JLL’s Law Firm Outlook Highlights | 2016
The U.S. economy remains the anomaly among mature and emerging markets in its relative stability despite global economic uncertainty.
The domestic economy has weathered a number of potential shocks throughout the first half of 2016. However, year-to-date growth in GDP, jobs and other economic indicators have been less consistent than in 2014 and 2015, with employment gains varying increasingly on a monthly basis and inflation stubbornly low due to the slump in oil and energy prices.
As a lagging indicator that follows the economy, the U.S. office market continues to move steadily throughout the real estate cycle, with the Trophy and CBD Class A segments in particular outperforming across most economic metrics.
Over the past six quarters, sustained demand has chipped away at some of the last remaining large blocks of quality space, giving landlords the opportunity to push rents at double-digit rates in many geographies. At the same time, the diversity of demand and changing industry drivers such as tech, digital media and other creative companies have in many cases eschewed more traditional top-tier space, providing some relief for law firms.
Rightsizing has been aggressive, and more is to come
Tighter financial scrutiny, less reliable gross revenue and profit growth and rising real estate costs have all played a role in firms’ aggressive rightsizing and efficiency measures during the current cycle. Benchmarking figures collected across more than 40 markets demonstrate a sharp drop
in square feet per attorney from a historical average of 976 square feet to its current level of 760 square feet, a savings of 22.2 percent for a typical firm. As rents have risen faster than tenants can trim down on space, annual U.S. aggregate rent per attorney rates have fallen by 12.1 percent from $38,535 to $33,879.