Britain’s top law firms are driving a surge in demand for City office buildings in their efforts to win over talent and meet their ESG goals.
Law firms have taken up a record 1.5m square foot of office space in 2022, following a series of big deals involving Britain’s top firms, data from Knight Frank shows.
The record figures follow a series of high-profile deals involving law giants Clifford Chance, Reed Smith, Addleshaw Goddard, and Squire Patton Boggs.
The deals come in the midst of a boom in demand for new offices that has seen law firms agree to take up 2.18m square foot of City office space over the past two years.
The boom has seen law firms account for more than half (59.6 per cent) of the City’s pre-lets since the start of 2020.
Looking forwards, top firms including Eversheds Sutherland, Morgan Lewis, and Akin Gump are all currently reviewing options to relocate.
This year’s record deals come as law firms are seeking to win over new recruits with the prospect of luxury offices amid fierce competition for workers between the City’s top firms.
Reed Smith’s London managing partner Andrew Jenkinson told City A.M. the uptick is being driven by law firm’s efforts to “attract and retain the best talent in the market.”
The continued commitments to take up new office space come as law firms have taken a bullish approach to the current economic downturn in continuing to hire, despite major economic headwinds.
Addleshaw Goddard partner Adrian Collins said: “There is still a war on talent in the legal industry and top firms will want to create spaces where people really want to be.”
Knight Frank partner Jennifer Townsend said the “surge in office transactions” has come as law firms push ahead with “post-pandemic workplace strategies” to “attract and retain talent”.
The uptick in office deals also comes as law firms are seeking to boost their ESG credentials by taking up space in energy efficient buildings, as they push to meet ambitious climate goals.
“Almost all the deals agreed have been for new, best in class City office buildings with strong sustainability credentials, transport connections and wellbeing features enhancing employee experience, to encourage staff to return to the office,” Townsend said.
Notably, Clifford Chance is currently aiming to cut 80 per cent of its direct greenhouse gas emissions by 2030, while Squire Patton Boggs is set to reach net zero by 2035.
All in all, 95 per cent of the new office commitments were for space in London’s most sought after, new-build and newly-refurbished, ‘Grade A’ buildings.
The deals centered on offices in the City, with 94 per cent of the 248,501 square foot worth’s of commitments for space in London’s financial hub.
The legal sector’s focus on the City saw law firms account for 18.7 per cent of the Square Mile’s leasing deals in the third quarter of 2022 alone.
Knight Frank however warned that a lack of supply of high-quality office space in London’s prime areas could lead to a 10m square foot shortfall over the next four to five years.
The prospect of a shortfall has in turn driven demand in the short-term, as law firms seek to secure space in high quality buildings before the supply is gone.