Law firms are a small sector, regularly accounting for only between 1.8 % (Berlin) and 5.9 % (Frankfurt) of office take-up in German office locations – but they rent almost exclusively in central locations and value first-class space. In return, they are willing to pay the highest rents in the market and top the rental prices paid by banks, financial services providers and consulting firms, according to a new study by Cushman & Wakefield. Covid-19 has not changed this.
Office space take-up by law firms in the German top-5 markets exhibits a 10-year average of around 90,000 square metres and 112 lease conclusions per year. Between 2015 and 2018, the sector achieved its highest take-up results, peaking at 120,000 square metres in 2017. Take-up had already fallen significantly in 2019, and fell again, to 63,000 square metres in 2020. The major law firm cities, Munich (-68 %) and Berlin (-43 %) saw the sharpest declines.
Law firms prefer prime city centre locations
Law firms rent 90% of their space in the central business districts and the adjoining city centre submarkets. In Düsseldorf, for example, there are clusters of law firms in the banking district and Medienhafen, while in Frankfurt they are in the banking district and Westend-Süd. A centrally-situated office is prestigious and easily accessible for clients and employees alike. High-priced offices are also a salient factor in law firms positioning themselves as attractive employers. Incidentally, Covid-19 has not changed this preference. 82 percent of law firms still plan to rent in prime central locations or want to move there. Also central, but not exclusively: 70 percent of consulting firms, banks and financial service providers choose CBD and city centre locations, other sectors only 50 percent.
Rents far above average
At the end of 2020, the average rent paid by law firms for new leases across all top-5 markets had reached 31.55 euros per square metre per month, while the average rent across all sectors is 22.60 euros per square metre per month. This means that law firms pay rents which are on average 40 per cent higher than those of other sectors. The highest rents paid by law firms are in Frankfurt, averaging 41.05 euros. "The special requirements on location, building and space quality explain these high costs. We also observe that the larger the office space rented, the more likely it is that it will be rented in a development project," explains Christian Lanfer, Head of Office Agency at Cushman & Wakefield.
Despite Covid-19 and home office, single offices remain the first choice
The previous level of remote working of 0.6 working days per week rose to 3.7 working days during the Covid-19 pandemic. But even for the post-Covid-19 period, single and two-person offices remain a constant in law firms’ office world, especially for lawyers themselves. The majority of law firms are not planning any changes here. Law firms generally have strong hierarchies, from associate to senior partner. This hierarchy is reflected in the office structure. The higher in the hierarchy, the larger the office and the fewer people work in one room. The traditional, cellular office structure enable focused and confidential work.
More flexible lease terms desired in future
Law firms are reacting to the current challenges posed by the Covid-19 crisis, but also to long-term trends such as different working time models and the adaptation of offices to accommodate modern working environments. Helge Zahrnt, Head of Research & Insight Germany at Cushman & Wakefield, summarises an emerging trend: "The legal sector is in motion. Although law firms are remaining constant in their location and space preferences, as many as a third want lease terms that would enable more flexible planning in the future." In addition: for hybrid workplace structures, law firms need more communication areas. Decision-makers should take this into account when redesigning their space and when taking on new tenants.
