Today's Legal Sector
Law firms have typically adhered to established practices, but the pandemic significantly impacted and expedited changes in the workplace and technology. The transition to remote work happened almost instantly, resulting in greater investments in secure cloud platforms, document management systems, and virtual client engagement.
This change prompted a cultural shift in the way attorneys and staff worked and serviced clients. Firms quickly realized they could operate effectively with less square footage, expanded technology and overall new workplace strategies. Although law firms have returned to the office more than other industries, hybrid forms of working have become the new standard. Real estate overhead remains a significant investment, typically the second fixed expense, equaling 4 to 8 percent of a firm’s annual gross revenue. The office workplace is being reimagined to support business strategies, culture, talent acquisition, and the firm’s overall competitive stance.
HIGHLIGHTS
- Law firm leasing activity (number of transactions) has increased each year from 2022 to 2024, aligning with pre-pandemic levels, supporting the legal sector “getting out of real estate gridlock”.
- Employment in the legal services industry has experienced moderate, steady growth over the past decade.
- Shrinking real estate footprints indicate greater spatial efficiency with target ratios below 500 SF per attorney.
- Led by Am Law 100 and 200 firms, there has been a significant flight to quality driven by overall weak demand for office space, especially in 2022 and 2023. During this period, over 75 percent of Am Law firms opted for new leases rather than renewing their current ones. However, in 2024, firms were more likely to renew their leases at their current locations, doing so 62 percent of the time, as the availability of large blocks of space (50,000+ square feet of contiguous space) in top-tier Class A buildings has decreased, limiting relocation options.
- Since the beginning of 2024, US law firms have conducted nearly 100 transactions involving spaces larger than 50,000 square feet. Although there were nearly equal numbers of expansions and contractions, the total square footage leased from these transactions is lower overall.
LAW FIRMS TAKE THE LEAD
A mix of economic, operational, and talent-focused factors is driving law firms’ real estate decisions. Coming off an active 2023 and 2024, when many law firms seized the opportunity to right-size their footprints or relocate to newer, efficient, and amenity-filled buildings, more law firms in the first half of 2025 committed to renovating their existing office space. For larger firms, particularly Am Law 100 law firms, the scarcity of large block prime office space has been a driver for firms deciding to stay in place. Smaller to medium-sized firms are now choosing to renovate their spaces more frequently than to relocate, which marks a notable change from the past two years. Additionally, rising construction and fit-out costs are prompting firms to reconfigure existing space rather than undertake required capital costs for relocations. The key is to find the right balance of space efficiency, capital costs and overall workplace design that will provide flexibility in future years while also reducing overall occupancy costs.