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EMEA, 30 October 2013 – With global growth prospects volatile and continuing to diverge, law firms will encounter diverging market conditions across Europe over the next 12 months according toJones Lang LaSalle’s Global Law Firm Perspective 2013.
The study, an annual barometer of law firm real estate trends around the world, details opportunities for portfolio optimisation in what has been a challenging environment for firms.
2013 has been another year of change in the broader economic operating environment in which international law firms operate, fuelling increased optimism for 2014 and 2015.
“London remains a core market for law firms and sentiment is on an upwards trajectory. Latest research from Legal Week indicates a third consecutive year of growth for the top 50 firms and this has been reflected in improved demand for office space this year. However, the supply of appropriate office stock in the City of London is reducing, and law firms face the potential for rental increases and diminishing incentives due to a number of large lettings and the tightening of supply. The need to plan ahead in respect of property strategy has never been greater.” Said Richard Proctor, head of Central London Tenant Representation at Jones Lang LaSalle
By August 2013, seventeen letting transactions in London had secured over 535,000 square feet (sq ft) of floor space – already above the three-year quarterly average (522,291 sq ft) and +114% up on the same period last year. The two largest transactions in the year-to-date were CMS Cameron McKenna who leased a total of 140,190 sq ft at Cannon Place, EC4, and Bird & Bird who have taken a pre-let of 136,200 sq ft at 12-14 New Fetter Lane, EC4.
In Germany too, law firms may face more landlord-favourable conditions over the next 24 months in select locations including Munich and Frankfurt where rents are reaching €31 and €34 square metres (sq m) per month respectively.
“Law firm growth in the German Big 7 has been evident in leasing activity – with around 150,000 sq m of office space in each of the last two years. Although activity has been more restrained in 2013 with only 45,000 sq m of new office space leased in H1, growth drivers remain positive with both the number of lawyers and revenue growth increasing.” Said Randy White, regional director, Tenant Representation at Jones Lang LaSalle Germany.
Moscow is one of the major office markets in Europe, with 3% of high quality office space occupied by law firms. The majority of law firms in Moscow are located in the city centre within the Kremlin Area, Boulevard Ring and Tverskaya Street districts.
Kate McMurtrie, Regional Director, Head of International Client Services, Corporate Solutions, Jones Lang LaSalle, Russia & CIS, comments: “The legal sector occupies less than 60,000 sq m of office space in Moscow, mainly within the Central Business District (CBD). Over the past 3 years a number of transactions have been completed by law firms in this district, e.g. new leases by Hogan Lovells, Akin Gump, King & Spalding; renewals by Noerr, Cleary Gottlieb, Skadden and Clifford Chance; and a major pre-let by Baker & McKenzie in 2012. The largest legal firm transaction of H1 2013 was the new lease by Dentons (3,600 sq m) at the recently completed prime office development, White Gardens. Since Q2 2011, prime rents have remained flat and vary from USD 1,000 to USD 1,150 per sq m per year for top buildings.”
“Long-term rents are forecasted to increase marginally in the CBD submarket due to low future supply and consistent demand from occupiers. Historically, law firm offices have been concentrated in and limited to this submarket thanks to its reputation as an established and prestigious business district. However, in the future limited availability of new high-quality space in the CBD may force occupiers to reevaluate their strategy and seek out new opportunities – for example, in the rapidly developing business district of Moscow City.” – Kate McMurtrie added.
Increasingly positive economic news across much of the Eurozone is likely to impact both revenues and real estate conditions for law firms across the region.
“In 2014 we foresee great opportunities on offer to law firms looking to take advantage of tenant-favourable conditions in certain parts of the Eurozone. Such markets include; Milan, Paris, Brussels, Madrid and Warsaw, where higher vacancy rates and better opportunities to negotiate with landlords will favour law firms seeking to improve the quality of their real estate or reduce costs.” Said Tom Carroll, director, EMEA research at Jones Lang LaSalle.
Natalia Kopeychenko, Head of PR
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