Law firms nearly double space in LA during pandemic
Gains on renewals, relocations of 20K sf+ run counter to other major markets
Leasing activity among law firms has nearly doubled in Los Angeles during the pandemic, defying a drop in other major US cities, according to a new report from commercial real estate brokerage firm Savills.
In 2020 and 2021, the amount of office space leased to law firms in the city for renewals and relocations increased 97 percent compared to the two years before the pandemic, reaching around 500,000 square feet. Gains were spread across firms of all sizes in terms of lawyers, according to the report, which considered firms with 20,000 square feet or more of office space.
Chicago joined LA as a gainer, posting a 32 percent increase to around 800,000 square feet.
The increase in space over the course of the pandemic in Los Angeles and Chicago stands in sharp contrast to sizable drops for law firms in cities such as Houston, which registered a 68 percent decline, and New York, which posted a 44 percent drop.
“As the second full year of the pandemic comes to a close, the legal sector is faring better than many industries, but leasing has not yet returned to pre-pandemic norms,” the report read.
New York remains the largest market for office space for law firms despite the recent declines, with about 1.5 million square feet of space–half again as big as second-place Washington, D.C., and nearly triple Los Angeles,
The two-year hit from the pandemic had a two-step effect. In 2020, leasing activity for law firms in the US mostly consisted of deals that were in the works before the pandemic. The first half of 2021 saw a steep decline, which was attributed to delayed decisions among law firms due to the uncertainty of the pandemic. The low point for the sector came in the second quarter of 2021, when leasing volume dropped to below one million square feet across all major markets nationwide.
On a quarterly basis, the leasing average for law firms was at 1.8 million square feet per quarter during the two years before the pandemic. In the two years since the pandemic started, the quarterly average sat at 1.4 million square feet, a 23 percent drop compared to the previous period.
“While current leasing activity is not far from pre-pandemic norms, COVID-19 variants may continue to slow the consistent return of market demand,” the report read.
In spite of Los Angeles’ performance in the past two years, the city did not see transactions that were at the scale of other major markets. During the fourth quarter, the largest lease deals were in New York, Washington DC, New Jersey and Chicago.
A renewal for 241,000 square feet in New York by the Dechert firm led the nation for the quarter.