Law Firm Employment and Space Trends

Savills Studley Insights October 2014

Savills Studley Research

LAW FIRM EMPLOYMENT AND SPACE TRENDSIn Summary

The number of law firms and the total headcount of lawyers both have failed to keep pace with the growth observed in other professional and business service sectors, the majority of which have sharply rebounded in the wake of the recession. We suggest several reasons why the headcount of lawyers has stagnated over the past several years, and submit that the square footage currently occupied by law firms is likely to continue to decline over the next several years, though perhaps at a slower pace than has been the case recently.

“ As partnerships, law firms have always been mindful of costs, but what we’re seeing now is a true paradigm shift. Law firms as a group are, for the first time, really starting to question traditional assumptions about how they use space, who sits where, and how to maximize flexibility to prepare for what the future may bring for their business.” Lisa Davidson, Executive Managing Director, Savills Studley

“ Overall, firms are feeling pressure to be more efficient. Private offices remain a necessity, but there is an emerging trend toward universal size for partners and associates with the distinction being made by creative furniture solutions that also facilitate easy adaptability of offices.” Zev Holzman, Corporate Managing Director, Savills Studley

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Savills Studley | Insights

Law firms head count growth has been sluggish

Why has headcount at domestic law firms slowed?

We believe that there are three main reasons why domestic employment at US law firms has failed to echo the rebound observed in other professional office-using sectors:

1) Merger and acquisition activity among law firms has led to fewer employees.

2) Law firms have focused on growing internationally, rather than increasing their domestic presence.

3) Revenue growth at law firms has slowed and prevented more aggressive expansion within the U.S.

Table 1: Largest Law Office Employment by County, Q1 2014 Average, Private Sector Only

Chart 1: National Employment by Establishment Type, Select Sectors

The record high in office-using employment largely has resulted from the immense strength of the professional and business services sector, where employment is 7.5% above its prior peak at the end of 2007. However, not all categories within the professional segment have rebounded equally: since the end of the recession in June 2009, the number of employees at law offices, as measured by the Bureau of Labor Statistics (BLS), is unchanged and stands well below the count observed more than a decade ago (Chart 1).

Persistent weak employment at law firms could have a notable impact on major office markets (Table 1), particularly in those locales where law firm employment has typically comprised a sizable fraction of professional and business services employment. Compounding the problem are many law firms’ plans to decrease the space per employee, particularly in light of the fact that law firms have typically allocated one of the highest levels of square footage per employee1 among major users of office space.

Source: CoStar and Savills Studley.

Source: Bureau of Labor Statistics

Chart 1: National Employment by Establishment Type, Select Sectors

980

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Professional and Business Services (000s, SA) Offices of Lawyers, (000s, SA)

Source: Bureau of Labor StaJsJcs

New York County, NY 314,447 65,702 21%Los Angeles County, CA 278,390 45,295 16%Cook County, Illinois 204,804 36,476 18%District of Columbia 106,226 28,632 27%Harris County, TX 180,977 19,266 11%Miami-Dade County, FL 65,379 18,899 29%Suffolk County, MA 68,720 14,422 21%Orange County, CA 120,189 14,248 12%Fulton County, GA 85,706 13,817 16%United States 8,253,357 1,034,538 13%

County/State Professional/ Business Services Employment

Offices of Lawyers Employment

Law Firm Employment (% of Professional/Business

Services Employment)

Table 1: Largest Law Office Employment by County, Q1 2014 Average, Private Sector Only


1 Norm G. Miller, PhD. “Estimating Office Space per Worker: Implications for Future Office Space Demand.” Forthcoming: Journal of Corporate Real Estate. http://www.normmiller.net/wp-content/uploads/2014/04/Estimating_Office_Space_Requirements-Feb-17-2014.pdf

savills-studley.com/research 03

October 2014

Firm (Headcount) Announcement Date Status

Locke Lord (630) and Edwards Wildman Palmer (450) Sep-14 Pending

Hinshaw & Culbertson (460) and Barger & Wolen (45) Sep-14 Eff. Oct. 1, 2014

Squire Sanders (1227) and Patton Boggs (280) May-14 Completed

Buchanan Ingersoll & Rooney (425) and Fowler White Boggs (92) Mar-14 Completed

Stinson Morrison Hecker (308) and Leonard Street Deinard (202) Sep-13 Completed

BakerHostetler (807) and Woodcock Washburn (68) Nov-13 Completed

Taft Stettinius & Hollister (330) and Shefsky & Froelich (63) Nov-13 Completed

Lewis and Roca (175) and Rothgerber Johnson & Lyons (75) Jul-13 Completed

Source: http://www.altmanweil.com/

Table 2: Major Law Firm Merger Announcements, Q3 2013 – Q3 2014 (to date)

2014 2014 2013 2013Firms Attorneys Firms Attorneys Firms Attorneys

China 150 2,526 144 2,415 4% 5%UK 95 6,913 89 6,012 7% 15%Germany 81 2,205 76 1,930 7% 14%Belgium 43 708 40 674 8% 5%France 37 1,859 35 1,595 6% 17%UAE 37 417 34 360 9% 16%Japan 33 660 31 682 6% -3%Australia 32 1,667 21 819 52% 104%Russia 26 674 24 593 8% 14%Italy 24 719 22 653 9% 10%Singapore 24 447 22 330 9% 35%Brazil 23 341 18 264 28% 29%Canada 23 1,345 13 160 77% 741%Mexico 20 407 18 387 11% 5%Poland 14 618 12 384 17% 61%Grand Total 853 25,278 755 20,159 13% 25%

% Change in:

Table 3: International Presence of National Law Journal's Largest 250 US Law Firms

Law firm merger and acquisition activity

While there are many reasons that U.S. law firm employment has contracted, we speculate that a lack of robust revenue growth domestically, in tandem with a focus on firms growing their international presence, has led to headcount growth that can only be characterized as anemic. As shown in Table 2, there have been several major combinations of law firms over the past year. Through the first five months of 2014, there have been 50 mergers or acquisitions of law firms according to ALM Media—more than half of the total number of combinations in all of 2013. The flurry of activity shows no signs of abating: last month, Bingham McCutchen LLP (800 attorneys) and Morgan, Lewis & Bockius LLP (1,400 attorneys) disclosed that they were in merger talks. (A full list of all law firm mergers and acquisitions over the past twelve months in shown in Appendix II.)

We suspect law firm mergers will continue to make economic sense, particularly given the savings associated with shared resources. According to the 2014 Law Librarian survey released by ALM Legal Intelligence, the average firm-wide library budget (including staff, print materials, electronic resources, online costs, etc.) has fallen from $5.8 million in 2009 to $5.5 million in 2014, likely led by a decline in librarian headcount.

Table 2: Major Law Firm Merger Announcements, Q3 2013 – Q3 2014

Table 3: International Presence of National Law Journal's Largest 250 U.S. Law Firms

Source: www.almlegalintel.com

Source: National Law Journal

Law firm headcount growth also has been muted due to an increased focus on international growth. Overall, the 250 largest U.S. law firms expanded their international presence by increasing their branch count across the top 15 global markets by almost 100 firms (13%) and by more than 5,000 attorneys (+25%) between 2013 and 2014 (Table 3). Even excluding tremendous expansion into Canada, the average growth in the number of attorneys is still a robust 23%.

Focus on international presence

04


Table 4: Merger and Acquisition Activity (includes all announcements of US targets)

Source: CoStar and Savills Studley

Source: Bloomberg

A lackluster increase in U.S. law firm employment may also be resulting from sluggish revenue growth. While gross revenue for the top 200 U.S. firms has increased from $65.2 billion in 2005 to $96.4 billion in 2013 according to ALM Legal Intelligence—equivalent to a compound annual growth rate of 5%—the growth in average profits per equity partner for those same years has been substantially weaker, and stood at just 1.8% as of 2013. Moreover, a Census Bureau measure of total legal services revenue shows that total revenues fell in 2013 for the first time since 2010 (Chart 2). One driver of lower revenues has been the trend toward corporate clients performing work in-house; another has been the move toward alternative fee arrangements, which largely eliminates the “hourly rate” from the revenue equation. (Instead, firms bill on a contingency fee or fixed fee basis.) More clients are also asking for outright discounts on their legal bills when outside counsel is retained. The most recent Law Firm Leaders Survey (2013)2 shows an average of 60% of the surveyed firms’ top 50 clients receive a rate discount, up from just 47% the year prior.

Additionally, while some practice areas, such as merger and acquisitions advisory work, have been boosted by the economic recovery (Table 4), other areas are likely to have fallen amid an improvement in overall economic conditions, such as a reduction in corporate restructuring stemming from fewer bankruptcies (Chart 3).

Chart 2: Quarterly Services Survey: Total Legal Services Revenue, Year-Over-Year Percentage Change

5.9% 6.3% 6.7%

0.8%

-‐1.2%

-‐5.2%

2.7%

5.1%

-‐0.8%

-‐6%

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Source: U.S. Census Bureau

Number $ Value, Fraction of Deals Largest Sector of Deals trillions Completed or Pending (based on aggregate deal value)

1/1/14-9/15/14 6,178 1.4 96.1% Communications 1/1/13-9/15/13 5,068 0.75 98.9% Communications1/1/12-9/15/12 5,093 0.5 98.8% Consumer Non-Cyclical1/1/11-9/15/11 5,323 0.68 98.6% Consumer Non-Cyclical

Date Range

Table 4: Merger and Acquisition Activity (includes all announcements of US targets)

Chart 3: Number of Total Business Bankruptcy Filings by Quarter, SAAR

Slower revenue growth

Chart 3: Number of Total Business Bankruptcy Filings by Quarter, SAAR

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Source: U.S. District Courts and Moody's Source: U.S. District Courts and Moody's

Chart 2: Quarterly Services Survey: Total Legal Services Revenue, Year-Over-Year Percentage Change

2 Conducted by The American Lawyer.


October 2014

On a national level, there is evidence that more and more lawyers are choosing to work outside of traditional law firms, as measured by the declining fraction of attorneys employed at “legal service” firms (primarily law offices) versus other types of establishments (Table 5). As such, growth in the number of attorneys at law firms has been even slower than growth in the total number of attorneys overall. Not surprisingly, first-year associate salaries have reflected the softness in law firm employment. According to a recent National Association for Law Placement (NALP) study, in 2009, about 90% of offices in Los Angeles and Washington, D.C. at firms with 700 or more attorneys reported first-year salaries of $160,000; in 2014, only about 40% of firms did so.

Table 5: Number of Lawyers by Establishment Type

Table 6: Attorney Headcount by City at the Five Largest Law Firms (by Attorney Count)


Source: Crain's (local editions), National Law Journal, CoStar, Articles, Internal Data

Total Number of Lawyers

Information Firms

Finance and Insurance Firms

Legal Service Firms

Fraction of Lawyers at Legal Service Firms

Mar-08 553,690 4,510 20,100 362,530 65.50%

Mar-09 556,790 4,250 19,810 363,170 65.20%

Mar-10 561,350 3,710 19,940 369,600 65.80%

Mar-11 570,950 4,100 19,930 372,030 65.20%

Mar-12 581,920 4,450 21,380 373,510 64.20%

Mar-13 592,670 5,180 21,170 374,950 63.30%

Lawyers at

City Change: 2014 vs. 2005 2014 2013 2012 2009 2005NEW YORK Paul Weiss ↑ 716 674 636 670 592Skadden Arps ↓ 629 675 738 803 814Davis Polk ↑ 562 560 571 563 508Simpson Thacher ≈ 553 560 563 631 551Sullivan Cromwell ↑ 550 529 524 485 408

CHICAGOKirkland & Ellis ↑ 577 588 591 621 508Sidley Austin ↓ 503 500 502 562 529Mayer Brown ↓ 365 361 389 463 466Winston & Strawn ↓ 297 316 358 351 388McDermott Will & Emery LLP ≈ 279 316 310 262 282

WASHINGTON, D.C.Covington & Burling ↑ 440 436 429 481 375Hogan Lovells ↑ 500 500 500 500 453Arnold & Porter ≈ 424 436 429 439 417WilmerHale ↓ 396 422 402 466 484Williams & Connolly ↑ 322 270 264 247 211

DALLASHaynes and Boone ≈ 191 200 208 198 191Thompson & Knight ↓ 170 168 169 185 192Locke Lord ↓ 148 146 156 183 177Jones Day ↓ 140 145 163 192 199Gardere Wynne Sewell ↓ 130 132 136 154 171

Table 6: Attorney Headcount by City at the Five Largest Law Firms (by Attorney Count)

Evidence of slow growth is borne out by the attorney count at some of the nation’s largest law firms. As shown in Table 6, attorney headcount at the five largest law firms in New York City, Chicago, Washington, D.C. and Dallas is flat over the last decade: the total count of attorneys at the firms shown in 2005 was 7,916, while in 2014, the figure totaled 7,892.

06


Table 7: Attorney Count and Occupied Space by Office and by Year

Moreover, among the top law firms examined, none has expanded their footprint over the past several years. A review of total space per attorney3 shows that the majority of firms have shrunk, rather than expanded, their space on a per attorney basis (Table 7).

2014 2014 2012 2012 Occupied Space per Attorney Ratio: Attorney Count Occupied Space (sf) Attorney Count Occupied Space (sf) 2014 vs. 2012 % Chg

NEW YORK Paul Weiss 716 585,000 636 585,000 -‐11%Skadden Arps 629 825,000 738 825,000 17%Davis Polk 562 675,000 571 675,000 2%Simpson Thacher 553 595,000 563 673,000 -‐10%Sullivan Cromwell 550 530,000 524 567,000 -‐11%

CHICAGOKirkland & Ellis 577 600,000 591 600,000 2%Sidley Austin 503 575,000 502 575,000 0%Mayer Brown 365 450,000 389 450,000 7%Winston & Strawn 297 430,000 358 430,000 21%McDermott Will & Emery LLP 279 225,000 310 235,000 6%

WASHINGTON, D.C.Covington & Burling 440 420,000 429 420,000 -‐3%Hogan Lovells* 500 420,000 500 420,000 0% (-‐8%*)Arnold & Porter** 424 425,000 429 485,000 -‐11% (-‐23%**)WilmerHale 396 540,000 402 540,000 2%Williams & Connolly 322 289,000 264 289,000 -‐18%

DALLASHaynes and Boone 191 181,300 208 181,300 9%Thompson & Knight 170 183,000 169 183,000 -‐1%Locke Lord 148 176,000 156 176,000 5%Jones Day 140 133,000 163 180,000 -‐14%Gardere Wynne Sewell*** 130 216,000 136 216,000 5% (-‐50%***)

Source: National Law Journal, CoStar, Articles, Internal Data

City

* In 2014 Hogan Lovells signed a lease for 385,000 SF that will commence in 2017.

** In 2014 Arnold & Porter signed a lease for 375,000 SF that will commence in 2015.

*** In 2014, Gardere Wynne Sewell signed a lease for 109,000 SF that will commence in 2016.

Table 7: Attorney Count and Occupied Space by Office and by Year

Source: National Law Journal, CoStar, Articles, Internal Data

3 The ratio of total occupied square feet per attorney is not meant to represent the amount of space allocated per attorney, as it ignores all non-attorney professionals. Rather, it is meant to serve as a rough proxy for attorney space allocation.

4 In some cases, loss factors have increased between lease signings, which can have the effect of making firms appears as if they have taken more space than if the loss factors have been maintained at prior levels.

5 Their lease was arranged in 2012.

In New York:

• Paul Hastings announced a future move from 240,000 sf at 75 East 55th Street to 180,000 sf at 200 Park Avenue—a space reduction of -25%—despite the fact that they have no plans to reduce their attorney headcount. (In fact, ALM statistics show a current count of 231 attorneys, up from 215 in 2013 and 205 in 2012.)

• Weil, Gotshal & Manges recently renewed its headquarters lease beginning in 2019 for approximately 30% less than it currently leases. The firm intends to fit its existing employee base through a complete interior renovation scheduled to take roughly three years.

• Kaye Scholer just moved into 250,000 sf at the brand new 250 West 55th Street,5 leaving behind 330,000 sf at 425 Park Avenue, a -17% reduction in space.

• Troutman Sanders will move from the Chrysler Building at 405 Lexington Avenue to 875 Third Avenue next year, leaving 140,000 sf and taking 87,000 sf, for a space reduction of almost -40%.

The shrinking law office phenomenon is evident across other firms, too; the trend to allocate fewer square feet per employee more generally has played into a number of the space downsizings highlighted below.4


October 2014

Many other firms currently have sublease space on the market even if they have not experienced a dramatic reduction in attorney count over the last few years—again, consistent with the trend to “universal” offices—similarly-sized offices for partner and associate alike (Table 8).

In Washington, D.C.:

• Hogan Lovells renewed its lease earlier this month for -8% less space than they currently occupy.

• Arnold & Porter will move to 601 Massachusetts Avenue in its third reduction in as many years, having downsized from 485,000 sf to 425,000 sf (currently) to 375,000 sf with their October 2015 lease signing.

• Nixon Peabody, at the end of 2013, also announced a 2015 move within Washington, D.C. where the firm will cut its footprint by nearly -30%, from 92,000 to 65,000 sf.

• Sheppard, Mullin, Richter & Hampton completed its August 2014 move to 58,000 sf at 2099 Pennsylvania Avenue NW, down from the 64,000 sf it previously occupied. Even so, the firm plans to expand its attorney count from 60 to as many as 100+ attorneys over the next five years, increasing the number of offices from 70 to 90.

In Chicago:

• Seyfarth Shaw has sliced its occupied space by one-third (from 300,000 sf to 200,000 sf) for its 215 attorneys.

• Blatt, Hasenmiller, Leibsker & Moore downsized from 30,000 sf to 23,000 sf with its recent move.

• McDermott Will & Emery and DLA Piper each will pare office space in their respective moves once River Point, currently under construction, is completed. McDermott Will & Emery will reduce its footprint from 303,000 sf to 225,000 sf, while DLA Piper will trim its space from 260,000 sf (part of which it currently sublets) to 175,000 sf for its 210 Chicago-based lawyers. (The building’s slightly narrower windows will allow more offices per floor than is the case with most existing skyscrapers.)

• Latham & Watkins modestly reduced its space from 144,000 sf to 136,000 sf when it moved with its 143 lawyers (and 245 employees) to the AMA tower. Dentons took Latham’s old space at the Willis Tower, moving within the building, but downsizing from 177,000 sf.

Firms are also shrinking their footprint by quietly subletting partial floors, particularly with spaces earmarked for future growth that has not materialized. In Manhattan, Weil, Gotshal & Manges, which underwent a downsizing of 60 junior attorneys and 110 staff last year, sublet a small portion of its space on the 23rd floor of the GM Building (767 Fifth Avenue) in April, while Davis Polk & Wardell sublet 27,000 sf in its 450 Lexington Avenue office and Sills Cummis & Gross and Sullivan & Worcester each recently signed subleases from other law firms (for 25,000 sf and 12,500 sf, respectively.)

In Chicago, too, many firms have sublet space, although in many cases, the need to sublet arose from attorney reductions. According to Chicago Lawyer Magazine, Jenner & Block sublet two of its 14 floors after its attorney count fell from a peak of 386 in 2006 to 279 in 2014, while Mayer Brown gave back one floor and sublet another in 2013 as its Chicago attorney count fell from 509 in 2009 to 375 in 2014. Locke Lord sublet approximately 55,000 sf last year as well. Skadden, Arps, Slate, Meagher & Flom and Kirkland & Ellis—each of which has seen their Chicago headcount decline over the past five years—each have sublet space, while Winston & Strawn, whose attorney count has fallen by -17% over the past two years, currently has 75,000 sf of sublet space on offer.

Manhattan 2012 2013 2014 Current Office Attorney Count Attorney Count Attorney Count Sublet Space Available (sf)Arnold & Porter 51 97 93 12,000

Bingham McCutchen 166 155 138 22,000

Bryan Cave 129 128 129 26,000

DLA Piper 207 222 227 11,000

Greenberg Traurig 221 223 216 46,000

Herrick, Feinstein N/A 130 115 25,000

King & Spalding 98 111 92 120,000

Table 8: Attorney Count by Year and Sublet Space Available, Select Manhattan Firms

Source: Savills Studley and National Law Journal

08


Aggregate law office space also has contracted as firms have trimmed their support staff, evident in the lackluster growth of legal secretaries (Chart 4). With clients more vocally scrutinizing legal bills, law firms have begun to increase their use of electronic document review, records management and discovery services, which has reduced their need for paralegals as well. As with temporary hires—which enable companies to “optically” reduce their headcount and associated benefit expenses—the use of third-party vendors (such as Williams Lea and Accenture) has proliferated as firms remain focused on cost cutting.

Not surprisingly, an article from the American Bar Association had this to say in an article published earlier this year.6

“ Some law firms, wanting to cut costs and increase efficiency, are eliminating legal support staff positions, including secretaries. Those remaining secretaries, who once supported one or two attorneys, are now often supporting five or more, especially when assigned to younger lawyers. In addition, some law firms have retitled “legal secretaries” as “legal assistants,” not only so they can bill certain tasks of the secretary (such as drafting correspondence or organizing documents) to clients, but also to entice a new generation of entry-level college-degree workers who view a secretarial job as temporary or transitional.”

Earlier this year, Arnold & Porter offered voluntary resignation packages to its entire secretarial staff, for example, and over the summer, Sheppard, Mullin, Richter & Hampton offered voluntary retirement to certain older employees in offices in California, “with the possibility of further cutbacks among the administrative staff in the future.” Other staff cutbacks are noted in Table 9.

Chart 4: Legal Secretary Employment

Table 9: Select Support Staff Reduction Announcements, 2014

Source: BLS

Source: Online articles

#NAME? #NAME? #NAME? #NAME?Mnemonic: OSE5411O232011.USOSE5411O232099.USOSE5411O231011.US OSEO436012.USDescription: Employment -‐ Legal services -‐ Paralegals and legal assistants*, (#)Employment -‐ Legal services -‐ Legal support workers all other, (#)Employment -‐ Legal services -‐ Lawyers, (#) OES: Employment -‐ LEGAL SECRETARIES, (#)Geography: United StatesUnited StatesUnited States United States

Employment -‐ Legal services -‐ Paralegals and legal assistants*, (#)Employment -‐ Legal services -‐ Legal support workers all other, (#)Employment -‐ Legal services -‐ Lawyers, (#) #########31-‐Dec-‐00 ND ND ND 27067031-‐Dec-‐01 ND ND ND 26359031-‐Dec-‐02 143640 ND 341290 25901031-‐Dec-‐03 ND ND ND ND31-‐Dec-‐04 ND ND ND ND31-‐Dec-‐05 162540 4720 355860 2005 26500031-‐Dec-‐06 166900 ND 362060 2006 26817031-‐Dec-‐07 176170 5880 363160 1.9948366 2007 26618031-‐Dec-‐08 187360 5490 362530 1.8798548 2008 25781031-‐Dec-‐09 179350 4930 363170 1.970751 2009 24438031-‐Dec-‐10 179850 7760 369600 1.9700442 2010 22870031-‐Dec-‐11 183240 9620 372030 1.9290159 2011 22068031-‐Dec-‐12 197750 10800 373510 1.7909854 2012 21673031-‐Dec-‐13 202930 10160 374950 1.7595852 2013 22068031-‐Dec-‐14 ND ND ND ND

0.1518987 0.7278912 0.032465

0

50,000

100,000

150,000

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300,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: BLS

Support DateStaff Reduction Announced

McDermott Will & Emery 25 Jun-14 Across firm’s 20 offices

Winston & Strawn 30 (out of 728) May-14Lawyer count dropped from 842 lawyers in 2013 to 822 lawyers in 2014

Snell & Wilmer 40 (approximate) May-14 No cuts to firm’s 400+ attorneys

Downey Brand 17 Apr-14 Addl. attorney reduction

Fitzpatrick Cella “Unspecified number” Apr-14 Attorney reduction through “associate attrition”

Nixon Peabody 38 Apr-14 Cuts across 16 offices

Edwards Wildman Palmer 42 Apr-14Also cut 10 attorney positions; cuts across 10 of firm’s 16 offices

Bingham McCutchen 31 Jan-14

Rumors of efforts to merge; also sent 22 positions to firm’s Global Services Center in Lexington, KY.

Kasowitz, Benson, Torres & Friedman 30 Feb-14 Includes attorney cuts

Husch Blackwell 25 (out of 750) Jan-14 Offices in 16 US cities and London

Firm Comments

6 Cynthia Thomas, “The Changing Role of Legal Support Staff. Law Practice, Volume 40, Number 1. http://www.americanbar.org/publications/law_practice_magazine/2014/january-february/the-changing-role-of-legal-support-staff.html

savills.co.uk/research 09

October 2014

In addition to the lackluster growth of attorneys and legal staff employed at law firms overall, law firms have been shifting a number of the non fee-earning workers that they have retained to lower-priced locales. While some firms have trimmed expenses by outsourcing some administrative functions to third-party providers, others have taken advantage of lower labor costs and less costly office space by shifting operations away from major metropolitan areas. Tampa is home to back-office operations for DLA Piper, for example, while White & Case recently announced its own service center there, having received approximately $300,000 in incentive grants to relocate 45 positions. In June, Fish & Richardson announced a plan to save $3 million per year

by consolidating its administrative functions in Minneapolis—a move that followed Sedgwick's decision to operate certain administrative positions in Kansas City, Missouri. Kaye Scholer relocated 100 staffers to Tallahassee, while Pillsbury Winthrop Shaw Pittman's back office is in Nashville.

For law firms, the shift toward reduced space allocation is likely permanent. While we don’t foresee law offices being configured in the “workbenching” model that has become so popular with technology firms any time soon, we would expect further compression of space on a per attorney basis. The lack of growth in the number of practicing attorneys is puzzling, too. Such anemic headcount growth so

far into a recovery suggests that the contraction observed to date is more than just a cyclical phenomenon, and that we are unlikely to see a rebound in the amount of space occupied overall stemming from an increase in the number of attorneys (even if each attorney is given a smaller desk.) Looking ahead, we suspect that firms will continue to shed unneeded space through further sublet activity—particularly to other law firms looking to expand their footprint geographically. Firms nearing lease expiry will continue to look for more open floor plans achieved either through re-design or new construction, with the result that more open space for everyone means smaller office space for each one.

Savills Studley is the leading commercial real estate services firm specializing in tenant representation. Founded in 1954, the firm pioneered the conflict-free business model of representing only tenants in their commercial real estate transactions. Today, supported by high quality market research and in-depth analysis, Savills Studley provides strategic real estate solutions to organizations across all industries. The firm's comprehensive commercial real estate platform includes brokerage, project management, capital markets, consulting and corporate services. With 25 offices in the U.S. and a heritage of innovation, Savills Studley is well known for tenacious client advocacy and exceptional service. The firm is part of London-headquartered Savills plc, the premier global real estate service provider with over 27,000 professionals and over 600 locations around the world.

The information in this report is obtained from sources deemed reliable, but no representation is made as to the accuracy thereof.

Heidi LearnerChief [email protected]

Alexandria Faiz Senior Research [email protected]

010


APPENDIX I

Largest Law Firms: For New York City firms, Crain’s New York ranks firms by the number of New York-area attorneys, which includes New York City, Long Island, Westchester, and Northern New Jersey. The attorney numbers provided are for New York City only. For Chicago firms, Crain’s Chicago ranks them by the number of attorneys in the six-county Chicago area: Cook, DuPage, Kane, Lake, McHenry and Will counties. The attorney numbers provided are for Chicago only. For Washington D.C. firms, the Washington Business Journal ranks firms by metro-area attorneys; the attorney counts provided are for Washington, D.C only. Dallas firm rankings are determined from the National Law Journal.

APPENDIX II: Law Firm Mergers and Acquisitions, Q3 2013 – Q3 2014

PRIMARY FIRM SECONDARY FIRM NEW FIRM DATE

Kuhn Darling Boyd & Quandt Calcutt Rogers & Boynton Kuhn Rogers PLC 9/1/14

DLA Piper Haskovcova&Co. DLA Piper 9/1/14

Lowndes, Drosdick, Doster, Kantor & Reed, P.A. Potter Clement Bergholtz Alexander Lowndes, Drosdick, Doster, Kantor & Reed,

P.A. 8/1/14

Baker & McKenzie Vani Chetty Competition Law Baker & McKenzie 8/1/14

Takvoryan Law Group Tepper & Associates Tepper & Takvoryan 8/1/14

LeClair Ryan Hays McConn Rice & Pickering LeClair Ryan 8/1/14

Johnson Pope Bokor Ruppel & Burns, LLP Bronstein Carlson Gleim Shasteen & Smith PA Johnson Pope Bokor Ruppel & Burns, LLP 8/1/14

Leech Tishman Sheldon Mak & Anderson Leech Tishman Fuscaldo & Lampl, LLC 7/21/14

Quinn Emanuel Urquhart & Sullivan Gerger & Clarke Quinn Emanuel Urquhart & Sullivan 7/14/14

Shaheen & Gordon Smith & Elliott Shaheen & Gordon 7/10/14

Venable Weingarten Brown Venable 7/8/14

Hogan Lovells Barrera Siqueiros y Torres Landa Hogan Lovells 7/7/14

Squire Patton Boggs Mamiya Law Offices Squire Patton Boggs 7/7/14

Apperson Crump The Putnam Firm Apperson Crump 7/1/14

O'Connell Attmore & Morris Skelley Rottner O'Connell Attmore & Morris 7/1/14

Bland & Partners Crain Wilson Bland & Partners 7/1/14

Jackson Kelly PLLC Rudolph, Fine, Porter & Johnson, LLP Jackson Kelly PLLC 7/1/14

Simmons Browder Gianaris Angelides & Barnerd LLC

Hanly Conroy Bierstein Sheridan Fisher & Hayes LLP Simmons Hanly Conroy 7/1/14

Marshall Dennehey Warner Coleman & Goggin Jones Hirsch Connors Miller & Bull Marshall Dennehey Warner Coleman & Goggin 7/1/14

Husch Blackwell Miles & Peters Husch Blackwell 6/30/14

Lindsay Hart Wood Tatum Lindsay Hart 6/10/14

Smith Gambrell & Russell The Kapoor Law Group Smith Gambrell & Russell 6/2/14

Shook Hardy & Bacon Sander Ingebretsen & Wake Shook Hardy & Bacon 6/1/14

Squire Sanders Patton Boggs Squire Patton Boggs 6/1/14

Connors Morgan Karen Schaede Law Office Connors Morgan 5/28/14

Poyner Spruill Bode Hemphill Poyner Spruill 5/16/14

Robins Kaplan Miller & Ciresi Peitzman Weg Robins Kaplan Miller & Ciresi 5/14/14

Allman Spry Leggett & Crumpler Davis Harwell & Biggs Allman Spry Davis Leggett & Crumpler 5/1/14

CMS Cameron McKenna Dundas & Wilson CMS Cameron McKenna 5/1/14

Donahue Gallagher Woods Fitzgerald Abbott & Beardsley Donahue Fitzgerald 5/1/14

Fortis Law Partners Friesen Lamb Fortis Law Partners 5/1/14

Dentons KapdiTwala Dentons 4/9/14

Coleman Talley J. Stephen Gupton PC Coleman Talley 4/1/14

Hudson Martin Witten & June Mallery & DeMaria Hudson Martin Witten & June 4/1/14

Wilson Elser Hake Law Wilson Elser 4/1/14

savills.co.uk/research 011

October 2014


Butler Snow Kiesewetter Law Firm Butler Snow 3/25/14

Holland & Hart Crapo Smith Holland & Hart 3/24/14

Sutherland Asbill & Brennan Arbis LLP Sutherland Asbill & Brennan 3/18/14

McCathern PLLC Braden Hinchcliffe & Hawley McCathern PLLC 3/17/14

Buchanan Ingersoll & Rooney PC Fowler White Boggs Buchanan Ingersoll & Rooney PC 3/14/14

CzepigaDaly Law Offices of Sharon L. Pope CzepigaDalyPope 3/3/14

Dinsmore & Shohl Peck Shaffer & Williams Dinsmore & Shohl 3/1/14

Cohen Milstein Sellers & Toll Leopold Law Cohen Milstein Sellers & Toll 2/12/14

Field Fisher Waterhouse Heatons Field Fisher Waterhouse 2/7/14

Herum Crabtree Suntag Law Firm Herum Crabtree Suntag 2/3/14

McDonald Hopkins Welin O'Shaughnessy & Scheaf McDonald Hopkins 2/3/14

Bond Scoeneck & King Kennedy & Gillen Bond Schoeneck & King 2/1/14

McCarter & English Miller Balis & O'Neil McCarter & English 2/1/14

Bartimus Frickleton Robertson & Gorny Goza Honnold Bartimus Frickleton Robertson & Goza 1/30/14

Howard Kohn Sprague & FitzGerald Baio Associates Howard Kohn Sprague & FitzGerald 1/28/14

Travers Thorp Alberga Paget-Brown Travers Thorp Alberga 1/8/14

Weintraub Tobin Chediak Coleman Grodin Waldron & Bragg Weintraub Tobin Chediak Coleman Grodin 1/7/14

Tripp Scott Ellis Law Group Tripp Scott 1/6/14

Taft Stettinius & Hollister Shefsky & Froelich Taft Stettinius & Hollister 1/2/14

BakerHostetler Woodcock Washburn BakerHostetler 1/1/14

Bond Scoeneck & King Kehl Katzive & Simon Bond Schoeneck & King 1/1/14

Brown & Ruprecht Sandage Bell Brown & Ruprecht 1/1/14

Cantey Hanger Smith & Moore Cantey Hanger 1/1/14

Carlton Fields Jorden Burt Carlton Fields Jorden Burt 1/1/14

Carmody & Torrance Sandak Hennessey & Greco Carmody Torrance Sandak & Hennessey 1/1/14

Cooley LLP Dow Lohnes Cooley LLP 1/1/14

Fein Such Kahn & Shepard Levitan & Frieland Fein Such Kahn & Shepard 1/1/14

Fox Rothschild MBV Law Fox Rothschild LLP 1/1/14

GableGotwals The Glass Law Firm GableGotwals 1/1/14

Hiscock & Barclay Davidson & O'Mara Hiscock & Barclay 1/1/14

Lewis King Krieg & Waldrop Thomason Hendrix Harvey Johnson & Mitchell Lewis Thomason 1/1/14

Littler Mendelson Schuster Aguilo Littler Mendelson P.C. 1/1/14

Michael Best & Friedrich LLP Vantus Law Group Michael Best & Friedrich LLP 1/1/14

Michael Best & Friedrich LLP Vantus Law Group Michael Best & Friedrich LLP 1/1/14

Polsinelli PC Rafuse Hill & Hodges Polsinelli PC 1/1/14

Roberts Markel Weinberg Butler Hailey Roberts Markel Weinberg Butler Hailey PC 1/1/14

Saiber Marcus Brody Ford & Kessler Saiber 1/1/14

Silver Freedman & Taff Elias Matz Tiernan & Herrick Silver, Freedman, Taff & Tiernan LLP 1/1/14

Stinson Morrison Hecker Leonard Street and Deinard Stinson Leonard Street 1/1/14

ENSafrica De Comarmond & Koenig ENSafrica 12/13/13

Pierce Atwood Little Bulman Medeiros & Whitney Pierce Atwood 12/9/13

Becker & Poliakoff Taylor & Carls Becker & Poliakoff 12/1/13

Hogan Lovells Routledge Modise Hogan Lovells 12/1/13

Squire Sanders Melli Darsa & Co. (MDC) Melli Darsa & Co. in strategic alliance with Squire Sanders 11/18/13

DeWitt Ross & Stevens Mackall Crounse & Moore DeWitt Ross & Stevens 11/16/13

Irwin Mitchell MPH Solicitors (McCool Patterson Hemsi) Irwin Mitchell 11/14/13

012



Wynne Law Firm Law Office of Jon Michael Franks Wynne Law Firm 11/12/13

Conn Kavanaugh Rosenthal Peisch & Ford Friedler Law Group Conn Kavanaugh Rosenthal Peisch & Ford 11/7/13

Clifford Law Offices Law Office of Kenneth Chessick Clifford Law Offices 11/1/13

King & Wood Mallesons SJ Berwin King & Wood Mallesons 11/1/13

Shutts & Bowen Livingston Patterson Strickland & Siegel Shutts & Bowen 11/1/13

GrayRobinson Hirschhorn & Bieber GrayRobinson 10/30/13

Maser Amundson Garvey Boggio & Hendricks Maser, Amundson, Boggio & Hendricks 10/29/13

LeClair Ryan Adelman Sheff & Smith LeClair Ryan 10/15/13

Littler Mendelson BDS Asesores Littler Global 10/1/13

Littler Mendelson Godoy Cordoba Abogados Littler Global 10/1/13

Rhoads & Sinon Tsoules Sweeney Martin & Orr Rhoads & Sinon 10/1/13

Smith Haughey Rice & Roegg Even & Franks Smith Haughey Rice & Roegg 10/1/13

Thompson Coburn Freedman Weisz Thompson Coburn LLP 10/1/13

Offit Kurman Fineburg Law Associates Offit Kurman 9/30/13

Warren Kasper Davis and Brewer Kasper and Payne 9/26/13

Clark Hill Folk & Associates Clark Hill 9/16/13

Gregory P. Joseph Law Offices Hage Aaronson Joseph Hage Aaronson 9/16/13

Carson Boxberger Federoff Kuchmay Carson Boxberger 9/1/13

Lewis & Roca Rothgerber Johnson & Lyons Lewis Roca Rothgerber 9/1/13

Moye White Franke Greenhouse Moye White 9/1/13

Slater & Gordon Goodmans Law Slater & Gordon 8/30/13

Lydecker Diaz Clyne & Associates Lydecker Diaz 8/28/13

Slater & Gordon Taylor Vinters Slater & Gordon 8/16/13

Dickey McCamey & Chilcote Miller Lawrence Dickey McCamey & Chilcote 8/7/13

Dressman Benzinger LaVelle Reed Wicker Dressman Benzinger LaVelle 8/2/13

Blank Rome Bell Ryniker & Letourneau Blank Rome 8/1/13

Clyde & Co LLP Clasis LLC Clyde & Co LLP / Clyde & Co Clasis in Singapore 8/1/13

Verrill Dana Friedman Gaythwaite Wolf Verrill Dana 8/1/13

Woods Oviatt Gilman Fix Spindelman Brovitz & Goldman Woods Oviatt Gilman 7/2/13

Baker & McKenzie Habib Al Mulla Baker & McKenzie 7/1/13

Ballard Spahr Stillman & Friedman Ballard Spahr LLP 7/1/13

Chun Kerr Dodd Beaman & Wo Chun Yoshimoto Chun Kerr LLP 7/1/13

Coombs & Dunlap Toller & Novak Coombs & Dunlap 7/1/13

Fox Rothschild Lottner Rubin Fishman Saul Fox Rothschild LLP 7/1/13

Husch Blackwell Brown McCarroll Husch Blackwell LLP 7/1/13

Lorch and Naville Ward King Agnew Lorch Naville Ward, LLC 7/1/13

Marshall Grant Law Office of Ruben E. Soccaras Marshall Socarras Grant P.L 7/1/13

Rifkin, Livingston, Levitan & Silver, LLC Law Offices of Arnold Weiner Rifkin, Weiner, Livingston, Levitan & Silver, LLC 7/1/13

Schiff Hardin Mazur Carp & Rubin Schiff Hardin LLP 7/1/13

Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, PA Hyman & Mars, LLP Siegfried, Rivera, Hyman, Lerner, De La Torre,

Mars & Sobel, P.A. 7/1/13

Sprouse Shrader Smith Irwin Merritt Hogue Price Sprouse Shrader Smith 7/1/13

Source: ALM Legal Intelligence / www.almlegalintel.com

Law Firm Employment and Space Trends

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