Law firms are continuing their reign as the kings of the leasing market, according to a new report by Jones Lang LaSalle.
Law firms led all other New York businesses in leasing activity in the first quarter of 2004, taking 1.55 million square feet of space throughout the city, according to the report.
The banking sector came in second, signing for 1.2 million square feet of space in the first quarter. Accounting firms took the third spot with 836,400 square feet of space leased, and the financial services sector posted 516,300 square feet of leasing activity, the report said.
“The growth of the legal sector is consistent with several years of heavy leasing and expansion activity on the part of law firms in New York,” said Barbara Byrne Denham, research manager with Jones Lang LaSalle and co-author of the report. “Not coincidentally, law firms added 600 jobs in the first quarter of 2004, according to data from the New York State Department of Labor.”
Law firms were also the most active businesses in Manhattan commercial real estate last year, leasing more office space than the financial industry for the first time in the five years tracked by the report.
Office leasing data released by Cushman & Wakefield earlier this year showed similar findings last year for Manhattan, with law firms placing first in leasing, followed by financial services companies, and insurance firms finishing a close third.
“Law firms have ramped up their gross leasing activity for a number of reasons,” said Lisa Kiell, executive vice president with Jones Lang LaSalle and the other author of the report. “Some large law firms headquartered outside Manhattan are acquiring local boutique firms to augment their operations in New York. Mergers, acquisitions and consolidation among smaller regional players have also fueled a spate of transactions.”
Gross leasing activity through December 2003 showed that law firms leased 3.9 million square feet of space in New York City, a 426 percent increase from the previous year, when the legal industry signed for just 752,348 square feet of space.
In previous years, finance firms – including investment banks, brokerage firms, venture capital firms, and mutual and hedge funds – reigned supreme, particularly in late 2001 when many were displaced after Sept. 11. This past year, the finance industry placed second to law firms, recording 2.9 million square feet in gross leasing activity, representing a 140 percent increase compared to the 1.24 million square feet leased in 2002.
Some local Manhattan law firms have taken expansion space and others have relocated from Downtown to Midtown in an effort to upgrade their space. A number of law firms have moved from Midtown to Downtown to capture lower rents and take advantage of the incentives available in Lower Manhattan.
The pickup in gross leasing activity has also been driven by the rollover or expiration of existing leases, displaced Sept. 11 tenants finding permanent space and firms renewing early to take advantage of the weaker market conditions, the report said.