The legal sector can recoup costs by reconsidering its real estate options, in particular incorporating flexibility in the workplace, according to Jones Lang LaSalle.
Jones Lang LaSalle’s report The Legal Sector Workplace: Change is Coming? examines how law firms can adapt workspaces to reduce occupancy costs and increase efficiency.
Michael Greene, JLL director tenant representation, says the legal sector is still recovering from the GFC, facing pressure from clients to control costs and the continuing discussion around fixed fees.
“Many of their major clients, particularly multinational firms, are very much bottom line focused so there is a lot of pressure on law firms to do more with less. Fixed fees allow for greater cost control for clients but it can be challenging for some legal practices,” Greene says.
The report says incorporating flexibility in the workplace can increase efficiency and mitigate increasing cost pressures.
“A number of companies, particularly in the banking sector, have adopted flexible work practices to drive operational efficiency in the post-GFC market. Some of these strategies would be applicable to the legal sector, including the use of larger, flexible floor plates, increasing mobility of the workforce and smaller individual offices. These are relatively small changes but they can make a big difference to operating costs,” Greene says.
“In addition to reducing costs, flexible work environments also support a collaborative style of working which is becoming key for law firms. Where large offices were once the norm, shared, collaborative spaces are becoming more commonplace in the legal sector as they allow for ad hoc group discussions and the exchange of ideas.”
According to the report, adoption of flexible work practices will become important over the next two years as lease expiry profiles in the legal sector increases nationally.
Lease expiry profile is expected to peak in 2016, and Sydney and Melbourne will have their biggest tranches of space expiring.
The report says law firms in Melbourne spend less on rent as a percentage of total revenue than their Sydney and Brisbane counterparts.
The average law firm operating in Melbourne spends approximately 5 percent of national revenue on net real estate costs, while a tenant operating solely in Sydney will spend 6.2 percent, according to the report.
Greene says most major law firms occupy A-grade buildings in CBD cores.
“While it is necessary for the legal staff to be in these offices, back office operations can often be housed in other more cost effective locations outside the CBD,” he says.
View the Jones Lang LaSalle report