03.19 Legal Briefs - LSAG Newsletter

LEGAL SECTOR LEASING ACTIVITY

For the major law firms like Boies, Schiller, and Flexner and Skadden that have leased space in new development, the flight to modernity is largely attributed to attracting and retaining top talent. Firms can create a new identity and environment in an emerging neighborhood on Manhattan’s Far West Side. These buildings offer more efficient floorplates allowing firms to reduce their total footprint by 18.3% as well as their attorney psf ratio, while still having future growth space. Since the start of 2016, there has been a dramatic increase in concession packages, largely attributed to landlords trying to retain and attract tenants as they compete against new construction and the rising construction costs. From 2011–2015, 47 leases signed with work allowances greater than $100 psf. Over the past three years, however, 252 leases were signed with triple digit concession packages. In 2018, law firm leasing declined 2.2% from the prior year to 2.8 msf. While overall leasing was down slightly, the most notable shift was that new leases were up 45.6% in 2018 with over 2.2 msf leased. The significant amount of new leasing activity comprised 80% of the sector’s activity—a significant jump from the 54.3% average over the past five years. The average transaction size in 2018 was also bigger; it increased 35% from 23,603 sf in 2016 to 31,870 sf in 2018. Historically, the majority of law firms have leased space in Midtown. In 2005–2008, law firms leased the most space in the Sixth Avenue/ Rock Center, Grand Central, and the East Side/UN submarkets. Although, Sixth Avenue and Grand Central are still the preferred submarkets for law firms, the Penn Station submarket has replaced the East Side/UN submarket. Industry leasing activity decreased across all Midtown submarkets from 2015–2018 compared to 2005–2008, except for the Sixth Avenue/Rock Center, Grand Central, and Penn Station submarkets. In 2018 alone, four out of the five top leases are future relocations

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Square Feet in Millions New Renewal 10-Year Average: 2.8 msf

LEGAL SECTOR LEASING ACTIVITY BY MIDTOWN SUBMARKET

Square Feet in Millions

0

2

4

6

8

10

2005–2008

2015–2018

6 Ave / Rock Cntr Madison / Fifth

Grand Central Park Avenue

East Side/UN

Murray Hill

Penn Station

Times Square South West Side

to new construction or renovated assets, compared to one in 2017.

12 | Legal Sector Advisory Group | ADVISING FOR EXCELLENCE