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Comment: Welcome back to the office? Re-thinking law’s real estate for the post-corona age

If we can already make a few forecasts about some aspects of the post-coronavirus world, currently pole position among things the legal industry abruptly realised will look radically different as of ten weeks ago are large-scale, grand, frightfully-expensive offices. It turns out that we were all used to the modern, shiny, flagship office and now realise we had only the most tenuous grasp of why we believed it so fundamental to the business of professional services all along.

Yet the office will never be the same.

I’d be surprised if many senior lawyers doubt this, but here’s a wide range of observations on this topic. According to a comprehensive article in The New York Times earlier this month:

• Facebook and Google have extended their WFH policies through the end of this year, Microsoft through at least the end of October.

• Twitter told all its employees a few days ago that they could work remotely ‘forever’ if they want to and their position allows for it.

• James Gorman, the chief executive of Morgan Stanley, said the company had ‘proven we can operate with no footprint. That tells you an enormous amount about where people need to be physically.’

• At the investment bank Jefferies, the firm’s chief executive, Rich Handler, and president, Brian Friedman, wrote in a memo to staff. ‘We will not be bringing anyone “back” to work because, as best as we can tell, none of us has stopped working.’

• ‘In Hong Kong there have been no cases for three weeks so we’re also thinking about moving back,’ said [Wim] Dejonghe [global managing partner of Allen & Overy]. ‘But there is no need for any of our people to return to the office. There are very few people in these offices and it’s voluntary.’

• Eversheds just announced that it will be repurposing a substantial portion of its real estate spend to technology.

• And finally, for unmatched brevity, we offer the response of an AmLaw 10 chief operating officer in response to partners’ pestering about when the firm’s offices might reopen: ‘What’s the rush?’

The lone dissenting voice came wanly and unconvincingly from Steven Roth, chair of Vornado Realty Trust, one of the largest commercial landlords in New York: ‘We do not believe working from home will become a trend that will impair office demand and property values. The socialisation and collaboration of the traditional office is the winning ticket.’

If nothing else, this proves how remarkably adaptable human beings are. So adaptable that we are already at risk of forgetting how quickly we all adopted brand-new views on this, essentially opposite the previous conventional wisdom.

While managing partners widely believed remote working chilled productivity, experience during the lockdown has been zero drop-off at worst and measurable improvements at best.

So the real-estate genie is out of the bottle.

Anyone glancingly familiar with law firm P&Ls knows ‘occupancy’ is the second largest bucket of expense after compensation and benefits. Nice chunky target that, eh? Over the next decade or so as leases come up for renewal, we’re all going to find out how much we can squeeze from that category.

Consider the short- (medium-? long-??) term obstacles to returning to the old office this side of a vaccine or herd immunity:

• Is everyone going to go up and down in elevators one or two at a time? One real estate investment trust that owns a significant share of midtown Manhattan recently estimated it could take 12 hours to fill a standard office tower under those constraints. Given the vogue for high-rise builds in central London over the last decade, similar challenges are at play in the UK.

• What tests will you need to conduct, presumably each and every day, before your professionals and staff can be permitted to enter the office? Temperature? Nasal swab? Saliva?

• If someone in your office tests positive for Covid-19, I assume you plan to tell everyone else who was there to stay home for 14 days. How long before more or less everyone is back home under effective quarantine again at that rate?

• How are your people going to get to the office and home again in major cities dependent, for all practical purposes, on mass public transport?

• Finally, how willing is your firm to keep paying the landlord for space you effectively cannot occupy for the foreseeable future?

Thinking about your next office involves much more than cost, however. Don’t imagine for a moment that the law firm office of the future will be the law firm office of February with a third of capacity shorn, it will be designed, built, and occupied around fundamentally different assumptions.

Now imagine, our post-social distancing world, when we can congregate at will together once again.

Out will be dedicated, private offices, which studies have long since shown are vacant 60-80% of the week anyway. In will be flexible, modular co-working, meeting, and conference spaces. The questions are (a) why do people really need to get together? And (b) what do they do when they are together?

Now, I would be the last to propose that we should do away with offices; study upon study has shown that for bonds between people to remain strong, they need to be together in person from time to time. Julie Sweet, the head of Accenture (Columbia Law and former Cravath partner) gave a Bloomberg interview this month recounting how that firm had begun going virtual/remote in a big way in the 1990s but recognized there are limits: there’s no substitute for renewing personal connections on a regular basis. In the long run, your culture depends upon it.

Of course, all of this is premised on equipping all your staff with the two indispensable tools of delivering legal (or any professional) services today: high-powered computer hardware, from smartphone to laptop to multi-monitor desk PC, plus high-speed broadband. You think your firm has invested a lot in technology now? Just wait. Microsoft chief executive Satya Nadella has said that the last ten weeks have seen as much progress in digital adoption as the previous five years, and he calls tech the ‘run-time’ of business.

When I started as a baby associate at a Wall Street law firm, the reception area was on the 57th floor. Directly ahead from the elevators was a mahogany desk enshrined left, right, and centre by the firm’s library behind glass walls, with oil portraits of the three name partners. It made a powerful statement, and the library was to me the most ‘high-functioning’ part of the office.

‘High-functioning’ is what we still need most. But it’s going to be unrecognizable from what we thought it had to be in February.

Bruce MacEwen is the president of Adam Smith, Esq, a strategic consulting business focused on the legal industry. You can read his articles here.