Today’s narrative is that businesses are handing back office space, hand over fist. Many indeed are, but generalisations don’t work in my game. What’s important for me is to understand the underlying drivers of change, because that’s what informs forward-thinking decisions. To this point, I recently interviewed a Senior Partner from a large Commercial Law Firm to gauge how the sector’s business conditions were impacting their property decisions. Below is what he told me. But first, some brief property stats from Australian Law Firms, to tee up the conversation. Australian Commercial Law Firms have reduced their office footprint by around 20-25%, over the last decade.
Examples of this reduction, using Sydney data only, include:
• Herbert Smith Freehills: 20,000sqm in 2014, to 15,000sqm in 2024, via 1 building move
• Minter Ellison: 13,000sqm in 2010 to 9,500sqm in 2024, via 1 tower move.
• Allens: 12,500sqm in 2019 to 8,500sqm in 2024, via 1 building move
• Ashurst: 15,500 in 2015 to 13,700 in 2024. Recently committed to 10,000sqm from 2025, via a new building move. Now to my interview, with a delightfully honest Partner, whose name and Firm shall remain anonymous.
Q:Why the space reduction? WFH?
A: It is not work from home that’s been the greatest driver of space change, but two other factors. Firstly; a cultural change; many Partners and Senior Lawyers now prefer to be on the floor amongst their team, rather than tucked away in a lonely office. So all that dedicated office space is now surplus to need. Secondly, a technological change. Partners used to have the assistance of their own EAs, then as technology became pervasive Partners relied less on their assistants for day to day matters. EA to Partner ratios have gone from 1:1 to 4:1 over a little more than a decade, with the obvious space requirement reductions.
Does the sector remain profitable enough to warrant the expensive office real estate?
For the most part business is relatively steady for the large Firms, and while there are peaks and troughs of demand, such as the recent softening of M&A, when you look at the largest Firms, last year they averaged over $500,000 of annual revenues per lawyer, which is considerable given the major Firms all have well over a thousand lawyers.
What shifts do you see in the sector regarding work trends that concern you?
From the perspective of someone who’s done this for many years, the biggest threat to the sector is this notion that skills can be transferred equally in a remote working environment, when this simply isn’t the case, and a notable skills gap is starting to appear. This is the iceberg ahead of the Titanic for the emerging generation. It’s all well and good saying let’s do a few days at home each week, if you’ve already gained the experience, but to reveal my true feelings, I think it is negligent of Partners and Senior Lawyers to deny juniors the experience that they themselves have benefited from.
What about the threat of AI?
Everyone is talking about AI as if it’s the end of lawyers. There’s no doubt that volume work, like conveyancing or drafting financing arrangements, are examples of work streams that will be disrupted by AI in the near future. But in the current moment AI is really an efficiency tool, for tasks like summaries of documents, or for researching points. Today the results from AI are incomplete, and real lawyers have to review and amend to final versions. I’m not saying that AI won’t change the legal workforce numbers, I’m just saying it hasn’t yet.
What is the role of office in Law Firm’s War for Talent?
People who choose to take up Law do so mainly because of the career and financial opportunities that it offers. There’s little delusion about the long hours and hard work required to stay the course. So the criteria for talent in selecting a Firm, regardless of experience, is market reputation, subject specialisation and career enablement. Therefore, while office environments are important from a functional perspective, they are perhaps less important for Law Firms than for other sectors. With all that said, Firms invariably have prime office locations, with quality interiors, and the high views. But this has as much to do with the clients we welcome to our office, as it has to do with the lawyers themselves.
Any last comments?Firms should always be thinking of the next generation and their career experience, because they will be servicing the clients of tomorrow So there you have it folks, a genuine and informed perspective, that sounds entirely logical to me.