide.