Mid-tier legal firms in the regions will face further consolidation, according to Knight Frank.
The advisory firm’s UK regional cities legal sector report shows Cardiff, Leeds and Manchester saw the largest percentage of regional office take-up in 2016 at 19.2%, 18.8% and 16.3% respectively.
However, struggles around competitive fees might force firms to merge to improve their position.
This has already been seen with 69% of M&A last year involving a regional law firm.
In Cardiff, Hugh James Solicitors acquired MLM Cartwright solicitors and consolidated into one office at 2 Central Square.
Agile, tech-savvy and client-focused new entrants will also take an increasing market share, hitting the profitability of traditional law firms if they fail to adapt.
Law firms are also continuously deploying off-shoring and near-shoring strategies to reduce cost.
Occupiers have extended the scope of existing centres and looked to UK cities in which high-quality talent can be obtained for cheaper.
In Manchester, Freshfields Bruckhaus Deringer took 81,300 sq ft of space at One New Bailey, spurred by proximity to a skilled talent pool.
But demands from the workforce will also drive more occupier demand for offices in central business district locations.
The report also predicts a radical change in the organisational structure and talent requirement of law firms over the next five years.
Traditional law firm staffing structure will be replaced by a streamlined pool of permanent legal staff working with non-traditional and temporary employees.
Knight Frank forecasts certain roles will vanish or be redefined as work is either automated or outsourced, and an increase in the use of contract lawyers is anticipated.
A broader range of business skills relating to technology, business analytics, data intelligence and project management is also needed and will pitch law firms into a more intense war for talent.
Lee Elliott, head of commercial research said: “Law firms have been an integral part of the development and, in some instances, rebirth of regional office markets across the UK.
“Despite multiple pressures on the operating model of legal services firms, we firmly believe the sector will continue to be strongly represented across the UK regional markets.”
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