Results of groundbreaking survey launched by Cushman & Wakefield provide exclusive insight into the Business, Financial and Operational Drivers influencing competitive decisions at 286 U.S. law firms
Cushman & Wakefield, the world’s largest privately held commercial real estate services firm, today released the results of a unique benchmark survey of law firms administered by the company’s Legal Sector Advisory Group (LSAG). Drawing on input received from a broad range of experts and executives in the legal sector, the first of its kind survey provides actionable data concerning key business, financial and operational drivers that influence real estate decisions at law firms.
“More now than ever, maintaining profits and controlling expenses are key challenges that the legal industry is facing,” said Sherry Cushman, executive managing director and leader of Cushman & Wakefield’s Legal Sector Advisory Group in the Americas. “The results of the survey will assist in gaining a better understanding of how real estate can be used as a vehicle to decrease overhead, improve overall operations, and increase profits to remain competitive in the future.”
A key metric benchmarked in the survey, which is driving competition among law firms, is the fact that the legal industry occupies on average two to three times the square footage per employee than the banking, finance, insurance and technology industries. How individual law firms implement policies and decisions to address this imbalance is expected to have a dramatic affect on competition within the industry in the next few years.
Information submitted by firms was collected in a blind fashion by a third-party professional polling firm and is therefore untraceable to individual responders. The collective data, however, is extremely valuable to participating firms as it offers an anonymous, comprehensive perspective of how a firm stacks up against industry peers in relation to real estate expenses, location and efficiencies. This is important from a competitive standpoint because it provides hard data demonstrating how similar-sized firms can use real estate as a vehicle to decrease overhead, improve overall operations, and increase profits.
Of the 286 law firms that responded to the survey, 26 percent were AM 200 firms (signifying the largest 200 American law firms based on revenue). Firms from every region of the United States responded with a high concentration (70 percent) based in the Northeast.
Real estate is the second most expensive line item next to salaries at law firms, but until now, there has been no empirical data that enables law firms to benchmark their business strategies against their U.S. competitors using current, aggregate data on all three drivers (business, financial, and operational).
On average, the percentage of gross revenue spent on real estate per the respondents was 6.2%. This percentage represents an approximate 2 percent to 4 percent reduction from 10 years ago. However, future target percentages will continue to reduce real estate occupancy costs through careful evaluation of operational issues and workplace strategies, as well as solutions to create ultimate long-term flexibility and an environment that supports business synergies.
Over the past five years, the legal industry has experienced a great stress on space efficiencies, reduced square footage per attorney ratios, space flexibility, and long-term space densification to adapt to the ever-changing marketplace. This stress has not been due to the desire to simply downsize—rather it has been due to the financial pressures to maintain profits, decrease occupancy and operational costs, as well as to be more in line with other industries.
In addition to the survey, C&W completed five national Roundtable Discussions with more than 100 key law firm decision-makers throughout the country to discuss decision making drivers, as well as emerging future trends in the legal industry. These responses are included in the “Future Trends” section of the report and will continue to be tracked in the coming years.
During the next 60 days, Cushman & Wakefield’s Legal Sector Advisory Group will host informational symposiums in 14 major U.S. cities to present detailed benchmarking statistics from the survey. The events are expected to draw large groups of clients, prospects and local C&W brokerage professionals in each market.