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Law firm rents set to skyrocket across Americas, EMEA and Asia Pacific

Firms need to consider more modern ways of working, research suggests 

24 October 2014

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By Manju Manglani, Editor (@ManjuManglani)

Consolidation in the global legal market is set to increase even further between 2015 and 2017, according to new research.

It predicts that law firms will have "ample opportunity" to increase revenues in both traditional and emerging markets through acquisition strategies and organic growth.

"As we head into 2015, momentum in the economy is expected to pick up, providing revenue growth and diversification opportunities for many law firms," commented Alexander Low, a UK director at JLL, which produced the report.

Impact of rental costs on growth strategies

In the United States, the first six months of 2014 marked the highest amount of merger activity in that period since 2008, the report says. This followed on from a record year of law firm mergers.

Among the emerging markets, Africa, Asia and Latin America continue to present the greatest opportunities.

However, law firms should expect significantly increased rents across the Americas, EMEA and Asia Pacific, the research warns.

The scarcity of available quality properties means that firms' growth plans may well be hindered if they do not consider alternative ways of working.

The report recommends using more contract lawyers, outsourcing more work and relocating some staff to lower-cost locations.

Videoconferencing, document sharing and more effective remote/mobile team working will become the norm in future, it says.

"There appears to be plenty of opportunity for the global legal sector, provided firms adopt a combined approach to their real estate strategies," commented Low.

He said this includes taking advantage of pre-let activity to create offices "fit for the future". For him, this means creating open, flexible and collaborative working environments.

Low noted that firms should also be forward planning for their 2019-2020 lease expirations and considering pre-let options.

"If such an approach is adopted, the slow-growth performance that numerous firms have been accustomed to in recent years will likely accelerate into a more dynamic outlook ahead."

Productivity, efficiency and innovation vital

With growing client emphasis on value and resistance to traditional billing models, efficiency and productivity programmes look set to stay.

"Productivity, efficiency and innovation is now at the top of the agenda," said Low.

The research found that, in 2013, 60 per cent of the top 10 US law firms and approximately one third of the top 11 to 100 invested in business improvement and cost reduction programmes.

However, most firms did not achieve the scale of benefits they expected, with the majority saving less than five percent of pre-programme costs.

The global research is published in Law Firm Perspective.

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