A study released Monday by Chicago-based real estate investment and advisory firm JLL on the real estate outlook for law firms in San Diego said local firms have not decreased their footprints as much as firms have in some other primary U.S. markets.
According to JLL, the typical U.S. law firm has shrunken its office footprint by 22.2 percent, from an historical average of 976 square feet per attorney to 760 square feet today. The average U.S. firm has also cut annual rent per attorney by 12.1 percent, from an historical average of $38,535 to $33,879 today, the report said.
In San Diego, however, where the historical average office space per attorney is 1,000 to 1,200 square feet, average square footage today is 900 to 1,000 per attorney, among the highest in the nation, the report said.
Historical rent per attorney in San Diego was $60,000; today, it’s $50,000, JLL said.
A list of notable law firm leasing activity didn’t include any San Diego-based firms, but the report singled out a few firms that have expanded their San Diego offices, including Jones Day, which has leased 63,000 square feet, and Dentons US LLP, Allen Matkins Leck Gamble Mallory & Natsis LLP, Pillsbury Winthrop Shaw Pittman LLP and Devaney Pate Morris & Cameron LLP, which have leased 46,000, 28,000, 26000 and 10,000 square feet, respectively.
The report said firms in San Diego looking to expand may struggle because of high build-out costs and higher rental rates for new construction in law firm-appropriate areas.
However, JLL also said opportunities for firms are likely to arise as landlords drop rent in older spaces in response to new construction coming online. The Irvine Co. has already done this in University Towne Center, JLL said.
Law firms with lease expirations over the next few years may find landlords are increasingly willing to restructure those leases early to maintain occupancy, JLL said.
Rents in downtown San Diego, however, will continue to rise for a time even as prices in UTC and Del Mar Heights begin to fall, the report said.
JLL defined the real estate market for San Diego law firms this year as “neutral,” favoring neither law firms nor landlords, and said that status will extend into next year, too, but predicted in 2018 the market will become favorable for law firms.
By Sarah de Crescenzo Monday, October 24, 2016