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Legal business hasn’t recovered: Hiring rates down, firms seek shorter office leases

David Pendered

By David Pendered

The lawyering business isn’t hiring at the same rate it was before the Great Recession, and a pair of mixed reports released this week on metro Atlanta show that even though some local firms are hiring, the sector is taking a conservative position with office space.

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Some Atlanta law firms are taking a ‘wait and see’ strategy regarding the office space they will need. Some firms are downsizing, others are remodeling rather than moving, and other are seeking short-term leases, according to a report by CBRE. Credit: Kelly Jordan

The introduction to the report by CBRE, A Shifting Landscape, sums up the myriad of challenges facing the business of law. In metro Atlanta, the sector is a bellwether of the region’s broader economy. The introduction to the report by CBRE, a commercial real estate services company, portrays the sector remains in flux as clients recalibrate their spending and technology takes over a growing number of tasks now done by lawyers:

  • “The next decade will present a massive shift in law firm demographics, delivery of legal services and competition for talent. At the same time, uncertainty about the economy, rising expenses and continued dispersion of firms are putting pressure on profitability. As a result, law firms must be strategic in their location and workplace initiatives, ensuring that they have access to top talent while creating operational efficiencies to facilitate better business performance.”

Two indicators of the business of law are its needs for office space, and the rate at which it’s hiring. The two new reports suggest a less-than-rosy economic outlook, similar to that of Rajeev Dhawan’s whose report last month predicts a drop in housing starts and sluggish employment gains.

Regarding office space, CBRE’s report focused on the Midtown market. The report states that firms are taking a conservative approach to office space. They tend to downsize in an existing building rather than absorb the cost of a relocation. They are renovating space to appeal to millennial lawyers and creating to shared workspace, according to the report:

  • “Larger law firms in Atlanta continue to downsize their existing locations when possible, given historically high costs for newly constructed office buildings and the expense to move.
  • “Driven by the need to recruit and retain a new generation of talent, law firms are modernizing their workplaces as a competitive differentiator. As firms design more collaborative space, construction costs have increased by 25 percent during the current real estate cycle.
  • “Given relatively high rents, particularly in Midtown and Buckhead, and uncertainty regarding growth, some firms are renewing space for short lease terms as a wait-and-see strategy.”

Regarding hiring, the National Assoc. for Law Placement reported that metro Atlanta’s large firms are not hiring at the same level they were before the Great Recession. Firms with more than 251 lawyers have hired 59.1 percent of the number of recent law school grads they hired before the Great Recession. NALP helps law school grads find jobs.

Specific to metro Atlanta, the NALP report observes in its report, Law Firm Hiring Has Not Rebounded Evenly Across Major Markets Following the Recession:

  • “A growth spurt at large firms in Atlanta in 2012 was not sustained, and large firm hiring has been below the 2012 level every year since, except in 2017. Thus, the number in 2018 was just 59 percent of the 2007 and 2008 levels.”

A chart of hiring at the larger firms in metro Atlanta puts the situation into graphic perspective. A total of 215 young lawyers were hired in 2007 and the same was added in 2008, according to NALP’s report. The number flickered up, to 145 in 2017, as NALP reported, before it dropped to 127 hires in 2018.

 

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David Pendered
David Pendered

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow.

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