Law Firms Office Leasing Trends Surpassing Pre-Pandemic Levels
In the first quarter of 2024, law firms across the country are not only keeping up with the office leasing momentum of 2023 but actually surpassing it. According to Savills’ U.S. Law Firm Activity Report, law firms leased approximately 1.7 million square feet in the first quarter of 2024, showing a significant increase of 47.6 percent compared to the same period in 2023.
The report also highlights that leasing activity for law firms has been on the rise, with a new quarterly average of 2 million square feet in 2023 and 2024, up from the 1.5 million square feet recorded between 2020 and 2023. This surge in leasing activity has now exceeded pre-pandemic levels from 2018 to 2019 when the quarterly average was 1.8 million square feet.
One of the reasons for this increase in leasing activity is the commitment of law firms to office space as an essential element for their long-term growth and stability. As leases expire, law firms are making strategic decisions to secure long-term occupancy, signaling a return to the ‘new normal’ in real estate decision-making.
Notable transactions in 2024 include Finnegan, Henderson, Farabow, Garrett & Dunner renewing its lease in Washington, D.C. and King & Spalding signing a new lease in New York. Despite the increase in leasing activity, the rate of relocations has slowed down, with relocations accounting for 54.1 percent of leases signed in the first quarter of 2024, a decrease from previous years.
The report suggests that the limited availability of high-quality office buildings, rising expenses for tenant improvements, and landlord debt issues are factors influencing law firms’ decisions to relocate or renew leases. Despite these challenges, the trend towards longer-term leases in major cities indicates a positive shift in the post-pandemic real estate landscape for law firms.
As the year progresses, it remains to be seen whether new leases will continue to outpace renewals. However, experts anticipate a steady level of law firm leasing activity throughout the year, with a focus on strategic long-term occupancy decisions.
Factors Influencing Law Firms’ Leasing Decisions
The rise in office leasing activity by law firms in 2024 is driven by various factors that are shaping their real estate decisions. Law firms are prioritizing high-quality office spaces, with a focus on long-term occupancy strategies to support their organizational growth and stability.
One of the key trends observed is the increase in lease terms, indicating a shift towards longer-term commitments in cities like Washington, D.C., Chicago, Dallas, San Francisco, Boston, and Los Angeles. This trend contrasts with stagnant or declining lease lengths in cities like New York and Houston, reflecting the diverse leasing landscape for law firms across different markets.
The report also highlights the impact of rising expenses for tenant improvements and landlord debt issues on law firms’ relocation decisions. Limited availability of new, high-quality buildings is another challenge, with newer buildings accounting for the majority of first-quarter relocations.
Despite these challenges, law firms continue to be a bright spot in office leasing activity, with notable transactions in major cities like New York, Washington, D.C., Dallas, San Francisco, Chicago, and Los Angeles. The focus on strategic long-term occupancy decisions and the return to longer lease terms signal a positive shift in the post-pandemic real estate market for law firms.
Outlook for Law Firm Leasing Activity in 2024
The outlook for law firm leasing activity in 2024 remains positive, with a continued focus on long-term occupancy decisions and strategic real estate planning. Despite challenges such as rising expenses and limited availability of high-quality office buildings, law firms are exceeding pre-pandemic leasing levels and setting new trends in the post-pandemic real estate landscape.
Experts anticipate a steady level of leasing activity throughout the year, with a mix of renewals and new leases driving the market. The shift towards longer lease terms in key cities indicates a return to stability and growth for law firms, as they navigate the evolving real estate market in a post-pandemic world.
As law firms continue to prioritize high-quality office spaces and strategic long-term commitments, the leasing landscape is expected to remain dynamic and resilient in 2024. Stay tuned for more updates on the latest trends and developments in the law firm office leasing market.