U.S. law firm leasing, a strong indicator of office health, has rebounded with “record-breaking” results, according to Savills.
In the fourth quarter, law firm leasing reached 10.2 million square feet. That’s a 31.4% surge from the 7.7 million square feet in 2023 and a 21.4% rise from the 2019 peak of 8.4 million square feet. The final quarter accounted for 37.2% of all activity, and was a key contributor to the success.
“This milestone marks 2024 as the most robust year in over five years, highlighting the legal sector’s revived demand for office space,” Savills wrote. During 2024, quarterly leasing averaged 2.5 million square feet, far stronger than the 1.5 million square feet quarterly average from 2020 to 2023. The firm saw the results as a return to pre-pandemic activity for the sector.
Expansions were 36.4% of all occupancy changes in 2024, which was down from 43.6% in 2023. Downsizes were 33.9% of occupancy changes, up from 28.7% in 2023. Still, expansions remained larger than downsizes.
The total change in footprint from firms that expanded was 47.6%; the net change of all relocation and renewal was 2%; and the total footprint change in firms that downsized was -35.3%.
Not all the news was good, however, as 46.5% of relocation leases signed in 2024 were for downsized moves.
The average change in footprints of expansions was 21,787 square feet. The net change for all relocations and renewal transactions was 181,879 square feet. And the average change in downsizes was 27,011 square feet.
Law firms also adjusted their “leasing strategies to balance cost and flexibility.” Landlords increasingly used longer leases to manage a growing gap between tenant improvement allowances and rising construction costs, which for private industry final delivery are up a bit more than 40% since 2019.
The firms have been using longer-term leases to get desirable locations with flexibility provisions. In markets that are tenant-favorable, and space availability is great, firms can negotiate leases with built-in options for greater flexibility over the lease term.
Some of the major law firm deals involved Ropes & Gray’s 430,000 square-foot relocation in New York and its 413,000-square-foot renewal in Boston; Winston & Strawn’s 237,815-square-foot New York renewal; Loeb & Loeb’s Los Angeles 130,000-square-foot renewal; a 119,555-square-foot Washington, D.C. relocation for ArentFox Schiff; a New York expansion of 116,334-square-feet by Simpson Thacher & Bartlett; and a Smith Anderson renewal and expansion of 112,327-square-feet in Raleigh.
Source: “Law Firm Leasing Hits Record-Breaking 10.2M-SF in Q4”
