Law firms compete for the top offices in London

Top law firms took over more than a quarter of all office space leased in the City of London last year, leading a charge for sustainable, quality jobs as firms aim to cut emissions and win the battle for talent.

The 1.1 million square feet of space leased by law firms in central London last year was the largest space the sector has occupied since the Brexit referendum in 2016, more than 50 per cent more than the amount taken up in 2020 and 85 percent more than it took in in 2019 overall, according to real estate agency Knight Frank.

“Part of that is expansion, but a lot of what we’re seeing is companies looking to scale up,” said Richard Proctor, head of tenant representation at Knight Frank in London.

Concerns about the future of offices have haunted developers and landlords since the onset of the coronavirus pandemic, with long stretches of forced homeworking and a shift to more hybrid working models threatening the traditional workplace.

While the future of older buildings, which are losing out in a new competition with workers’ homes, remains in question, property owners and investors are increasingly optimistic about the prospects for modern, low-emission offices.

According to Knight Frank, 94 per cent of the space occupied by law firms in the UK last year was in so-called Class A buildings, the top segment of the market, compared with 73 per cent five years ago.

Three of the biggest deals signed in London in 2021 underscored appetites for the latest stocks as they were pre-let deals to occupy space in office towers being developed.

US firm Latham & Watkins agreed to take 250,000 square feet and UK firms Allen & Overy and Travers Smith signed leases for 271,000 and 160,000 square feet respectively of City of London office space.

These companies are shuffling from older inventory for a number of reasons, Proctor said. “A big part of that is the piece of talent and retention. Wellbeing matters and we have many law firms that have committed to achieving net zero carbon [emissions] on certain dates. Many of them are taking the opportunity to move into much more sustainable buildings,” he added.

Law firms are striving to be seen in the most carbon efficient buildings in part because they are now marketing themselves as consultants on environmental issues, said Tony Williams, founder of legal firm Jomati.

Given the advent of remote work, Williams predicted that aside from US-based firms that were “on a growth trajectory,” high-end law firms would not increase their office space even if they moved to new premises. Some might even get smaller, he added.

US law firms were particularly active in London last year, accounting for 42 percent of all space occupied by law firms in the city. “Americans have really started the war for talent,” Proctor said.

With firms leasing an average of more than nine years in the past year, the wave of activity in the legal sector is unlikely to continue.

However, as the largest firms try to outperform their rivals’ offices, that could remain the case in the short term, Proctor said. “This sector in particular is keeping tabs on its competitors and if there’s a trend that something is taking up space, there could be a ripple effect.”

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