The law office style that was prevalent many decades ago is no longer relevant. Gone are the days of large law libraries, mountains of paper files, and an assistant for each attorney. Recent technological advances are going to take this even further, as firms transform older, inefficient offices to well-planned work environments, or move to new space.
Firms that are doing it right —whether large or small, global or local—not only lock in efficient space at economic terms that work for their business, but also create work environments that reflect their culture, ethos, and values. As a result, they can work more productively and retain and recruit attorneys more effectively.
So how can you maximize the benefits of relocation, but minimize the costs? How can your office serve as a recruiting tool for new hires and clients? From my 40+ years in the commercial real estate business, I know how to create office space that positions a firm properly for the future, culturally and, more importantly, economically.
Here are some of the most important questions you need to be asking:
1. Do I really need to move?
Law firms are often courted by building owners to anchor the newest development, which often comes with the highest per square foot rent in the market. I always push clients to make sure they give adequate thought about whether they can stay in their existing space. A relocation often costs more (and is more disruptive) to a firm than a simple upgrade or modification of the existing space. Firms must fully assess what renovations can be done to their current space to meet the future needs of the business. A word of caution—living through a renovation can be difficult on your ongoing operations, so make sure you factor this into your decision making.
2. Am I spending too much money?
Some people mistakenly think that a growing rent bill is the sign of a growing law firm. Many firms actually need less space (and expense) rather than more space. With the added pressure firms are seeing clients place on their billing rates and fees, the bottom line impact of real estate expenses is becoming more significant.
Traditionally, after moving into the newest “Class A” space, law firms have built out spectacular Architectural Digest-style environments with high-end finishes and custom built-ins. Besides the obvious financial impact and increased operating or capital expense, this tactic may turn off a client. One of my clients told me the story of visiting his law firm’s new offices. He fired the firm on the spot as he assumed the firm’s billing rates increased to cover the overhead of the firm’s accoutrements of wealth.
Another important issue for firms to consider is the financial security or guarantees a landlord will ask the firm to post to securitize the lease. For a partnership, this is an important issue that is often overlooked until the eleventh hour of lease negotiations. Landlords look for a larger security deposit the larger the rental obligation and the larger the capital costs are associated with the lease.
3. Am I following old traditions that no longer apply to the modern workplace?
Traditionally, law firms recognized career advancement with real estate. As you were promoted, your workspace became larger, with the goal of getting a private office and ultimately that oversized corner office. These days, instead of awarding large private offices as rewards, I typically advise my clients to find other ways to recognize career advancement or a job well done. Look for new ways to bring workers together instead of driving them apart.
Law firms across the country are shrinking their per-attorney footprint and shedding unnecessary spaces like libraries and large file rooms. They are making individual offices smaller (and often embracing one, standard size office) by pulling the small conference tables out of individual offices and converting that saved square footage into dedicated conference rooms that can be utilized by the entire firm. The standard size offices, especially when they are the same size as the small conference rooms, provide for more flexibility and allow the firm to use office space more efficiently.
4. What about risk?
Because of the volatility of our economy, any law firm signing a new office lease should seek to hedge three potential types of risk: Building Risk (changes to your building’s infrastructure or ownership which could impact your occupancy), Market Risk (events in the global marketplace that trickle through to real estate and have an impact on rents tenants pay) and Business Risk (the inherent risks within your own business that impact profitability).
So how do you mitigate these risks in your new office lease?
Before you sign your lease, you must clearly understand your ability (or lack thereof) to expand or contract your space over the course of that lease. This is especially important if you are considering a long term—5 or even 10 year—lease.
These days, a law firm may experience rapid growth, or conversely, a sharp decline in partners or loss of a practice group. In this case, you will need more or less space almost immediately, even if your lease has not ended.
In negotiations, push to have as much lease flexibility as you can—with layers of options to expand, contract, and terminate. In many instances, landlords are initially resistant to providing these rights, but firms should push for these options and even be willing to pay a premium for this added flexibility.
5. Is the location staff friendly?
Your attorneys and staff consistently pull long work hours. If your office space is ultimately a recruitment and retention tool, wouldn’t understanding the commuting habits of your present and prospective employees be paramount?
For this reason, seek to find an office location that is convenient for your attorneys and staff—and not just convenient for partners.
Remember, too, that convenience is about more than just commute times. Firms are placing more importance on work-life balance as one of their core values. These firms are focusing on locations close amenities and services such as restaurants, day care, fitness centers, bike rooms, and even pet friendly environments.
6. Am I taking my clients into consideration?
Your office space is ultimately a reflection of the firm’s values and culture. Forward-thinking firms are taking it a step further and making sure their space is a place their clients also feel comfortable. For instance, for a firm trying to expand its tech practice, traditional office space in a trophy-high rise tower may not reflect the values or work style of these clients. Consider building in amenities that your clients can also use, such as conference rooms with great connectivity and internal spaces that can host industry mixers or startup competitions.
7. Does my advisor have a conflict of interest?
One final point: I always recommend finding an experienced commercial real estate broker who does not have the typical conflicts of interest commonly found in the industry.
How do you know if your broker has a potential conflict? Ask him or her if their company also represents the building landlord in this or other transactions. Even if they say they keep a “wall” between their tenant and landlord representation divisions, they ultimately may not have your best interest at heart. Your clients wouldn’t allow you to represents both sides of a negotiation, so why would you pick a brokerage firm that does.
With the proper planning and strategy, and a careful balance of economics and culture, your new office space can infuse the firm with newfound energy and enthusiasm. Better yet, it can improve the performance of all of your employees and, ultimately, your bottom line.
Howard Ecker is the founder of Howard Ecker+ Company, a commercial real estate company focused exclusively on representing tenants.