THE Heron Tower building is probably the most prestigious new location in the City, and a few weeks ago a law firm became the first to rent space in it. American firm McDermott Will & Emery will leave its current home – the rather traditional sounding 7 Threadneedle Street – in about a year’s time and move into the sparkly new skyscraper. A sign, you might say, that some law firms at least have turned the corner and are willing to splash out on flashy new premises.
Well maybe. In fact, this is perhaps a tale of prudence rather than confidence. The firm has snapped up the space at £50 per square foot, a good £5 less than it is predicted to be this time next year when it moves in. And while the firm has not lost any people during the downturn, it is downsizing to 25,000 sq ft from 50,000 in the more efficient new office space, although office costs will remain more or less the same.
Elsewhere in the City it’s all about finding new ways of cost-cutting, and some are going to unusual lengths. “Due to the impact of the redundancies in 2009 and pressure on fees, some of the larger UK firms are thinking about sub-letting,” says Jeremy Attfield, a partner in the City office of estate agent King Sturge.
Among those who are looking to rent space in their offices is Allen & Overy, which is sub-letting a massive 200,000 of the 600,000 sq ft in its swish Spitalfields offices. Eversheds is marketing 28,000 sq ft, Simmons & Simmons 42,000, SJ Berwin 18,000, and Charles Russell is aiming to fill 12,000 sq ft.
The reason that this space is going on the market now is that the firms have now “re-stacked” their offices following the redundancies they made in the past two years. The leases on offer are up to 10 years, suggesting that the firms do not expect to go back up to the pre-downturn staffing levels. It’s a good time to be looking for about 20,000 sq ft of space in the City in well-equipped offices with the use of a gym and flash law-firm meeting rooms – if you don’t mind a big law firm’s name over the door, anyway.
Value for money is the name of the game right now. So far this year, law firms have taken 19 per cent of the City’s office space, taking advantage of the good 2010 prices – the figure is normally 12-17 per cent. The biggest recent moves were Pinsent Masons, taking 165,000 sq ft, Clyde & Co taking 150,000 and Stephenson Harwood taking 120,000.
A number are looking at pre-lets for 2014/15, hoping to get bargains before the market picks up again. The biggest are CMS Cameron McKenna, which is looking for 350,000 sq ft, and Field Fisher Waterhouse, which needs 120,000.
Isn’t this a come-down for the big law firms, who once prided themselves on being indestructible and ever upwardly-mobile? Not at all, says Attfield. These days, the thing is to show that you are savvy enough to cut costs. Empty space doesn’t mean that you are expecting to fill it with keen, bright new associates any more – it means that you are forking out for too much space and that the client is effectively paying for empty space. A good, sensible rental can save you a million a year, cut your costs and your fees.
Frugality – or the international law firm version of it – shows that you are moving with the times. And, of course, it also helps keep all that profit per partner motoring along quite nicely.