The recent topic that has caught our attention is how law firms are managing their property expenses, particularly amid the pandemic which has seen offices around the world empty. How they are adapting to these changing circumstances is quite intriguing and seems to herald a change in the traditional law firm office model.
According to recent research from Colliers 2023 Law Firm Office Markets North America Report, the average law firm is barely occupying half of the office space it owns. More specifically, the report states that the overall office occupancy rate is recorded at only 48% as of March 2023, a figure that in some cases drops to 26% for some law firms.
Such levels of occupancy might not be a cause for concern if not for the exorbitant cost of maintaining these office spaces. The Cushman & Wakefield 2023 Bright Insights report states that on average, law firms dedicate a significant 10.5% of their gross annual revenue to real estate costs. This statistic brings the real impact of the underutilized office space into sharp focus. Moreover, specific costs per square foot and the total area occupied by law firms nationwide bring the projection of unused real estate to an eye-popping figure of $24 trillion per year.
Considering these factors, it comes as no surprise that about 65% of law firms plan to decrease their space requirements, whether renewing their current leases or relocating. Significant calibrations in their office model are on the horizon. One model that has come under consideration is ‘hoteling’, a concept outside of the legal industry’s norm. Although often viewed negatively in the legal field, hoteling has proven successful in other sectors over the years, indicating that law firms might gain from exploring this path.
For a more detailed look at how law firms are dealing with this concern and the potential future of ‘hoteling’ within the legal sector, refer to the complete analysis here.