Law Sector and the Office Market Update

Knight Frank, the property consultant, has just published an update on trends in the law sector over 2017-18 which impact on the UK office market. Some of the main points include:

Consolidator firms such as Gordon Dadds, Redkite Solicitors, Knights and Metamorph Law are acquiring smaller rivals to gain market share. Consolidation activity is driving occupier demand in certain markets as merged firms looked to consolidate into single offices;

Some mid-tier law firms are aggressively expanding, in particular those that have focussed on niche services. One such firm that is forging ahead is Weightmans which has invested £1.3million on new technology over the last year. Another leading mid-tier firm is Fieldfisher who recorded a second consecutive year of double-digit growth that included moving into a single site in London;

New market players are expanding in regional markets. These included Leeds-based Alpaca, who launched in 2017, and Rradar, who relocated to larger office space at the Bruntwood Platform building in Leeds having undergone rapid growth;

Meanwhile, Norton Rose Fulbright revealed plans to create 100 new jobs in its legal process hub in Newcastle, Simmons & Simmons taking larger offices in Bristol, Walker Morris will relocate to 33 Wellington Street, Leeds, Reed Smith opening in Leeds, Graysons moved into larger, more modern premises in Sheffield, Pinsent Masons consolidated their two offices into 141 Bothwell Street in Glasgow, while Hogan Lovells tripled its space in Birmingham;

Manchester recorded the highest legal services sector takeup by square footage across all the UK regional cities at 155,328 sq ft or 13% of total take-up last year. This was followed by Bristol where legal services accounted for 9.4% of total take-up

Knight Frank conclude that changing business structures will demand a resetting of the corporate footprint with most relocating to higher quality office space in core CBD locations.

Metropolis is tracking over 100 law firms with either identified requirements or potential requirements for relocation from October 2018 onwards.

 

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4000 office moves for 2018-19

Metropolis has broken new records after 7,200 office business leads were published in 2017. If all the office space contained within those leads were added together the total would top 200 million sq ft.

Covering office deals agreed, companies searching for space, those with potential requirements and a small number of key speculative schemes, the 7,200 leads covered the whole UK from the tip of Cornwall to the north of Scotland. Office sizes ranged from 1,500 sq ft for 10 staff to Google’s new 800,000 sq ft London HQ.

Key points:

  • 2,700 company office moves confirmed to have completed in 2017;

 

  • 3,200 office moves are planned for 2018 and 890 office moves already planned in 2019 or later;

 

  • 3,000 companies, including 1,300 with ‘identified requirements’ expect to be making property decisions in 2018 and 2019;

 

IT and media services is the largest sector (800 leads) followed by financial services (600 leads) and professional, including large numbers of accountants and law firms (450 leads). Although the leads are spread over all UK regions, the size of the London office market, means that over 40% of the leads feature relocations, both scheduled and planned in central London. All leads include contact names, telephone numbers and 75% have email addresses, many of which are specific to the decision maker.

Metropolis remains the largest specialist provider of market intelligence led, office market business leads.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business opportunities on the database in recent months exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages or to discuss a trial, then please email Simon at simon@metroinfo.co.uk

 

Law sector expanding outside London

A recent report by property consultant CBRE analyses trends in the legal sector of the office market outside London.

The main points of the survey are:

82% of law firms are seeing increase in fee income (70% in 2014) and 10% of regional office take-up in the last 3 years can be attributed to law firms;

The pressure of competition within the legal sector by new firms such as Riverview Law, Axiom, Obelisk and Keystone Law is leading many firms to review their property occupation, especially in the UK regions;

Recent new office openings have included Latham & Watkins and Freshfields in Manchester, Hogan Lovells in Birmingham, Belfast has attracted Allen & Overy, Herbert Smith, Eversheds and Baker & McKenzie. Legal services firm Axiom has also announced plans to double its Belfast workforce;

Bristol firms occupy the most total legal office space, Manchester has the widest representation of firms in the Top 100; Bristol, Birmingham and Manchester all have over 750,000 sq ft of office space occupied by law firms.

Recently, Manchester and Leeds have seen notably strong letting activity. Manchester saw a 100,000 sq ft deal to Slater and Gordon and 45,000 sq ft for DLA Piper. In Leeds 51,500 sq ft was taken by Addleshaw Goddard, 33,000 sq ft by Squire Patton Boggs and 24,800 sq ft by DAC Beachcroft;

Generally firms in Glasgow and Edinburgh are occupying space at a higher density than counterparts in other UK cities;

‘Nearshoring’ of back office functions from London has led to new regional offices for Trowers & Hamlins, Clyde & Co with Edinburgh based Simpson & Marwick and Slater & Gordon with Chester based Walker Smith Way;

Law firms summarise their ideal space as space which is ‘high tech, high spec, high density’. The survey concludes that law firms are seeking more ‘light, bright, technologically enabled, open plan, collaborative and modern workspace’. Law firms are developing an approach to real estate which aligns it with technology and their approach to workplace design;

Metropolis is currently monitoring 40 law firm office identified requirements outside London, with a further 40 at an earlier stage.

The Changing Professional Sector

CBRE’s recent report on the changing nature of the professional services (law firms, accountants, consultants etc) sector throws up a number of interesting points which are reflected in the research that Metropolis carries out with office tenants.

Firstly, cost as a relocation trigger. Professional services firms are using space more flexibly and efficiently in order to reduce costs. Metropolis has spoken to a number of companies that are using shared desk strategies and are looking to take short term serviced offices, instead of longer term leases. Recent examples include Pinsent Masons, Fieldfisher and CMS Cameron McKenna.

Secondly, staff attraction and retention. Companies are using attractive buildings, technology and aesthetics in order to attract and retain key staff. Previous Metropolis blogs have noted the increased willingness of professional firms to consider previously fringe locations, if staff can be housed in an attractive building.

Thirdly, building ‘wellness’ and the positive impact on staff retention. CBRE found that moving staff to a better location had positive impacts on productivity and company efficiency.  PwC’s refurbished Embankment Place is an example.

Fourthly, collaborative space in professional companies. Many accounting and management consulting groups require more dedicated collaborative space than existing locations can provide. In contrast, law firms require more quiet space for individual analysis and client contact. Deloitte recently took space at the Buckley Building, EC1 for this purpose. Metropolis has found professional companies increasingly opting for new space which can be designed to reflect their needs.

Fifthly, the implementation of technology straegies. The rapidly evolving use of technology, for example cloud strategies to allow for more mobile working, has led to re-configuration of office environments. KPMG recently spent £20m on an IT upgrade and Clifford Chance is innovating. Metropolis has found more companies inviting tenders for IT upgrades, amongst this sector, than many others.

Sixthly, outsourcing is becoming more important for cost control. Law firms in particular are making more use of external outsourcing or setting up their own support services operations in regional UK cities. a recent example is Hogan Lovells planning to double its lawyer count in its Birmingham. Metropolis has recently reported on a number of new offices in Manchester, Midlands, Scotland and Belfast.

The professional sector is also seeing a high number of mergers as a way of increasing competiveness and reducing cost. Metropolis reports a steady stream of mergers, which often lead to a requirement to bring offices under one roof. Recent examples are the Moore Stephens merger with Chantrey Vellacott and Charles Russell with Speechly Bircham. In addition in London, mid-level firms indicate that in the search for cost control further fringe locations are being considered such as Battersea, Shoreditch, Stratford and White City.

The outlook for professional services indicates further growth. During the past five years, professional services employment has increased by 20%, adding 42,500 new jobs in Central London according to government statistics forecasts suggest professional services sector will grow by 55,500 jobs between 2014 and 2019. There is 6.8m sq ft of professional sector breaks and expiries scheduled from 2015 to 2021, of which 4.9m sq ft is made up of legal firms. Metropilis’ own figures suggest over 100 companies with nearly 2m sq ft of outstanding London and UK office requirements looking for alternative office space over the next two years.