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Table of contents
United States Law Firm market – Office outlook 3
Local Law Firm markets 7
Atlanta 8Austin 9Baltimore 10Boston 11Charlotte 12Chicago 13Cincinnati 14Cleveland 15Columbus 16Dallas 17Denver 18Detroit 19Fairfield County 20Fort Lauderdale 21Houston 22Indianapolis 23Long Island 24Los Angeles 25Miami 26Milwaukee 27Minneapolis 28New Jersey 29New York 30Oakland 31Orange County 32Philadelphia 33Phoenix 34Pittsburgh 35Portland 36Raleigh-Durham 37Richmond 38Sacramento 39San Diego 40San Francisco 41Seattle-Bellevue 42Silicon Valley 43St. Louis 44Tampa 45Washington, DC 46Westchester County 47
2JLL | United States | Law Firm Perspective | 2015
LAW FIRM PERFORMANCE IS:
REVIVINGAmLaw 100 revenue
reached a record
$81 billion in 2014 and is growing consistently at around
4.5% per year.
$$ RISING $$
16% of AmLaw100 firms now have profits per partner greater than $2.5 million.
OFFICE MARKET IS:
TIGHTENING
CBD Class A direct vacancy is down by 100 basis points year-on-year to
11.1% in Q2 2015
CBD Class A direct vacancy below 10%:
Pittsburgh5.9%
Portland6.4%
Charlotte7.1%
Midtown (NY)8.5%
San Francisco9.0%
1/3 more Class A development is underway now than at this time last year, totaling:
38.3 million s.f.Firms have more options for quality space with the construction pipeline preleasing rate at:
38.1% vs. 47.8% average
NEW SUPPLY PIPELINE WILL PROVIDE:
RELIEF
Will law firm demand grow over the next 12 months?
Job growth has reached the highest level since the late ‘90s with 10.4 million jobs created since the trough in 2010. Further, economic growth prospects for 2016 remain bullish with most recent second quarter 2015 growth pegged at 3.9 percent annually, with growth diversified across business and consumers. Different from earlier points in the cycle, companies across sectors and geographies are growing, including the office-using heavyweight of banking and finance, thereby adding talent and office space.
Nowhere are these trends more present than in CBD Trophy and Class A space, the same subset of the market in which law firms locate their offices. A combination of demographic shifts, limited supply, accelerated rent increases and record sales pricing pushing up underwritten rents has placed law firms in a landlord-favorable setting across markets from Boston to Miami and New York to San Francisco.
16.0%4.0%
80.0%
Increase
Decrease
Stable
United States Law Firm marketOffice outlook
In line with improvements in the broader economic picture, law firms have begun to see a more uplifting business environment. AmLaw 100 gross revenue reached a record $81.0 billion, rising 4.6 percent over the year, with revenues now growing at or above 4.5 percent annually for four of the past five years. This rate is increasingly becoming the new normal, demonstrating growth but stability from the 10 percent growth rates many firms experienced in the earlier part of the decade.
Fee compression as well as weaker demand for legal services following the recession, however, have forced law firms to focus on enhanced efficiencies for two of their largest expenditures: talent and real estate. The industry’s deep focus on operational leverage has helped firms buoy two key industry metrics in the slower-growth environment of recent years, revenue per lawyer and profits per partner, the latter of which rose by 5.3 percent in 2014 to $1.6 million.
Meanwhile, a greater focus on diversified practice groups such as cybersecurity, financial regulations, health care data management and privacy has boosted financial gains at the market level as well, strengthened by consistent hiring across industries in geographies as diverse as San Francisco (tech and intellectual property), Dallas (corporate law), Miami (international finance) and Denver (ancillary services). For perhaps the first time since the late 2000s, law firms have reason to be more optimistic, with their business outlook improving.
On the other hand, law firms face a tighter and more competitive office market than in previous years just as they are beginning to expand.
3JLL | United States | Law Firm Perspective | 2015
KEY HIGHLIGHTS:
1Record AmLaw 100 revenue of $81.0 billion and stable rates of growth are helping to revive the legal sector
2Just as firm revenue is expanding, improving economic conditions are boosting office market performance, creating a more competitive environment
3CBD Class A space is seeing vacancy fall into single-digit territory in many markets, while Trophy rents are rising 2.5x faster than the market average
4Development has been catalyzed in response to demand, although new space commands a 20 to 25 percent premium
Firms looking for low-cost space are actively taking interest in secondary and tertiary markets
OVERALL
PRIMARY
SECONDARYTERTIARY
How tight is the CBD Class A market? Very tight.
Law firms comprise approximately 17.0 percent of Trophy andClass A office space across cities with firms accounting for more than one quarter of occupancy in markets such as Washington DC, Palo Alto, Cleveland, Columbus, Fort Lauderdale and Austin. Nationally, as of September 2015, direct vacancy in this segment of the office market averaged 11.1 percent, far below the 14.2 percent rate for the overall office market. Across the highest-end of the market (the Trophy swath of the market) fundamentals are even tighter with vacancy levels dipping below 10.0 percent as of September 2015.
In many key mid-sized markets, direct vacancy has dropped to single-digit levels: Pittsburgh (5.9 percent), Portland (6.4 percent), Charlotte (7.1 percent), Midtown Manhattan (8.5 percent) and San Francisco (9.0 percent). Among large geographies, only Dallas and Atlanta reported significantly above-average direct vacancy yet even in those markets year-over-year vacancy declines have been some of the most dramatic decreases. These two markets witnessed a combined 989,327 square feet of occupancy growth year-to-date and we expect that vacancy will continue to fall until new construction delivers in 2016 and 2017 and companies put space back onto the market upon relocation.
This lack of supply has helped to boost rents sharply. Since 2010, CBD Class A rents have risen by 22.7 percent to $47.19 per square foot. Over the course of the recovery, Trophy rents have spiked by 28.3 percent to $57.97 per square foot and, at annual rates, we expect that they will jump at an annual rate of 18.1 percent through 2015. Respectively, CBD Class A and Trophy rents are growing at 2.0x and 2.5x the rate of overall market asking rents, a trend that we foresee continuing through 2016 and into early 2017 due to sustained employment growth in urban areas.
Leasing remains focused on efficiency
As one of the largest and most high-profile components of the national tenant base, law firms remain an outlier compared to other industries in terms of their share of leasing activity. Among transactions larger than 20,000 square feet, law firms accounted for just 7.2 percent of activity by volume over the past year. This is the fourth-largest contribution of any sector after finance, technology and government, but marginal compared to their 17.0 percent share of occupancy across the country.
Why has this evolved? First, high-growth segments of the economy, such as the high-tech and creative sectors, are dominating activity, accounting for 28.9 percent of leasing volumes. Second, law firms remain focused on efficiency plays and thus are largely stagnant from a real estate perspective. For example, 38.7 percent of law firm activity represented rightsizing with only 22.4 percent being expansionary, largely in industry-specific markets such as Silicon Valley, with high-growth practice groups such as intellectual property. In comparison, 75.2 and 69.8 percent of leasing for advertising/marketing and tech, respectively, has represented growth in recent quarters, signaling firms are not just competing against themselves, but more broadly against the new economy.
From a geographical perspective, the “big four” law markets of New York, Washington DC, Chicago and Los Angeles posted 4.3 million square feet of law firm leasing activity, or 50.5 percent of the national total. Other focal points include Dallas, San Francisco, Denver, Boston and Minneapolis, where diversified growth across industry sectors continues to power office demand and rent levels.
Firms experiment with core-fringe locations
As a result of tightening fundamentals across core urban areas, law firms have begun to consider relocating to core-fringe CBD micromarkets, particularly for firms looking at new construction. These core-fringe locations, such as the Seaport District in Boston, Hudson Yards in New York and Mount Vernon Triangle in Washington, DC, provide better access to younger talent in quality space, more mixed-use and less office-focused parts of the urban core and some of the most efficient workspace designs available. These are three key strategies all firms should be focused on as their businesses evolve, especially since in some of these core-fringe areas, there is an economic discount for first movers.
In New York, Skadden and Boies Schiller have signed on as anchor tenants for Brookfield’s 1 Manhattan West and Related’s 55 Hudson Yards, respectively, transitioning away from the traditional Midtown submarkets of Times Square, Grand Central and the Plaza District to the western edge of Manhattan. Similarly, in Washington DC, Venable and Arnold & Porter will move across the street from each other at 600 and 601 Massachusetts Avenue NW, respectively, in the emerging Mount Vernon Triangle area of the East End.
4JLL | United States | Law Firm Perspective | 2015
Will rents rise, fall or remain stable over the next 12 months?
Law firms represent 7.2 percent of leasing activity
22%
18%
7%7%
46%
Banking and finance
Tech and telecom
Government
Law firm
All other industries
7.2%
76.0%
4.0%
20.0% Increase
Decrease
Stable
Law firms across the board are in a rising-rent environment
OVERALL
PRIMARY
SECONDARY
TERTIARY
Development will help alleviate constraints, but at a price
In response to impending supply shortages as well as generally improving macroeconomic conditions, developers have begun to ratchet up the pace of groundbreakings offering firms limited opportunities over the next 12 months, but greater opportunity over the next 36 months. CBD Class A development activity currently totals 38.3 million square feet, the highest figure in seven years and more than one-third higher than halfway into 2014. This total will jump more in the coming quarters as the rate of groundbreakings increases. Rents for this space currently command far above-average premiums; in Q2 2015, CBD Class A space under construction had asking rents averaging $54.68 per square foot, 15.9 percent above rates for existing space.
Demand for new space has been widespread, resulting in a preleasing rate for CBD Class A space of 38.1 percent. Although still above historic norms, drops in preleasing due to increases in speculative development has resulted in available space under construction totaling slightly under 15.0 million square feet. Importantly, available space underway is growing faster than preleasing, which will bode well for law firms and other occupiers.
Constraints at the top of the market have also provided owners of second-generation properties with the opportunity to look at repositioning assets to provide more modern amenities and improved work environments in central and highly-accessible locations to capture latent demand at a slightly discounted price; for law firms, this space will provide additional options at lesser expense.
Outlook for law firms is one of competition and trade-offs
Nearing the peak of both the economic and real estate cycles over the next 12 to 18 months, law firms over the shorter-term face a very landlord-favorable environment and will need to assess a variety of factors from location to predicted footprint to talent access and retention.
Overall, the environment for tenants across the board is competitive, with law firms’ position in the market even more so. With some ingenuity and prioritization of needs, firms can buffer against escalating costs and dwindling options. Improved corporate and personal consumption are likely to boost revenue and business for firms, as will growing demand for mergers and acquisitions. Further, more accelerated increases in output across diversified industries will provide opportunities for firms with growing new practice groups in specific markets.
5JLL | United States | Law Firm Perspective | 2015
Top markets for law firm leasing activity (s.f.) – past 12 months
New York 2,004,220
Washington, DC 1,844,568
Dallas 770,125
Chicago 602,000
San Francisco 353,274
Minneapolis 317,887
Denver 310,547
United States law firm leasing total 8,791,872
Declining availability means firms in most markets need to look at new construction
OVERALL 52.0%48.0%
Yes No
66.7%
33.3%
40.0%
60.0%55.6%
44.4%
PRIMARY
SECONDARY TERTIARY
Are large law firms limited to new construction?
JLL | United States | Law Firm Perspective | 2015 6
The JLL office clock demonstrates where each market sits within its real estate cycle. Markets generally move clockwise around the clock. Geographies on the left side of the clock are generally landlord-favorable, while markets on the right side of the clock are typically tenant-favorable and as of the second quarter, the vast majority of markets are firmly positioned on the left side of the clock with only Houston hitting the top of the cycle and market conditions now sliding back to law firms.
2015 Law Firm office clock
Rents peaking
Rents falling
Rents rising
Rents troughing
Fort Lauderdale, Miami
Baltimore, Richmond, St. Louis
Milwaukee, Phoenix
Charlotte, Greenwich, Indianapolis
Boston, Dallas, Los Angeles, Pittsburgh, Seattle-Bellevue
Orlando, United States
Cincinnati, Cleveland, Stamford
Columbus, San Antonio
Minneapolis, Tampa
Detroit; Sacramento; San Diego; Washington, DC; White Plains
Atlanta, Denver
Midtown (New York), Oakland CBD, Raleigh-Durham
Austin, San Francisco
Chicago, Downtown (New York), Philadelphia
Palo Alto
Portland
Houston
STRATEGIES FOR LAW FIRMS IN THE MARKET:
1With competition for dwindling space options heating up in most markets, assessing long-term strategies well in advance of expiration is necessary
2Landlords capitalizing on rapidly increasing rents are likely to reposition commodity Class B properties to Class A or A-levels, providing improved amenities at a lower cost than top-tier Trophy and Class A+ space
3Space utilization is key to maintaining or shrinking footprints upon renewal or relocation. Moving associates from single offices to doubling up and reductions in square feet per attorney will help firms save on costs in this higher rent growth environment
4“Onshoring” non-revenue functions such as accounting to lower-cost secondary markets in the Sunbelt and Midwest can reduce labor and occupancy costs. Even in larger regional markets such as Atlanta and Charlotte, quality space is priced at discounts of more than 50 percent compared to gateway geographies
Atlanta
8JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Landlords with availabilities in Buckhead have increased asking
rates exponentially, leveraging current supply constrained market conditions
• Even available creative loft options are few and far between, frustrating smaller independent firms with leases coming due
• Technology companies are migrating to Midtown, the epicenter of Atlanta’s law firms, presenting a cultural mismatch within popular buildings
Real estate opportunities for law firms
• Large Midtown occupiers will find several opportunities to partner with developers on build-to-suit arrangements
• The Northwest and Northeast suburban submarkets offer several space options for moving secondary operations outside the CBD, offering larger floorplates and more affordable rents
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$29.79 $27.56$21.53
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Buckhead Midtown Downtown
12-month rent change
6%
Demand
Free rent (months)
7$
5.0%
95.0%
Share PBS* employment
$60
TI allowance ($ p.s.f.)Forecasted 12-month rent change
5%
Discount for B space
B 21%
Premium for Trophy space
46%
Firm Address Deal type s.f.
Hall Booth Smith191 Peachtree Street NE
Renewal 64,359
Holland & Knight1180 W Peachtree Street
Relocation 44,971
Finnegan 271 17th Street Relocation 26,252
Scrudder Bass 900 Circle 75 Parkway Renewal 13,546
Recent law firm leases
Law firm leverageLaw firm clock
Favorable
UnfavorableMarket Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Established
Pricing
24,100Legal services employment
+0 (+0.0%)12-month growth
Law firm environment prospects
Class A FS rents in law firm-concentrated markets
*PBS refers to professional and business services employment, which includes the legal services sector
Austin
9JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Demand for CBD space, combined with low vacancy, has
caused rates to consistently increase year-over-year• Austin has a booming tech sector that is driving a trend of open
office floorplans, thus limiting the amount of move-in-ready space for firms that prefer an office-intensive configuration
• Rise of boutique law firms: Due to the start-up friendly business climate in Austin, many large law firms have seen partners establish or join smaller boutique law firms
Real estate opportunities for law firms
• UT Austin’s LBJ Law School consistently ranks as one of the top law schools in the nation. Local law firms have a rich talent pool with law school graduates who prefer Austin’s quality of life versus relocating to other markets
• Flourishing government and tech sectors: Demand for law firms will remain robust as government agencies, anchored by the State Capitol, and tech start-ups seek legal counsel
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$46.66
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Downtown
12-month rent change
8%
Demand
Free rent (months)
1$
5.4%
94.6%
Share of PBS employment
$30
TI allowance ($ p.s.f.)Forecasted 12-month rent change
8%
Discount for B space
B 27%
Firm Address Deal type s.f.
Scott Douglass Colorado Tower Relocation 40,000
DuBois Bryant Colorado Tower Relocation 24,000
Munsch Hardt Colorado Tower Relocation 14,700
Kelly Hart Colorado Tower Relocation 14,000
Ogletree301 Congress Avenue
Renewal 9,600
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Premium for Trophy space
9%
Tenant-favorable marketNeutral marketLandlord-favorable market
8,500Legal services employment
+100 (+1.2%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
10JLL | United States | Law Firm Perspective | 2015
Baltimore
Real estate challenges for law firms• Availability for space larger than 10,000 square feet along the
waterfront from the Pratt Street Corridor to Harbor East has become scarce following several key renewals over the past year
• New construction opportunities are limited in the law firm-concentrated submarkets of the CBD and Harbor East
Real estate opportunities for law firms
• Opportunities remain for tenants not requiring Class A space along the waterfront with the Baltimore and Charles Street Corridors in the CBD continuing to face elevated vacancy
• Exelon’s pending relocation from more than 100,000 square feet at 750 E Pratt Street to their new headquarters at Harbor Point will create a new block of Class A availability on Pratt Street in 2017 and 2018
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$23.25$28.80
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD Baltimore SE
12-month rent change
5%
Demand
Free rent (months)
4$
5.3%
94.7%
Share of PBS employment
$41
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 20%
Firm Address Deal type s.f.
Kramon & Graham 1 South Street Renewal 25,853
Niles Barton & Wilmer 111 S Calvert Street Renewal 21,835
ARD&H 7 St. Paul Street Renewal 19,682
Offit Kurman 300 E Lombard Street Expansion 16,650
Salsbury Clements 300 W Pratt Street Renewal 10,755
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Premium for Trophy space
75%
Tenant-favorable marketNeutral marketLandlord-favorable market
12,000Legal services employment
-500 (-4.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Boston
11JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• While law firms make up only 6.0 percent of the active tenants
currently shopping for space in Boston CBD, competition is intensifying from financial services and technology companies
• With vacancy in the Financial District the lowest since 2009, law firms are challenged to find viable options
• Rents in Boston CBD continue to grow and law firms currently negotiating leases downtown will pay a premium
Real estate opportunities for law firms
• Rents have been rising rapidly, but most of the growth has occurred in high-rise and premium spaces. There are still many low-rise opportunities for value-seeking law firms
• New supply expected to deliver at 888 Boylston Street, only 30 percent preleased, will be an opportunity for tenants seeking premium space in the Back Bay
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$61.03 $56.36 $59.30
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
Back Bay Financial District Seaport District
12-month rent change
5%
Demand
Free rent (months)
3$
5.3%
94.7%
Share of PBS employment
$50
TI allowance ($ p.s.f.)Forecasted 12-month rent change
7%
Discount for B space
B 27%
Firm Address Deal type s.f.
Hemenway & Barnes 75 State Street Relocation 44,233
Fragomen 100 High Street Relocation 43,186
Centrulo 2 Seaport Lane Relocation 33,209
Manion Gaynor & Manning
125 High Street Renewal 31,203
Sunstein 125 Summer Street Relocation 28,502
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
10%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
24,600Legal services employment
+300 (+1.2%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Charlotte
12JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• With vacancy in Uptown at 8.2 percent, demand is high for
Trophy and Class A Trophy space • Average rents stand at the highest rate since 2009, and
landlords confidence and leverage over the near-term only appears to be expanding
• Growing competition for Class A space from financial institutions (for tech use) poses a competitive threat for law firms
Real estate opportunities for law firms
• With 714,459 square feet of Class A office space under construction in the CBD, tenants will have the opportunity to secure high-quality space when it hits the market over the next 24 to 30 months
• Although rents have increased, rates are substantially discounted to other major markets. Combine that with talent levels and Charlotte is an ideal back-office location for firms
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$28.27 $30.70
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Downtown Southpark
12-month rent change
10%
Demand
Free rent (months)
5$
3.9%
96.1%
Share of PBS employment
$25
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 26%
Firm Address Deal type s.f.
McGuireWoods 201 N Tryon Street Renewal 144,293
Womble Carlyle 301 S College Street Renewal 55,000
Cozen O’Connor 301 S College StreetNew to market
6,533
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
9%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
7,200Legal services employment
+200 (+2.9%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Chicago
13JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Blocks of available Class A space are diminishing greatly with
only 13 such blocks larger than 100,000 s.f.• Tightening conditions will continue into mid-2017 and as a result,
the market for large blocks will grow increasingly competitive • With growing demand for large blocks, rents will continue to rise
and concessions will compress
Real estate opportunities for law firms
• Firms willing to consider second-generation space will have opportunities prior to 2017
• Holding out on real estate decisions until 2017 will give firms a more tenant-favorable market for negotiating due to new supply in the form of the construction pipeline downtown
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$44.62 $40.99 $40.00 $38.21
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
River North West Loop Central Loop East Loop
12-month rent change
1%
Demand
Free rent (months)
12$
5.7%
94.3%
Share of PBS employment
$44
TI allowance ($ p.s.f.)Forecasted 12-month rent change
3%
Discount for B space
B 14%
Firm Address Deal type s.f.
Mayer Brown 71 S Wacker Drive Renewal 240,000
Freeborn & Peters 311 S Wacker Drive Renewal 112,000
Polsinelli 150 N Riverside Plaza Relocation 110,000
Butler Rubin 540 W Madison Street Relocation 90,000
SmithAmundsen150 N Michigan Avenue
Renewal 50,000
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
6%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
47,500Legal services employment
+300 (+0.6%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Cincinnati
14JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Large blocks of quality space are dwindling, particularly in the
CBD, the preferred location of many Cincinnati law firms • Firms in the market for space must act soon as meaningful rent
growth will begin to surface in the next 12–24 months, especially for Class A space, as steady leasing activity has tightened the market
Real estate opportunities for law firms
• Planned office space at The Banks development will provide additional Trophy space in the CBD
• Rents will remain at stable levels in the short-term, giving potential tenants a window to make any leasing decisions prior to rent growth
• Attractive concession packages remain in the CBD
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$22.57 $23.58
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD Midtown
12-month rent change
Demand
Free rent (months)
6$
4.3%
95.7%
Share of PBS employment
$40
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 27%
Firm Address Deal type s.f.
Dinsmore & Shohl 255 E 5th Street Expansion 8,039
Marshall Dennehey 312 Elm StreetNew to market
7,292
The Wolfe Practice 4438 Carver Woods Sublease 6,500
Frost Brown Todd9277 Centre Pointe Drive
Expansion 6,318
Kirby Thomas Brandenburg
24 Remick Boulevard Relocation 5,070
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
20%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
1%
7,500Legal services employment
+200 (+2.7%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Cleveland
15JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Reserved, climate-controlled parking is extremely limited
downtown and hard to acquire, thus tenants will find they are only able to negotiate a limited number of reserved spaces into their lease agreement
• Signage opportunities on existing assets in the CBD are limited • New construction is limited, but several projects have been
proposed and tenants will pay a premium upward of 50 percent for such space
Real estate opportunities for law firms
• Several of Cleveland’s corporate tenants have announced rightsizings in the last 18–24 months, which has created large blocks of space for landlords to market to prospective tenants
• Demand fluctuations have dampened rent growth over the last year and this trend will continue into 2016, providing tenants an opportunity to renew or extend leases at discounted rates
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$25.12$21.27
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Public Square Financial
12-month rent change
1%
Demand
Free rent (months)
8$
7.2%
92.8%
Share of PBS employment
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 10%
Firm Address Deal type s.f.
Ulmer & Berne Skylight Office Tower Renewal 87,000
Benesch 413 E Huron Road Relocation 66,500
Frantz Ward 200 Public Square Relocation 45,806
Javitch Block 1100 Superior Street Renewal 44,700
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
25%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
10,900Legal services employment
+100 (+0.9%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Columbus
16JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Quality, large blocks of space are dwindling, with only a limited
supply in the sought-after Capitol Square submarket • Class A rents are trending upward and concessions are
beginning to taper off as leverage continues to shift into the hands of landlords
Real estate opportunities for law firms
• Proposed speculative office space in the Capitol Square submarket will provide tenants with new, Class A space.
• Columbus boasts a highly-educated and growing workforce, lending to a qualified and accessible talent pool
• Although growing, rents remain below historic levels, providing a window of opportunity to make timely leasing decisions
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$26.30 $24.89
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Capitol Square Arena District
12-month rent change
1%
Demand
Free rent (months)
8$
4.2%
95.8%
Share of PBS employment
$40
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 24%
Firm Address Deal type s.f.
Crabbe Brown & James
500 S Front Street Renewal 26,296
Calfee 41 S High Street Expansion 23,728
Dickinson Wright 150 E Gay Street Expansion 19,500
Ulmer & Berne 65 E State Street Relocation 10,000
Dinsmore & Shohl191 W Nationwide Boulevard
Expansion 5,600
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
N/A
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
7,500Legal services employment
+500 (+7.1%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Dallas
17JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Limited space is available in most desirable properties• Low vacancy and much higher priced new construction are
creating significant upward rent pressure• Law firm buildout costs are skyrocketing – what was $40.00 per
square foot is now $75 per square foot and even upward of $100 per square foot in properties under construction
• Firms need to upgrade space to be competitive for talent
Real estate opportunities for law firms
• Significant economic growth and corporate relocations have put Dallas on the radar of firms looking to open new regional offices
• New construction is delivering premium spaces to Uptown and CBD
• Some firms are not relocating, but moving within a property to get updated, more efficient buildout at higher, but competitive rates
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$34.35
$23.55
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Uptown CBD
12-month rent change
6%
Demand
Free rent (months)
7$
4.7%
95.3%
Share of PBS employment
$40
TI allowance ($ p.s.f.)Forecasted 12-month rent change
7%
Discount for B space
B 15%
Firm Address Deal type s.f.
Gardere McKinney & Olive Relocation 109,000
Jackson Walker KPMG Hall Arts Relocation 104,000
Hunton & Williams Fountain Place Renewal 88,000
Sidley Austin McKinney & Olive Relocation 75,000
Strasburger & Price Bank of America PlazaRelocation in building
65,000
Meadows Collier Bank of America Plaza Renewal 41,000
Law firm clock
Market Business Talent
Premium for Trophy space
20%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
26,700Legal services employment
+0 (+0.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Recent law firm leases
Established
Denver
18JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Growing demand from multiple industries continues to curtail
supply of large blocks of Trophy quality available space• Stringent credit requirements make competitive deal terms more
difficult to obtain for all but strong, national-credit firms• Owners, many pursuing capital improvement projects, are
raising asking rents given limited available options for users• Construction and labor expenditures continue to rise, driving up
the cost of space build-outs
Real estate opportunities for law firms
• A measure of relief greets tenants in the form of new construction set to deliver; seven CBD projects will add nearly 1.9 million square feet of space to the market within the next 10 quarters
• Sublease dispositions create additional options for users. At present, energy sector companies are sublessors to some 52 percent of CBD sublease space; law firms use similar space
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$34.60 $37.36$42.96
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
West CBD Midtown CBD LoDo
12-month rent change
14%
Demand
Free rent (months)
8$
5.6%
94.4%
Share of PBS employment
$55
TI allowance ($ p.s.f.)Forecasted 12-month rent change
4%
Discount for B space
B 18%
Firm Address Deal type s.f.
Hogan Lovells 1601 Wewatta Street Relocation 72,000
Moye White 16 Market Square Expansion 41,110
Otten Johnson U.S. Bank Tower Renewal 28,942
Burleson Wells Fargo Center Renewal 23,161
Morrison Foerster Republic Plaza Relocation 18,071
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
15%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
13,800Legal services employment
-400 (-2.8%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Detroit
19JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• The CBD has recorded a sharp decline in available space due to
large corporations relocating and/or expanding downtown• Tenants downtown are facing increased real estate expenses
due to increased rents and CAM charges as landlords upgrade office towers and market fundamentals tighten
• Concessions continue to taper off as leverage transitions away from tenants
Real estate opportunities for law firms
• A dynamic shift in location preference from suburban to urban means firms can find premium office space in the suburbs at a discount
• Multiple redevelopment opportunities exist within greater downtown
• Large blocks of space remain available across Class B office
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$22.48
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD
12-month rent change
2%
Demand
Free rent (months)
7$
4.7%
95.3%
Share of PBS employment
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
5%
Discount for B space
B 18%
Firm Address Deal type s.f.
Kitch 1 Woodward Avenue Renewal 52,968
Jones Day150 W Jefferson Avenue
New to market
20,465
McKeen & Associates 645 Griswold Strett Expansion 14,000
Wilson Young 2 Town Square Renewal 4,730
Charfoos & Christensen
26622 Woodward Avenue
Relocation 2,500
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
5%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
17,800Legal services employment
-500 (-2.7%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Fairfield County
20JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Attracting young talent to travel from New York City to
Greenwich and Stamford has been a challenge for law firms• Rents in Greenwich are comparable to New York City and firms
who choose to relocate there will find greater business challenges than New York City due to shortage of both talent and business prospects
Real estate opportunities for law firms
• Building and Land Technology recently purchased the former Pitney Bowes headquarters with the plan of repositioning the building for smaller tenants, which will add quality space to South Stamford
• Connecticut has made a 30-year, $100 billion commitment to long-term transportation upgrades, which will make commuting from New York City quicker and easier
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$45.80
$89.20
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
Stamford CBD Greenwich CBD
12-month rent change
-3%
Demand
Free rent (months)
6$
5.0%
95.0%
Share of PBS employment
$50
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 40%
Firm Address Deal type s.f.
Cummings and Lockwood
6 Landmark Square Relocation 55,643
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
N/A
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
3,600Legal services employment
+0 (+0.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Fort Lauderdale
21JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Landlords downtown have regained control and continue to drop
concessions for new tenants and those looking to renew• Law firms with large requirements are feeling the effects of a
tightening market as large blocks downtown and in the suburbs continue to diminish, especially within Class A properties
• As rates across the board continue to rise, downtown deals are being executed at rates above peak levels
Real estate opportunities for law firms
• Smaller law firms are beginning to take advantage of spec suites, which are increasingly being built by landlords
• While there are no large availabilities within the Trophy assets, if Two Financial can secure an anchor tenant, the development of a new downtown property would be ideal for law firms looking to enter, relocate or expand downtown
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$35.67
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Downtown
12-month rent change
7%
Demand
Free rent (months)
6$
10.5%
89.5%
Share of PBS employment
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
6%
Discount for B space
B 21%
Firm Address Deal type s.f.
Greenberg Traurig401 E Las OlasBoulevard
Renewal 48,800
CSK Legal600 N Pine Island Road
Expansion 30,500
Kahane & Associates 8201 Peters Road Renewal 29,900
Shutts & Bowen200 E Broward Boulevard
Renewal 17,000
Lewis Brisbois 110 SE 6th Street Relocation 14,500
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
31%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
14,800Legal services employment
+200 (1.3%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Houston
22JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• The biggest challenge for law firms is to forecast their own
occupancy plans for the coming 5–10 years and timing the market, especially those with energy or mergers & acquisitions practice groups
• Despite slowing leasing activity and an uptick in availability –both on a direct and sublease basis – Trophy and Class A properties in the CBD are still well leased and leverage may not be tenant-favorable in the most sought-after addresses
Real estate opportunities for law firms
• With all forecasts pointing toward continued softening, 2016 will be an excellent time to lock in aggressive, long-term deals
• The vast amount of sublease space hitting the market is allowing firms to potentially occupy space at a steep discount
• Concessions in the form of tenant improvement allowances and free rent are becoming more commonplace
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$42.61$35.28
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD Galleria
12-month rent change
1%
Demand
Free rent (months)
4$
5.3%
94.7%
Share of PBS employment
$45
TI allowance ($ p.s.f.)Forecasted 12-month rent change
-5%
Discount for B space
B 23%
Firm Address Deal type s.f.
Mayer BrownBank of America Center
Renewal 54,902
Johnson Law Group Kirby Grove Relocation 21,975
Shannon Martin 1001 McKinney Street Renewal 20,001
Coats Rose 9 Greenway Plaza Relocation 50,000
AZA LyondellBasell Tower New 34,864
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
18%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
25,100Legal services employment
+200 (+0.8%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Indianapolis
23JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Availability has declined markedly within the urban core, which
firms increasingly desire for talent retention due to its mixed-use nature
• Strong investor sentiment for core properties will also boost rents higher as buyers seek to capitalize on above-market sales prices
• New construction has largely been limited to the suburbs and has not catered to law firms
Real estate opportunities for law firms
• Availability within lower floors of CBD office buildings remains high, providing tenants with greater flexibility
• Refurbishment and repositioning of office properties in lieu of new construction may give tenants more space options
• Tenants still have some negotiating power for greater concession packages, although these are eroding quickly
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$20.92 $21.23
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD Keystone
12-month rent change
1%
Demand
Free rent (months)
8$
4.8%
95.2%
Share of PBS employment
$25
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 17%
Firm Address Deal type s.f.
Hall Render 500 N Meridian Street Relocation 105,000
Bingham Greenebaum Doll
Market Tower Renewal 80,000
Scopelitis Market Tower Renewal 36,000
Wooden & McLaughlin
Regions Tower Renewal 27,000
Woodard Emhart Chase Tower Renewal 20,000
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
22%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
7,700Legal services employment
+100 (+1.3%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Long Island
24JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Flight-to-quality in the office market has reduced the supply of
Trophy and Class A availabilities for expanding firms• High construction costs are driving law firm renewals rather than
relocations due to firms not wanting to allocate capital to move and build-out costs not covered by landlords
Real estate opportunities for law firms
• Access to major highways, mass transit and the courts will keep Garden City on the radar screen for law firms
• However, limited quality availabilities in Garden City may shift larger law firm requirements east to Jericho and Melville
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$31.83$27.40
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Nassau County Suffolk County
12-month rent change
0%
Demand
Free rent (months)
10$
11.0%
89.0%
Share of PBS employment
$30
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 17%
Firm Address Deal type s.f.
Ruskin MoscouFaltischek
1225 RXR Plaza Renewal 63,000
Farrell Fritz 1225 RXR PlazaRelocation in building
45,000
Meyer Suozzi English& Klein
990 Stewart Avenue Renewal 35,000
Jackson Lewis 58 S Service Road Renewal 28,000
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
N/A
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
19,100Legal services employment
+0 (+0.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Los Angeles
25JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Concentrated institutional ownership groups in Century City and
Downtown have successfully increased rents• Westside rents are nearing peak prerecession levels, forcing
some firms with pending expirations to consider options in more affordable submarkets
• Law firms seeking a presence in Los Angeles micromarketsdominated by creative and tech tenants will face sticker shock and more competition for quality space
Real estate opportunities for law firms
• Downtown’s burgeoning amenity base and residential options have become a selling point for recruiting new associates
• Large blocks of space in Trophy assets creates an opportunity for law firms seeking to trade up their image
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$52.45$42.09 $40.45
$60.25
$36.81
$0.00$20.00$40.00$60.00$80.00
$100.00
CenturyCity
Bunker Hill FinancialDistrict
SantaMonica
Marina DelRey/Culver
City
12-month rent change
9%
Demand
Free rent (months)
8$
7.9%
92.1%
Share of PBS employment
$48
TI allowance ($ p.s.f.)Forecasted 12-month rent change
6%
Discount for B space
B 10%
Firm Address Deal type s.f.
Lewis Brisbois 633 W 5th Street Renewal 215,230
Irell & Manella 1800 Avenue of the Stars Renewal 125,250
Manning & Kass 801 S Figueroa Street Renewal 80,328
Pillsbury 725 S Figueroa Street Renewal 61,000
Milbank 2029 Century Park E Relocation 56,527
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
22%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
49,800Legal services employment
+800 (+1.6%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Miami
26JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• As building occupancies increase, premium spaces are
commanding higher rates. As rents continue to rise and rent abatement continues to diminish, law firms may have to weigh the benefits of locating in the CBD to the savings of relocating to more cost-effective submarkets
• Law firms touring the market have limited options as large blocks in the CBD diminish. View space in particular is becoming scarce within the urban core
Real estate opportunities for law firms
• Rates, at least for the foreseeable future, will continue to rise. Given this expectation, early renewals will be beneficial for firms with leases expiring in the next 24 months for long-term rent savings
• Tenants willing to tour spaces lacking views may have more negotiating power with lease terms
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$45.53 $41.54
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Brickell Downtown
12-month rent change
5%
Demand
Free rent (months)
2$
14.5%
85.5%
Share of PBS employment
$40
TI allowance ($ p.s.f.)Forecasted 12-month rent change
4%
Discount for B space
B 33%
Firm Address Deal type s.f.
Akerman Senterfitt 96 SE 7th Street Relocation 110,500
Stearns Weaver 150 W Flagler Street Renewal 103,000
Gray Robinson333 Avenue of Americas
Relocation 35,400
McDonald Hopkins200 S BiscayneBoulevard
Expansion 25,310
Hughes Hubbard201 S Biscayne Boulevard
Renewal 23,600
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
17%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
22,500Legal services employment
+500 (+2.3%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
27JLL | United States | Law Firm Perspective | 2015
Milwaukee
Real estate challenges for law firms• Lack of large block Class A availabilities• Rising construction costs are making it difficult for developers to
build new Class A product• With tightening market for Class A space, landlords are pushing
rents more aggressively
Real estate opportunities for law firms
• A new office development is under construction for the first time in more than 10 years, providing new Class A space that appeals to law firms
• There is also at least one more development in the pipeline so firms can expect conditions to soften as this space comes online
• Smaller firms and firms willing to consider Class B space still have options
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
12-month rent change
3%
Demand
Free rent (months)
5$
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 20%
Premium for Trophy space
17%
Firm Address Deal type s.f.
Michael Best & Friedrich
100 E Wisconsin Renewal 89,725
The Previant Law Firm
310 W Wisconsin New 15,081
Whyte HirschboeckDudek
20800 SwensonDrive
New 12,921
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
$28.00$20.00 $16.00
$0.00$10.00$20.00$30.00$40.00$50.00
Downtown E ThirdWard/Walker's
Point
Downtown W
2.4%
97.6%
Share of PBS employment
7,400Legal services employment
+0 (+0.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Minneapolis
28JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$36.00
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Minneapolis CBD
12-month rent change
13%
Demand
Free rent (months)
5$
4.9%
95.1%
Share of PBS employment
$50
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 24%
Premium for Trophy space
19%
Firm Address Deal type s.f.
Meagher & Geer 33 S 6th StreetExpansion in building
51,000
Fish & Richardson 60 S 6th StreetRenewal & expansion
100,000
Best & Flanagan 60 S 6th Street Renewal 28,000
Nichols Kaster 80 S 8th Street Relocation 23,560
Lindquist & Vennum 80 S 8th Street Renewal 85,000
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Rental rates have increased significantly over the past
18 months• Pressure from clients to reduce rates means that firms have less
to spend on real estate and thus firms are looking at alternative locations to traditional Class A buildings
Real estate opportunities for law firms
• Some firms are finding solutions to these constraints by considering Class A space instead of Trophy space
• Firms are also moving back-office operations to less expensive nodes of the market
Outlook
15,300Legal services employment
-100 (-0.6%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
New Jersey
29JLL | United States | Law Firm Perspective | 2015
Real estate challenges for law firms• Aging suburban inventory base with more than one-half of the
office market developed during the 1980s leaves firms with many inefficient options
• Younger associates’ preference for locations in CBD markets and not suburban markets challenge recruiting efforts
• High build-out costs for second generation space
Real estate opportunities for law firms
• New Jersey’s use of economic incentive programs to retain and attract new corporate investments
• Consolidation and restructuring by other sectors are adding availabilities to the market
• Rental rate appreciation is being restrained by transitional office market conditions
Outlook
Rents peaking
Rents falling
Rents rising
Rents troughing
$32.80 $30.71$24.82
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Newark Route 24 Route 280Corridor
12-month rent change
-2%
Demand
Free rent (months)
12$
6.9%
93.1%
Share of PBS employment
$45
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 41%
Firm Address Deal type s.f.
Riker Danzig 1 Speedwell Avenue Renewal 110,000
Chiesa Shahinian & Giantomasi
1 Boland DriveRenewal/expansion
95,000
Sills Cummis 1 Riverfront Plaza Renewal 73,000
Greenberg Traurig 500 Campus Drive Relocation 47,000
Eckert Seamans 2000 Lenox Drive Relocation 25,000
Recent law firm leases
Law firm clock
Market Business Talent
Premium for Trophy space
7%
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverage
38,500Legal services employment
-400 (-1.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
New York
30JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$88.54 $79.13$67.47
$85-$100
$0.00$20.00$40.00$60.00$80.00
$100.00
PlazaDistrict
TimesSquare
GrandCentral
HudsonYards
12-month rent change
5%
Demand
Free rent (months)
9$
11.4%
88.6%
Share of PBS employment
$70
TI allowance ($ p.s.f.)Forecasted 12-month rent change
3%
Discount for B space
B 28%
Premium for Trophy space
11%
Firm Address Deal type s.f.
Skadden 1 Manhattan West Relocation 535,000
Norton Rose Fulbright
1301 Avenue of the Americas
Relocation 135,000
Curtis Mallet 101 Park Avenue Renewal 91,482
Boies Schiller 55 Hudson Yards Relocation 81,835
Morgan Lewis 101 Park AvenueExpansion in building
75,000
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Most existing law offices are inefficient and not built to support
current law firm requirements• Short-term renovations to improve efficiency are out of favor due
to rising construction costs, short amortization periods and the disruption caused by in-place renovations
• Limited large-block availability both in the market and contiguous within properties may create challenges for expanding firms
Real estate opportunities for law firms• If a firm can free up surplus space, there is a ready market for
short-term built law firm premises• Significant amounts of second-generation law firm space will be
coming to market, much of which, while not as efficient as newly built space, can be adapted with much lower out-of-pocket firm capital
• New developments at the Hudson Yards and the World Trade Center offer modern, efficient space at competitive pricing
Outlook
79,300Legal services employment
+700 (+0.9%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Oakland
31JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$39.84
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD
12-month rent change
13%
Demand
Free rent (months)
2$
3.3%
96.7%
Share of PBS employment
$25
TI allowance ($ p.s.f.)Forecasted 12-month rent change
18%
Discount for B space
B 17%
Premium for Trophy space
n/a
Firm Address Deal type s.f.
Barney & Barney1340 Treat Boulevard
Relocation 14,235
Lewis Feinberg 1333 Broadway Relocation 12,013
Foran Glennon 2000 Powell Street Renewal 10,342
Yaron & Associates 1300 Clay Street Relocation 6,081
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Law firm leverageReal estate challenges for law firms• Law firms represent a small portion of the tenant base in
the CBD • Downtown revitalization and east-bound migration have further
diversified the tenant market, and heightened demand has resulted in a spike in rental rates for both Class A and B space
• Cost-conscious law firms are consolidating or renewing in place, or considering other options outside of the desirable CBD
Real estate opportunities for law firms
• Law firms are demanding an open space office layout, creating the opportunity to update old, historical space
• Law firms are looking to East Bay suburban markets where rental rates for desirable Class A space are lower and similar amenities are available including transportation
Outlook
6,100Legal services employment
-400 (-6.2%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Orange County
32JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
12-month rent change
7%
Demand
Free rent (months)
6$
5.6%
94.4%
Share of PBS employment
$33
TI allowance ($ p.s.f.)Forecasted 12-month rent change
8%
Discount for B space
B 26%
Premium for Trophy space
15%
Firm Address Deal type s.f.
Snell & Wilmer 600 Anton Boulevard Renewal 54,000
O’Melveny & Myers 610 Newport Center Drive
Renewal 45,156
Palmieri Tyler Wilhelm & Waldron
1900 Main Street Relocation 28,275
Koeller NebekerCarlson & Haluck
3 Park Plaza Renewal 21,887
Sedgwick 2020 Main Street Relocation 13,000
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
$31.19 $30.77 $30.25
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Irvine Newport Beach Costa Mesa
Real estate challenges for law firms• There are a lack of available blocks of contiguous space in
amenity-rich projects• A tightening market is causing landlords to pull back
concession packages• Strong rent growth is limiting the number of value options• A trend toward efficient space utilization is being challenged by
rising local construction costs
Real estate opportunities for law firms
• The growth of the creative office market is providing more options for firms looking for progressive space that appeals to new recruits
• Increased speculative development will add new space alternatives in the Airport Area and South Orange County submarkets
• There is a deep and diverse talent base for recruiting in the area
Outlook
15,700Legal services employment
+200 (+1.3%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
33JLL | United States | Law Firm Perspective | 2015
Philadelphia
Rents peaking
Rents falling
Rents rising
Rents troughing
$28.73
$40.73
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Market Street West University City
12-month rent change
3%
Demand
Free rent (months)
6$
8.4%
91.6%
Share of PBS employment
$45
TI allowance ($ p.s.f.)Forecasted 12-month rent change
3%
Discount for B space
B 19%
Premium for Trophy space
23%
Firm Address Deal type s.f.
Stradley Ronon 1 Commerce Square Relocation 92,000
Rawle & Henderson 1 S Penn Square Renewal 69,420
Schnader Harrison 1600 Market Street Renewal 67,000
Pond Lehocky 1 Commerce Square Relocation 58,000
Hangley Aronchick One Logan Square Renewal 41,529
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Limited availability of quality Trophy blocks, vacancy rates at all-
time lows, and continuing conversions of Class B office space have resulted in rising rental rates and stiff competition for law firms seeking space in Center City’s premier office towers
• Ongoing landlord confidence has put continued downward pressure on concessions
Real estate opportunities for law firms
• Delivery of nearly 300,000 square feet of speculative Trophy space and two large blocks coming online at 1735 Market Street will ease strong landlord leverage between 2016 and 2017
• Center City has the strongest millennial growth rate of any major U.S. city, making it easy for firms to attract young talent
• The resurgence of Market East is making the submarket newly attractive to value-conscious law firms
Outlook
38,300Legal services employment
-700 (-1.8%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Phoenix
34JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$27.51$22.69
$30.08
$0.00$10.00$20.00$30.00$40.00$50.00
Downtown Midtown CamelbackCorridor
12-month rent change
6%
Demand
Free rent (months)
6$
4.1%
95.9%
Share of PBS employment
$20
TI allowance ($ p.s.f.)Forecasted 12-month rent change
5%
Discount for B space
B 20%
Premium for Trophy space
9%
Firm Address Deal type s.f.
Jones Skelton & Hochuli
40 N Central Avenue Relocation 60,000
Wilkes & McHugh2355 E Camelback Road
Renewal 6,557
Morrill & Aronson 1 E Camelback Road Renewal 6,400
Russell A. Brown3838 N Central Avenue
Renewal 5,034
Holden Willits 2 N Central Avenue Relocation 3,680
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Availability of Class A space is shrinking• Rental rates in law firm-concentrated markets are escalating,
with several markets approaching prerecession levels• There is a limited availability of high-quality space with premium
views preferred by law firms
Real estate opportunities for law firms
• An active development pipeline will provide new Class A availabilities over the next 18 months
• Availabilities for small-sized law firms (less than 10,000 square feet) remain abundant
Outlook
13,600Legal services employment
+400 (+3.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
Pittsburgh
35JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$27.98
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD
12-month rent change
2%
Demand
Free rent (months)
3$
7.2%
92.8%
Share of PBS employment
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 20%
Premium for Trophy space
10%
Firm Address Deal type s.f.
Eckert Seamans 600 Grant Street Renewal 120,000
Burns White 3 Crossings Relocation 105,000
Fox Rothschild 500 Grant Street Relocation 22,000
Swartz Campbell 436 Seventh Avenue Relocation 20,000
Robb Leonard Mulvihill
500 Grant Street Renewal 16,000
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Trophy space remains at near-full occupancy levels, limiting
options for tenants looking to upgrade offices• Concessions are at cyclical lows requiring tenants to make
significant outlays related to build-out costs when relocating• While several large-scale projects have been proposed in the
CBD, only one multi-tenant office building, Tower Two-Sixty, is under construction, limiting options for tenants
Real estate opportunities for law firms
• Several corporate tenants have announced rightsizings in the last 18 months, which has created a number of large blocks
• Demand fluctuations have dampened the prospects of rent growth over the next year, providing tenants an opportunity to renew or extend leases at non-peak rates
• Tenants have regained some leverage, particularly in Class B space, and may find landlords more flexible on terms
Outlook
13,500Legal services employment
+1,000 (+8.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Portland
36JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
12-month rent change
3%
Demand
Free rent (months)
4$
4.6%
95.4%
Share of PBS employment
$55
TI allowance ($ p.s.f.)Forecasted 12-month rent change
4%
Discount for B space
B 5%
Premium for Trophy space
21%
Firm Address Deal type s.f.
Troutman Sanders 100 SW Main Street Relocation 16,478
Greene Markley 1515 Market Square Relocation 14,095
Stewart Sokol & Larkin 2300 SW 1st Avenue Renewal 13,949
Sather Byerly & Holloway
111 SW 5th Avenue Renewal 13,704
Reinisch Wilson Weier10260 SW Greenburg Road
Renewal 12,848
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
$30.03
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD
Real estate challenges for law firms
• Rapidly-rising rents mean value-conscious law firms, whose leases were negotiated during the height of the recession, are facing significantly higher base rents
• Law firms are competing against tenants with better credit and quicker decision-making capability
• Local and regional firms will be challenged to find options where partners do not have to fund tenant improvements
Real estate opportunities for law firms
• A supply of commodity and traditional space is still available• New construction will soon be hitting the Portland market,
yielding more options, but at a rent premium• Spaces in the 5,000-15,000-square-foot range are still plentiful
and allow for decent leverage for tenants on TIs and free rent
Outlook
8,100Legal services employment
-300 (-3.6%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Raleigh-Durham
37JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$28.42$22.33 $21.20
$0.00$10.00$20.00$30.00$40.00$50.00
DowntownRaleigh
Cary RTP/RDU
12-month rent change
1%
Demand
Free rent (months)
5$
3.9%
96.1%
Share of PBS employment
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
1%
Discount for B space
B 31%
Premium for Trophy space
10%
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• In Tier I suburban submarkets, technology and life sciences
firms are driving demand, competing for space options• Consistently increasing rents in the CBD will make it difficult for
law firms to find financially-attractive packages in the near-term
Real estate opportunities for law firms
• The delivery of new buildings in CBD Raleigh, such as Charter Square, 227, and large-block availabilities at the Wells Fargo Tower, offer tenants availabilities of premium contiguous options
• Two new development projects (Edison & Dillon) are planned in Downtown Raleigh over the next few years, which will likely offset rental rates increases
Outlook
4,500Legal services employment
+0 (+0.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Firm Address Deal type s.f.
Everett Gaskins 220 Fayetteville Street Renewal 5,654
Hunton & Williams 421 Fayetteville Street Extension 22,129
Tharrington & Smith 150 Fayetteville Street Relocation 18,700
Polsinelli 555 Charter Square Relocation 11,000
Established
Richmond
38JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$24.65
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD
12-month rent change
-6%
Demand
Free rent (months)
8$
6.3%
93.7%
Share of PBS employment
$35
TI allowance ($ p.s.f.)Forecasted 12-month rent change
-3%
Discount for B space
B 26%
Premium for Trophy space
46%
Firm Address Deal type s.f.
LeClairRyan 919 E Main Street Relocation 52,728
Eckert Seamans 919 E Main StreetNew to market
13,228
Morris & Morris 11 S 12th Street Renewal 8,220
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms
• High premium in rents for Trophy space and increased construction costs to modernize space
• Rising suburban real estate costs for satellite offices due to space constraints
Real estate opportunities for law firms
• Recent relocations and growing vacancy in the CBD have created significant tenant leverage
• Declining rental rates in the Class A CBD
Outlook
6,200Legal services employment
+100 (+1.6%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Recent law firm leases
Sacramento
39JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$32.35
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
CBD
12-month rent change
4%
Demand
Free rent (months)
3$
5.6%
94.4%
Share of PBS employment
$15
TI allowance ($ p.s.f.)Forecasted 12-month rent change
6%
Discount for B space
B 25%
Premium for Trophy space
4%
Firm Address Deal type s.f.
Murphy Austin 555 Capitol Mall Relocation 15,000
Jackson Lewis 400 Capitol Mall Relocation 10,000
King & Spalding 621 Capitol MallNew tomarket
8,000
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• As the State of California continues to expand their real estate
footprint, large firms with expiring leases are left with increasingly fewer renewal options downtown
• Downtown asking rates have increased significantly over the past 12 months, with sustained growth expected through the next 12–24 months
Real estate opportunities for law firms
• The Affordable Care Act and Medi-Cal expansion continue to fuel local industry growth, which has also resulted in spin-off firms. These smaller firms benefit from more flexible real estate needs in terms of product type and the number of space options available to them
Outlook
6,800Legal services employment
+100 (+1.5%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
San Diego
40JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$47.64 $44.16
$31.20$35.52
$0.00$10.00$20.00$30.00$40.00$50.00
Del MarHeights
UTC Downtown MissionValley
12-month rent change
9%
Demand
Free rent (months)
6$
5.1%
94.9%
Share of PBS employment
$25
TI allowance ($ p.s.f.)Forecasted 12-month rent change
5%
Discount for B space
B 25%
Premium for Trophy space
30%
Firm Address Deal type s.f.
Fisher & Phillips 4747 Executive Drive Renewal 12,192
Withers Bergman 101 W BroadwayNew to market
12,053
Wood Smith Henning & Berman
501 W Broadway Renewal 11,608
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• There are fewer large blocks of high-end space available than in
previous years• Second-generation quality options are minimal, therefore law
firm tenants are limited to new construction to meet space needs, which requires large capital expenditures
• Firms are losing leverage as the market transitions to a landlord-favorable environment
Real estate opportunities for law firms
• Transaction volume has diminished slightly, resulting in less competition for tenants currently looking for space
• In spite of being a supply-constrained market, there are opportunities for quality space as some law firms continue to downsize
Outlook
12,500Legal services employment
+300 (+2.5%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established Emerging
San Francisco
41JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$69.40 $69.02
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
North Financial District South Financial District
12-month rent change
10%
Demand
Free rent (months)
3$
6.5%
93.5%
Share of PBS employment
$23
TI allowance ($ p.s.f.)Forecasted 12-month rent change
5%
Discount for B space
B 13%
Premium for Trophy space
4%
Firm Address Deal type s.f.
Kirkland & Ellis 555 California StreetExpansion in building
129,491
Sheppard Mullin 4 Embarcadero Center Renewal 65,234
Perkins Coie 505 Howard Street Relocation 55,695
Sidley Austin 555 California Street Renewal 52,660
Winston & Strawn 101 California StreetRenewal/ expansion
52,235
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Landlords are pushing rents in response to sustained demand• Law firms must compete with cash-rich high-tech start-ups who
view San Francisco as a must-have amenity, and are willing to pay the higher price tag for it
• With San Francisco nearing a cyclical peak, firms with a lease ending in the next two years are faced with a tough decision regarding market timing. Landlords are pushing for longer lease terms in an attempt to lock in today’s higher rates
Real estate opportunities for law firms
• Not all landlords want full exposure to high-tech and are eager to attract a diversified tenant roster
• A significant amount of new supply will hit the market in 2016 and 2017 opening up unique space options. Until then, the North Financial District offers the high-end space that in some cases can be found at a discount to the South Financial District.
Outlook
17,100Legal services employment
+500 (+3.0%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Seattle-Bellevue
42JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$39.35 $38.57$33.99
$0.00$10.00$20.00$30.00$40.00$50.00
Bellevue CBD Seattle CBD Belltown/DennyRegrade
12-month rent change
9%
Demand
Free rent (months)
6$
5.6%
94.4%
Share of PBS employment
$65
TI allowance ($ p.s.f.)Forecasted 12-month rent change
6%
Discount for B space
B 20%
Premium for Trophy space
20%
Firm Address Deal type s.f.
Wilson Sonsini 701 5th Avenue Renewal 42,080
Hillis Clark Martin & Peterson
999 3rd Avenue Relocation 31,109
Pacifica Law Group 1191 2nd Avenue Renewal 22,370
Kilpatrick Townsend 1420 5th Avenue Expansion 17,828
Yarmuth Wilsdon 1420 5th Avenue Relocation 14,649
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Vacancy has been declining and is approaching the tipping point
for substantial rent growth, driving up real estate costs for area law firms
• Due to a lack of available creative space in smaller tech submarkets, high-tech companies are increasingly migrating to the CBD, which means competition for premier, Class A space is heating up
Real estate opportunities for law firms
• With more than 3.7 million square feet under construction in the Seattle and Bellevue CBDs, law firms will soon have ample opportunity to acquire premier space
• Flexibility in deal structure is growing increasingly important as high-tech tenants dominate leasing
• Many firms are rightsizing, creating built-out space opportunities for other firms seeking cost-effective subleases
Outlook
15,000Legal services employment
+400 (+2.7%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Silicon Valley
43JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$98.16 $109.44
$0.00$20.00$40.00$60.00$80.00
$100.00$120.00
Palo Alto Menlo Park
12-month rent change
14%
Demand
Free rent (months)
6$
3.6%
96.4%
Share of PBS employment
$20
TI allowance ($ p.s.f.)Forecasted 12-month rent change
10%
Discount for B space
B 5%
Premium for Trophy space
N/A
Firm Address Deal type s.f.
Orrick 1000 Marsh Road Renewal 76,225
Baker & McKenzie 660 Hansen Way Renewal 34,414
Dentons 1530 Page Mill Road Renewal 21,698
Haynes & Boone 525 University Avenue Relocation 13,091
Osborne Clark 3000 El Camino RealNew to market
3,228
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• There is a lack of Class A professional space options in the
market as much of Palo Alto’s office inventory has become outdated
• Aggressive competition is developing between law firms and fast-growing high-tech firms seeking high image space
• City officials are pushing back on new office construction and are exploring the idea of implementing a citywide development cap
Real estate opportunities for law firms
• Other markets like the Mid-Peninsula and East Bay have similar quality space that is relatively less expensive
• Firms downsizing or consolidating open up potential opportunities for other firms to backfill
Outlook
8,300Legal services employment
+900 (+12.2%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
St. Louis
44JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$25.87$18.90
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
Clayton CBD
12-month rent change
0%
Demand
Free rent (months)
5$
5.9%
94.1%
Share of PBS employment
$25
TI allowance ($ p.s.f.)Forecasted 12-month rent change
2%
Discount for B space
B 24%
Premium for Trophy space
20%
Firm Address Deal type s.f.
Maune 1015 Locust Street Relocation 29,191
Herzog Crebs 100 N Broadway Renewal 22,130
Lewis Rice600 Washington Avenue
Expansion in building
19,089
Foley & Mansfield 101 S Hanley Road Relocation 18,939
Cordell & Cordell 600 Kellwood Parkway Relocation 18,503
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Low vacancy in Clayton is driving rents up• With limited space in Clayton, creating negotiating leverage
is difficult• With no new construction in the pipeline, existing buildings
remain the only option
Real estate opportunities for law firms
• There is an abundant amount of space available in the CBD for firms who are cost conscious and are looking to attract younger workers who want the amenities of a walkable CBD
• Any large firm in the market will be in great demand by landlords as there is a current dearth of large lease expirations in the market over the short term, suggesting landlords willingness to be more creative with favorable deal terms to land a tenant
Outlook
12,400Legal services employment
-200 (-1.6%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Tampa
45JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$27.98 $26.52 $24.42
$0.00$10.00$20.00$30.00$40.00$50.00
Westshore Tampa CBD St. PetersburgCBD
12-month rent change
5%
Demand
Free rent (months)
6$
8.5%
91.5%
Share of PBS employment
$38
TI allowance ($ p.s.f.)Forecasted 12-month rent change
3%
Discount for B space
B 23%
Premium for Trophy space
9%
Firm Address Deal type s.f.
Albertelli Cypress Center I Renewal 63,383
AkermanSunTrust Financial Center
Renewal 39,158
Buchanan IngersollSunTrust Financial Center
Renewal 32,205
Greenberg Traurig Bank of America Relocation 20,144
Thompson Sizemore Tampa City Center Renewal 14,594
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• There is currently a lack of quality large blocks in law firm-
concentrated markets available for lease• Rising rental rates, combined with low submarket vacancy, has
shifted leverage to landlords, further decreasing the level of concessions, particularly for buildings with established ownership
• Law firms preferring smaller floorplates are finding the majority of available blocks are in buildings with large floorplates
Real estate opportunities for law firms
• With multiple buildings under new ownership, landlords are more open to negotiating renewals before the lease has expired, allowing tenants to lock in more favorable rents. These new owners underwrote expecting to maintain or increase occupancy and are willing to give above-market concessions
• Declining vacancy opens the door for a new development downtown, specifically the Trump site
Outlook
17,500Legal services employment
+300 (+1.7%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
Washington, DC
46JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$64.23 $63.08 $63.16 $57.42
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
East End CBD Capitol Hill West End
12-month rent change
5%
Demand
Free rent (months)
10$
18.8%
81.2%
Share of PBS employment
$95
TI allowance ($ p.s.f.)Forecasted 12-month rent change
4%
Discount for B space
B 23%
Premium for Trophy space
16%
Firm Address Deal type s.f.
Kirkland & Ellis1301 Pennsylvania Avenue, NW
Relocation 188,000
Willkie Farr 1875 K Street, NW Renewal 70,000
Zuckerman Spaeder 1800 M Street, NW Renewal 65,533
Ropes & Gray2099 Pennsylvania Avenue, NW
Relocation 60,405
Bracewell & Giuliani 2001 M Street, NW Relocation 49,250
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• Near-term large block Trophy availabilities are limited with
vacancy trending below 8 percent and more than 60 percent of the Trophy construction pipeline leased
• Firms continue to enter the market farther in advance of their lease expirations, which in some cases, is driving increased competition
• The ability to lease out excess vacant space resulting from rightsizing remains difficult for firms, especially those located in buildings with large floorplates (larger than 40,000 square feet)
Real estate opportunities for law firms
• A number of Trophy projects are expected to break ground in the next 6–12 months, which will add space options in the 2018 timeframe
• Concession packages remain at all-time highs• Several large blocks of former law firm space are available for
sublease or relet at rates significantly below new construction
Outlook
45,900Legal services employment
-200 (-0.4%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Established Emerging
Favorable
Unfavorable
Westchester County
47JLL | United States | Law Firm Perspective | 2015
Rents peaking
Rents falling
Rents rising
Rents troughing
$29.04
$0.00$10.00$20.00$30.00$40.00$50.00
White PlainsCBD
12-month rent change
-1%
Demand
Free rent (months)
7$
5.0%
95.0%
Share of PBS employment
$50
TI allowance ($ p.s.f.)Forecasted 12-month rent change
-1%
Discount for B space
B 36%
Premium for Trophy space
N/A
Firm Address Deal type s.f.
Henningson Durham & Richardson
711 Westchester Avenue
Renewal 14,872
Collier Halpern Noletti 1 N Lexington Avenue Renewal 19,018
Schiavetti711 Westchester Avenue
Relocation 7,946
Recent law firm leases
Law firm leverageLaw firm clock
Market Business Talent
Tenant-favorable marketNeutral marketLandlord-favorable market
Real estate challenges for law firms• The challenge to attract and retain talent will always be a
problem for law firms in Westchester County because of its proximity to New York City
• There are more than eight blocks of space in White Plains that total over 100,000 square feet; however, the majority of these spaces are not divisible for smaller tenants
• As the idea of an efficient workplace continues to evolve, the old space that many Westchester law firms currently occupy is not ready to accommodate these changing needs
Real estate opportunities for law firms
• For law firms in the 10,000-30,000-square-foot range, there are a plethora of options at higher-end buildings in White Plains CBD
• Prices at buildings in White Plains located farther from the train can be leased at a 12 percent discount
Outlook
4,700Legal services employment
+200 (+4.4%)12-month growth
Law firm environment prospects
PricingClass A FS rents in law firm-concentrated markets
Favorable
Unfavorable
Established
For more information, please contact:
JLL Global Law Firm Group
Tom DoughtyInternational Director, Law Firm Group Co-Lead+1 202 719 5652thomas.doughty@am.jll.com
Elizabeth CooperInternational Director, Law Firm Group Co-Lead+1 202 719 6195elizabeth.cooper@am.jll.com
Research
John SikaitisManaging Director, Research+1 202 719 5839john.sikaitis@am.jll.com
Phil RyanResearch Analyst+1 202 719 6295phil.ryan@am.jll.com
About JLL Law Firm Group
The JLL Law Firm Group provides strategic and innovative real estate solutions tailored to meet the unique operational and financial objectives of law firms. Our multi-disciplinary senior-level team has deep experience working both in and with law firms, and has a proven track record of consensus-building. Our global expertise coupled with local market knowledge enable us to work with firms of all sizes and ensure you are proactively dealing with the ever-changing real estate and economic markets.
About JLL Research
JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in more than 70 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions.
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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015
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