Law Firm Demand Growing in Markets with Lower Costs, Strong Business Environments and Deep Talent Pools

Significant legal employment growth taking place in millennial-rich markets such as Austin, San Francisco and Dallas

As the legal environment becomes more competitive, law firms are expanding to markets that offer lower costs, strong business environments, and/or large, growing millennial populations such as Austin, San Francisco and Dallas, according to a new report from CBRE.

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.  Despite the expansion, law firm sq. ft.  only increased slightly year -over-year across the 26 markets tracked in CBRE’s annual North American Legal Sector Trends Report.

“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.  “In more expensive markets, many firms are reducing net square-footage to reduce overall operating costs.”

Employment growth accelerates in emerging markets

Employment growth in the legal sector has been slower in large, gateway markets, with the exception of Los Angeles. More robust employment growth has taken place in non-traditional markets. Atlanta leads the nation in lawyer employment growth, expanding 16.3% since 2015, well above the national average of 3%.  Rounding out the top five are Los Angeles (11.9%), Kansas City (11.4%), Austin (10.6%) and San Francisco (10.2%).

Austin takes the top spot for legal services growth (11.1%) followed by Atlanta (8.3%), Phoenix (4.7%), Detroit (4.4%) and Dallas (4.1%). The national average is 1.5%.

Millennial effect

Many of the markets experiencing strong employment growth in the legal sector also boast excellent millennial demographics and are among the national leaders in categories such as millennial growth and concentration.

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).

An analysis by CBRE’s Labor Analytics group determined which markets are most well-positioned to support a law firm Center of Excellence with IT, finance, litigation, HR and marketing functions.  Austin was identified as a well-positioned market, based on the balance of law firm support supply and cost. As previously noted, Austin is already a top market for legal services growth (11.1%) and lawyer growth (10.6%).  It also has the highest concentration of millennials in the country (28.2%) and has been a top market for millennial growth since 2012 (12.3%).

Columbus, Orlando and Kansas City are also among the best suited “growth markets,” while Atlanta, Dallas, Phoenix, Tampa and Denver are considered “established markets,” which offer greater depth of skills and scalability at a higher cost, but still lower than traditional gateway markets.

“As law firms seek new talent, they must be nimble and willing to shift their recruitment practices by expanding beyond traditional markets to address changing business needs,” said Mark Seeley of CBRE Labor/Analytics. “Many new markets are emerging that offer quality talent in places that law firms may not have considered before.”

Law Firm workplace trends

With the recruitment of this new demographic also comes a shift in workplace strategy, as firms look to implement innovative space designs to appeal to millennial workers. Often, these workers are looking for healthier environments that make strong use of technology and create a more social atmosphere.

“Firms competing for top talent have to consider more than compensation today. Now, they also have to deliver a compelling environment that will attract talent, and this is particularly true for millennials,” said Julie Whelan, Americas Head of occupier research, CBRE.  

Some of the workplace trends occurring in the legal sector include: Universal private offices; open workstations and additional focus rooms for staff and associates; centralized file storage; touchdown spaces/visiting offices; larger library footprints that doubles as a quiet zone; and larger working café space integrated with reception/concierge.

“We are already seeing how new technology, the quest for talent and the changing workplace experience will significantly influence the use of office space in the legal sector.” said Georgas.

Read the entire report here: http://bit.ly/2MV98Cy