Denver Law Firms Changing Their Approach to Real Estate, According to CBRE Report
16 Nov 2018
Larger Firms Contracting Space; One-size Offices Broadly Adopted
Denver law firms are shedding surplus space, increasing efficiency and migrating across downtown, according to CBRE’s 2018 North American Legal Sector Trends Report.
Overall, Denver recorded 283,848 square feet of law firm space transactions from Q3 2017 through Q2 2018. Of these transactions, 47.2 percent were contractions, 28.6 percent were expansions, 20.2 percent were stable and 4 percent were new-to-market. Of the firms who contracted, on average they reduced their footprint by 21.8 percent.
CBRE found increasing space efficiency a common trend among Denver firms. One-size offices have been broadly adopted in the market with 12 (28 percent) of the top 40 Denver law firms (measured by square footage) having implemented or in the process of implementing one-size offices. Ten of these new build-outs occurred starting in 2015, making it a fairly new phenomenon that is anticipated to continue.
In Denver’s Central Business District, law firms continue to migrate from Uptown and Mid-CBD with three major firms making this move from 2017-2018. Eighteen (45 percent) of the top 40 Denver firms are now located in LoDo or the adjacent Skyline Urban Renewal District.
In terms of employment, Denver’s legal services employment is slightly decreasing. The market saw a 1.2 percent decline in overall legal services employment and a 3.1 percent decline in lawyers specifically from 2015 to 2017. This aligns with the national trend of fewer millennials graduating with law degrees in recent years.
“Both nationally and in Denver law firms are facing a couple of headwinds. While profits are being squeezed, expenses are going up as rents rise and firms increase their compensation to attract and retain top talent. This is causing law firms to reevaluate their approach to real estate, considering how they can design their space to adapt to changes in technology, to changes in the generational composition of their attorneys, to win the war for talent, to respond to competitive forces and to maximize operational efficiencies. The result of all this is more modern and efficient design with law firms reducing space per lawyer by about 20 percent on average,” said Greg Holm, Senior Vice President, CBRE.
Nationwide, the report finds that law firms are shifting recruitment strategies and expanding outside of traditional gateway cities to find new talent in lower-cost environments, often those with large, growing millennial populations.
Other report findings include:
- More than one-third of AM 100 Law Firms expanded in the past year, accounting for half of the 1.6 million square feet of law firm space absorption in the U.S.
- For lawyer employment growth, Atlanta leads the nation, expanding 16.3 percent since 2015, while Austin leads the nation in legal services employment growth at 11.3 percent in that same time period.
- Six of the highest growth markets for legal sector employment (Austin, San Diego, Los Angeles, Orlando, San Francisco, Houston) are also among the top-10 markets for millennial concentration nationally, while six are among the top-10 markets for millennial growth (Austin, Orlando, Houston, Dallas/Ft. Worth, San Francisco, Phoenix).
“The expansion taking place is most often in lower cost markets, where large law firms are entering for business expansion and tapping into new talent at competitive price points,” said Jamie Georgas, Global Chair of CBRE’s Law Firm Practice Group.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.