Major law firms are searching for 1.3m sq ft of office space across London, ensuring that agents will be kept busy far beyond this year’s record-breaking take-up.
Firms currently looking for new offices in the capital include Mayer Brown (100,000 sq ft), King & Spalding (40,000 sq ft) and Finnegan (12,000 sq ft).
Data shared exclusively with EG by Knight Frank tracks 1.3m sq ft of live requirements in the sector, with 145,000 sq ft under offer.
The sector has bolstered the London leasing market, with 1.5m sq ft of offices taken up by law firms so far this year – an all-time high. In 2021, full-year take-up stood at 1.2m sq ft.
Richard Proctor, head of tenant representation at Knight Frank, said: “These firms are all looking to trade up in terms of the quality of the building they move to, but the number of buildings that will actually tick the boxes are quite limited, so you are constrained as to where you end up.”
Other firms on the hunt include Morgan Lewis (60,000 sq ft), Akin Gump Strauss Hauer & Feld (80,000 sq ft) and Orrick (50,000 sq ft).
Demand among London law firms is almost entirely concentrated on grade-A office developments, with the sector responsible for almost half of all prelets since 2020.
Some of the most substantial recent deals have included Addleshaw Goddard’s 114,176 sq ft prelet of Pembroke’s 41 Lothbury, EC2; US law firm Squire Patton Boggs’ 54,874 sq ft letting at 60 London Wall, EC2; and Clifford Chance’s 321,000 sq ft prelet of the entirety of GPE’s 2 Aldermanbury Square, EC2, which will see it leave Canary Wharf.
At Carter Jonas, head of tenant advisory Michael Pain said: “Since the fourth quarter of last year, there has been at least one prelet to a law firm in excess of 100,000 sq ft every quarter and many of them have been more than 200,000 sq ft.”
Geographically, firms continue to favour the City Core, where 94% of take-up occurred in the third quarter.
The recent moves of Skadden Arps, Slate, Meagher & Flom and Clifford Chance from “far out east” are notable examples of firms migrating back to the City and “reinforces the fact that the City Core is where law firms feel safety in numbers,” said Proctor.
“No one is going to get told off for deciding to move to a building that is rubbing shoulders with their peer group,” he added.
James Walker, principal in central London offices at Avison Young, said leasing activity has been “primarily driven by the acute shortage of good-quality development around Holborn and the courts, alongside the fact that advanced technology means proximity to clients is no longer as important”.
This change was “underpinned by broader cultural changes in how people regard the role of the office”, Walker added. “This is something we are seeing across sectors, [and] has led to the smoothing out of prime rents across submarkets as firms chase product rather than traditional location,” he said.
For some businesses, assessing space needs remains “a stab in the dark”, said Carter Jonas’s Pain, as occupiers adjust to new working practices and remember lessons of the past.
“A lot of law firms were significantly affected by the credit crunch as a lot of their business is corporate finance, so they had to let go of people very quickly and then had all this surplus space on their hands,” Pain said. “They have had their fingers burned once so are taking a slightly more cautious approach and are committing to buildings with flexibility.”
Knight Frank’s Q3 Global Corporate Sentiment Survey found professional service firms were most positive about future growth and workplace dynamics compared with all other sectors. Some 71% of law firm real estate leaders expect an increase in the range of amenities and services provided within their workplaces over the next three years, with an emphasis on wellbeing-related amenities.
Also high on the search agenda is ESG, with 86% saying it will be somewhat influential or a key influence in determining their real estate strategies over the next three years.
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