As Ashurst partners digest a year of tumbling profits and turnover, delayed profit distributions and a rising number of senior exits, the firm faces an estimated £55m cost to fit out its new Spitalfields office.
A partner at the firm has revealed the estimated bill for the new headquarters with Ashurst signing a lease on about 275,000 sq ft of office space in the London Fruit & Wool Exchange on Brushfield Street last year. The firm is due to move in 2019, in a step expected to substantially increase the annual rent it is currently paying on the 200,000 sq ft it already occupies across two buildings on Appold Street. The firm enjoys a comparatively cheap rent at Appold Street.
The hefty expenditure comes as the firm recorded a second year of falling revenues following the Blake Dawson merger. In July, the firm posted a turnover decrease of 10% to £505m for the 2015/16 financial year, while profit per equity partner dropped by 19% from £747,000 to £603,000.
One current partner said the firm is considering what to do with its new premises, adding: ‘It’s two and a half to three years out, but obviously you have to start planning things in the lead up. All options are on the table to consider different utilisations of space.’
However, former partners point out there are only two ways to raise enough money to cover the fit-out costs: borrow or build up a reserve from existing partners that could further affect distributions. Quarterly partner distributions were already delayed in August, with one former partner telling Legal Business it was the second delayed payment this year after a postponement in February. Some partners have also criticised management for lax cost control.
A spokesperson said the firm plans to sub-let between 60,000 and 110,000 sq ft of its new space.
‘Given the quality and location of the building, we are very confident that we will be able to do so. Fit-out costs are offset by landlord’s contributions and are also determined by the amount of space you let.’
However, concerns have been raised by those that have left the firm as to whether Ashurst would be able to sub-let the amount of space it is hoping to let go at a decent price.
This is not the first new office the firm has invested in since the merger in 2014. In July of last year, the firm opened the doors to a new Sydney office, which cost approximately A$40m (£23m).
Read more in the opinion piece: ‘Comment: Looking forward to Ashurst’s decline – The outlook worsens for a proud City institution’