Legal Business Blogs

‘Times have moved on’: City firms shrink office space as new leases down 50%

According to CBRE’s fifth Law in London report, the largest 100 firms in the City have made ‘significant changes’ to their real estate over the last five years, notably through a decrease in space per fee earner.

In addition, the report distinguishes international firms as having more generous space standards with 283 sq ft per person, and 477 sq ft per fee earner. In contrast, UK mid-tier firms occupy 189 sq ft per person and 277 per fee earner, 42% less than international firms.

The also report shows the number of firms taking up new London leases fell by more than 50% in 2016, as workplace strategies such as hot-desking and agile working, and technology ‘have taken centre stage’.

A corresponding report from Knight Frank, one of the agents for 100 Bishopsgate where Freshfields Bruckhaus Deringer is moving to next year with 30% less space, identifies five different trends influencing City firms’ attitudes to real estate: automation and legal tech, increased pressures to the middle tier firms from the top tier, legal processes outsourcing, transition from law firm to legal enterprise and less emphasis on scale.

Simultaneously, Ashurst also confirmed it is in ‘advanced stage negotiations’ with technology company NEX Group to sublet 115,000 sq ft, under half of its new office at the London Fruit & Wool Exchange in Spitalfields. The firm described the deal as ‘an exciting move for both organisations, including a mixture of workplace settings.’

Ashurst London managing partner Simon Beddow said: ‘Times have moved on. The way we do business over the last 30 years has changed. It used to be the case that a far higher percentage of meetings were face to face, but technology advancement has also impacted on space utilisation.

‘At the moment we are in an older, less space-efficient building. We are very keen that in the new and efficient building we want to utilise the space as best as possible.’

Mayer Brown European head of real estate Martin Wright agreed that requirements have changed. He said: ‘The necessity for insane amounts of space is gone. You do not need to be in an expansive, old-fashioned cellular office building anymore. New talent has different requirements in a world where work-life balance is real.

‘We should all be working much more agilely in open plan and denser areas, and when they are needing private time for confidential matters they can also find that. We all know younger lawyers can happily get on with what they’re doing in Starbucks.’

The CBRE report also suggested there is a strong link between the uncertainty surrounding the EU referendum and law firms’ real estate decisions last year. However, Wright disagreed: ‘Brexit is not really related. Automation, one of the most important disrupting factors in this, would have happened with or without Brexit.

He added: ‘It’s also much more than just about outsourcing. People are there seeing automation and artificial intelligence as a way of streamlining the process, and that will reorganise the firms as well.’

While he does not think the time for hot-desking for fee earners is quite here, Beddow agreed.

‘Brexit is not really the cause for less space. Firms have been looking at this for a while, whether in London or another near-shoring centre. That was going on anyway, as clients have been telling firms for years “do you really need this much office space in London in light of the cost per square foot?”‘