narrower windows, better views

By Roy Strom

Oh my! Look at that view!”If you’ll oblige the giddiness, it’s easy to imagine hearing that sometime in early 2017.

That’s when McDermott Will & Emery and DLA Piper lawyersplan to move into their brand-new space in Chicago’s first office towerto rise since the Great Recession: River Point, a 1-million-square-foot, 52-story glass oval that will feature the eastward view of the Chicago Riveryou’re looking at now.

May 2014

Volume 37 Number 05 • chicagolawyermagazine.com

Narrower Windows,better views

Six of the city’s largest firms are the crucial first tenants for downtown’s changing skyline

©2012, HiGrafix LLC

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16098 CL reprint MWE May2014-B 5/8/14 4:30 PM

That a law firm, McDermott, is theanchor tenant in the city’s first post-reces-sion office tower speaks to the outsizedrole the profession’s upper echelon has hadin defining the skyline — largely due to thefinancial stability its jumbo footprints andlong-term leases provide developers. At least six of Chicago’s largest lawyer

offices — Mayer Brown, Sidley Austin,Skadden Arps Slate Meagher & Flom, Kirk-land & Ellis, Jenner & Block and, now,McDermott — have been the financiallycrucial first tenants in newly built officespaces since 2002.For the lucky half of McDermott and

DLA Piper lawyers facing east, peeringonto the river corridor is bound to be theirfirst activity in their new office. The view is important. It factored into

McDermott’s decision to sign on as theanchor tenant at the 444 W. Lake St. towerinstead of at the one scheduled to rise justsouth of the El tracks at 150 N. RiversidePlaza.The business-minded, though, may want

to pry their eyes from the cityscape andinspect the actual windows instead. Their slightly narrower frames provide

the first sign of the changing way in whichlaw firms use office space — a less-is-moreapproach brought on by the same financialpressures that have stalled tower cranesand time sheets alike since 2008.In general, there are two ways to reduce

your square footage per lawyer. First, moveto a building that allows for a more effi-cient dispersal of attorneys. The secondway is through better space planning suchas smaller and more uniform sizes ofoffices.“What’s driving the business decision is

(asking), ‘What is my seat cost per attor-ney?’” said Sherry Cushman, whorepresents firms in real estate transactionsin her role as leader of Cushman & Wake-field Inc.’s global legal sector advisorygroup. “That is what corporate America hasalways done. Law firms historically havenever said, ‘What is my seat cost to housean attorney and the support they need?’And now they look at it that way.”The “new world densification,” as one

real estate veteran calls the trend of pack-ing more people in less space, dates to theearly days of the recession. As firms react to various squeezes on

their business, real estate is a natural cost-

cutting target. Apart from compensation,leases are a law firm’s largest fixed cost (tothe extent you agree compensation is afixed cost), consuming an average of 6.2percent of gross revenue, according toCushman & Wakefield. While that is 2 to 4 percent less than 10

years ago, the real estate firm says, there isstill room to trim. Law offices occupy, onaverage, two to three times the squarefootage per employee than the banking,insurance and technology sectors. Cush-man said a better metric would be 1.5 timesthose businesses, which may be unreason-able considering the privacy lawyersrequire.Getting a lease right is more important

— and also more difficult — than ever.

How does a firm plan 20 years into thefuture when the most knowable thingabout the practice of law is that it is headedfor dramatic change? It starts with the windows.

Three inches can save thousandsThe floor-to-ceiling window panes at

River Point are 4 feet 9 inches wide. That isthe same size as at 300 N. LaSalle St. — the60-story glass rectangle shooting out of theChicago River’s northern bank, anchoredin 2009 by Kirkland & Ellis’ 650,000-square-foot lease. The vast majority of buildings feature 5-

foot-wide windows. It’s a slight adjustmentwith a big financial benefit. Known as a “planning module,” the win-

dow-width sets the size of the building’sperimeter offices. Most crucially, it deter-

mines the number of possible offices alongthe windows, which, in the case of law firmreal estate, translates to one of the mostimportant metrics — how many lawyerscan sit on each floor.Cost is king when it comes to law firm

leases today, but putting a Big Law attor-ney in a windowless office is akin tomaking a supermodel pose in Antarctica:They could do it; they just wouldn’t behappy.At River Point, trimming each window

width by 3 inches — and, thus, reducing 6inches from each associate office and 9inches from every partner office — couldamount to as many as three additional asso-ciates sitting on a floor. With a square-footcost in the mid-$30s, that could saveroughly $16,000 a floor. Narrower windows have a similar effect

in Kirkland’s tower, where the cost savingsmagnify with the firm’s scale. About 75additional lawyers — more than 10 percentof the office’s attorneys — can fit in the 25stories leased by Illinois’ largest firm, saidGreg Van Schaack, senior vice president atHines, the international real estate com-pany that developed River Point andKirkland’s building with law firms in mind.Van Schaack characterized the “effi-

ciency” that law firms are seeking as “morelawyers on windows per floor and less inte-rior space per floor.”“We’re trying to pack more revenue pro-

ducers per floor on the perimeter of thebuilding,” Van Schaack said. “(River Point)has been able to show McDermott andDLA that they can put more revenue pro-ducers on the windows. And therefore,they need less space.”McDermott currently leases 303,000

square feet at 227 W. Monroe St., a build-ing erected in 1989 that the firm has been atenant in since 1990. McDermott will lease225,000 square feet at River Point — a 35percent reduction in square footage fromits current lease. DLA Piper will lower itscurrent square footage under lease by morethan half when it moves into 175,000square feet at River Point. It sublets part ofits current lease. Much of the cost savings McDermott

hopes to accrue results from its position asanchor tenant. Led by firm co-chairman Jeff Stone and

partners David DeYoe and Nancy Gerrie,McDermott’s move to River Point was the

“Law firms historically havenever said,

‘What is my seat cost to house an attorney

and the support they need?’

And now they look at it that way.”


result of a roughly six-year planningprocess. It considered staying in its currentspace or moving to a slew of new buildings— including (very briefly) the Wolf Pointdevelopment near the Merchandise Martand prospective towers at 301 S. WackerDrive, 130 N. Franklin St. and 150 N. River-side. The decision came down to RiverPoint or the 53-floor building at 150 N.Riverside, an upcoming cantilevered tower30 feet from the Chicago River.Negotiating from the anchor position

granted McDermott a number of benefits— some financial, others not. For instance,the firm’s contract forbids Hines from leas-ing any space above the 35th floor, orwhere McDermott tops out, to a law firm.Stone said the firm understood the

financial and marketing boost River Point’sdevelopers received from McDermott’slease. They negotiated accordingly.“When we were down to the final nego-

tiations, we went back to the last couple ofopportunities and said, ‘Here’s what weneed. Here’s the price move you need tomake,’” Stone said.“And it was because we appreciated the

value we brought to the table, even thoughthere were some people who thought wewere asking for too much and we werebeing too aggressive. We pushed forwardon that, and we got exactly what we askedfor.”There are limits to the anchor-tenant

benefits. Stone’s inquiry into whether thetop of the building could feature “MWE”in big letters was met with stiff resistance.“I think the answer was more along the

lines of, ‘You don’t have enough money,’”DeYoe said.

Interiors: Yesterday’s attraction. Today’s dissatisfaction?Not everyone agrees that 4-foot 9-inch

planning modules are the wave of thefuture. Nor are they the only factor impact-ing efficiency.Drew Nieman, executive vice president

at U.S. Equities Realty, points out that nar-rower windows can make it difficult tofind office furniture, which is typicallyoptimized for 5-foot windows. They can also result in smaller offices, of

course, which lawyers may balk at.The building Nieman is currently repre-

senting as a broker — 150 N. Riverside —has 5-foot-wide, 10-foot-tall floor-to-ceil-

ing windows. For law firms that haveexplored floor layouts there, the rectangu-lar building reduced their needed space by25 to 40 percent over setups in the theircurrent buildings. As of late March, the building had an

anchor tenant in investment firm WilliamBlair &Co., but it hadn’t yet signed any law firm

tenants.A building’s shape also impacts effi-

ciency, Nieman said, with rectangularlayouts typically the most efficient, fol-lowed by squares such as Aon Center andthen ovals, which include River Point andMayer Brown’s building at 71 S. Wacker. Jay Epstein, chair of DLA Piper’s U.S. real

estate practice, negotiated the firm’s River

Point lease with its client, Hines. While heagreed River Point’s curved exterior wallspresent some challenges, he said the 4-foot9-inch windows were attractive — and notjust because they free up space along thewindows. They also soak up more interior space,

provided a firm deepens the offices tomake up for the crimped width.It may seem counter-intuitive that tak-

ing up more interior floor space would beseen as efficient. But in today’s law firmenvironment that features fewer secre-taries, smaller libraries, less paper andseparate offices for back-office employeefunctions, interior space is less in-demand. “The really big challenge … is how do you

lay out the floor between the perimeteroffices and the rest of the floor?” Epstein

said. “Reduced depth on the floor from thewindow to the core is now viewed as a ben-efit in planning your space out. … The waythe space has to get designed and used isjust different, and I don’t think there’s asmany uses for the interior space.”Cushman & Wakefield’s survey backs

him up. So does the experience of Jenner &Block, which along with Mesirow Finan-cial co-anchored the 45-story 353 N. ClarkSt. building in 2009. Jenner has alreadyreconfigured its interior space after over-shooting on the number of secretary bays.The national ratio of timekeepers

(mostly attorneys and paralegals) to sup-port staff currently averages 3.4 to 1,according to a Cushman & Wakefield sur-vey. It predicts that first number to rise to7 or 8 in the next decade. As fewer secretaries service more

lawyers, interior vacant workstations willbe converted to collaboration space, inte-rior war rooms, conference rooms andflexible workspaces — and, the survey says,for interior associate offices (Welcome toAntarctica).Jenner’s new space was designed for a

secretary-to-attorney ratio of 3 to 1, saidDon Resnick, chair of the firm’s real estatepractice. Today, the firm’s ratio is more like4 to 1 or 5 to 1. The firm also planned fortwo floors of administrative space. Lookingback, it only needed one.While the firm’s planning missed on

those two aspects, it hit on something elseto lessen the pain of unused space:Demountable walls and furniture. “Everything can be moved,” Resnick said.Where an unused secretary bay was

before, a case room is now. A floor’s worthof administrative employees was dispersedamong floors with lawyers. Problemssolved. “It was very easy to do it,” Resnick said.

“You take down some secretarial space.”

Keep your options openJenner’s move highlights more than the

value of flexible walls. After all, such flexi-bility would likely be unnecessary had thelegal market not sustained the ever-closer-to-permanent shock of the 2008-2009recession. A number of firms that signed up to

anchor new offices in the heady days from2005 to 2007 found themselves swimmingin space when their new towers were deliv-

“We’re looking to open up the space.

More light. More flow.

We want our colleagues together as much as possible.And we want them to be running into

each other.”


ered in 2009 or shortly after. Headcountfell; associate hiring shriveled; crystal ballsused in 2006 failed.Jenner planned its building with “histor-

ical growth” in mind, Resnick said. Itinitially leased 390,000 square feet, but itsChicago office set a high-water mark in2007 with 386 attorneys. It had 354 attor-neys in 2009 and 279 in 2014, according toChicago Lawyer surveys. As a result, Jennersublet two of its 14 floors. It is not an outlier in that regard.Skadden (178 lawyers in its Chicago

office in 2007; 212 in 2009; 151 in 2014),Kirkland (591 in 2007; 683 in 2009; 607 in2014) and Mayer Brown (502 in 2007; 509in 2009; 375 in 2014) have sublet space intheir new office buildings. Bill Rogers, a 20-year veteran in

Chicago’s real estate market and executivecommittee member of Jones Lang LaSalle’s(JLL) law firm practice group, said youwouldn’t typically expect tenants in newoffice space to sublet floors so quickly. Butit’s a market dynamic that has impactednearly every firm, he said.JLL says subleased space in Chicago is

discounted an average of 35.5 percent fromthe going rate of $36.41 for Class A space.Overestimating growth is costly, but some-thing is better than nothing.“The market was doing phenomenally,

and then you had the 2009 crash,” Rogerssaid. “And so just naturally, they probablyshed some of their lawyers and didn’t needas much space. That pretty much wasacross the board.”DLA Piper’s Epstein — who negotiates

real estate for his firm and represents oth-ers in negotiations — said lawyers “havenever been good at” plotting growth andinvesting in real estate accordingly. But thecurrent environment is more challengingthan ever.“There’s been much more of a paradigm

shift in the last three to five years in thedelivery of legal services,” he said.Law firm managers combat this volatility

by purchasing options to take up morespace or to give it back in the future. Whileexpansion options have long been a part ofreal estate negotiations, contraction andlease termination options are increasinglysought by law firms.“It was very much the rarity, whereas

now it’s the rule,” said Pat Moran, a Den-tons partner who negotiated the firm’s15-year lease of 144,000 square feet beingrenovated within its current building, theWillis Tower, and who represents otherfirms and landlords. “All the law firms thathave found themselves in large space anddon’t need it have been longing for thosekinds of rights.” Cushman & Wakefield says 72 percent of

firms have expansion options, 22.5 percenthave contraction options and 38 percenthave lease termination options. That seemsto gel with a Citi Private Bank survey ofmanaging partners — however optimisticthey may be — that was released in Marchand largely predicts either slight growth orunchanged headcount for equity partners,associates and non-equity partners. But Epstein is skeptical of the profes-

sion’s chances for growth.“We hired a lot of people. But on balance,

I’m sure there’s not net growth in Chicago.And there’s not net growth in the firm in 12months,” Epstein said. “I think it’s very chal-lenging (to achieve net growth). And anylaw firm that’s been a big successful lawfirm, they find it difficult to admit to them-selves that they’re not growing.”

High-tech cuesWhen McDermott lawyers move to new

offices in 2017, they will step into a spacethat takes cues from the biggest names intechnology — Google, Facebook, Appleand the like.Co-chair Stone said he and the team that

designed the offices — including spaceplanners at Gary Lee Partners — want toincrease two things that tech companieshave in abundance: serendipitous encoun-ters and a sense of community.It is one more example — albeit a non-

financial one — of how law firms arechanging their approach to office space.In a full-service firm like McDermott

that has more than 15 separate practicegroups, Stone said chance meetings canlead to real money. “The real competitive advantage that we

bring is when those groups work together,”Stone said. “You bring tax transfer pricing together

with corporate governance (and) reallynovel and creative things happen. That’s

part of the reason why places like Grouponor Facebook create bullpens. It’s not justbecause they’re trying to use their spacemore cheaply. It’s literally because theywant people to bump into each other, tointersect, to have those conversations.”While bullpens — communal desks that

feature multiple employees — may be outof the question for a law firm (at least fornow), Stone said the firm is consideringseating attorneys from different practiceson the same floor, as opposed to groupingoffices by practice. It is an increasinglycommon seating plan known as “intermin-gling.”Mary Wilson, Dentons’ Chicago office

managing partner, said her firm is seekingout those very same encounters as it plansthe layout in its new 41,000-square-footfloors. They plan to cultivate them through“sticky spaces” — expanding areas of theoffice where people naturally gather, suchas the top of a stairwell, elevator lobby orcafeteria.“We’re looking to open up the space.

More light. More flow,” Wilson said. “Wewant our colleagues together as much aspossible. And we want them to be runninginto each other.”As for building a sense of community

(particularly important as lawyers work outof the office and change firms more thanever), Stone said the firm is consideringpartnering with other firms in the buildingto provide a free, top-of-the-line cafeteria. “Why does Google provide free food? It’s

not just because they don’t want peopleleaving the campus and wasting time,”Stone said. “It’s because they know there’sa value in people feeling good about theplace.”Doubling down on a sense of commu-

nity is one response to the advance ofmobile lawyering. Another, more radicalidea is to abandon the office altogether andhave employees work out of their homes,something known as a “hoteling” model. But that seems a long way off, as 60 per-

cent of respondents told Cushman &Wakefield there would be no hoteling inthe next 10 years.So if you’re enjoying a new view, fear

not. It may be narrower, but it’s not goingaway. n

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© 2014 Law Bulletin Publishing Company. Reprinted with permission from Law Bulletin Publishing Company.


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