Law firms find it better to move than renovate

Lured by deals on commercial leases and incentives offered by landlords, several Washington law firms are opting to upgrade to new but often smaller spaces in recently built or renovated buildings rather than rework the office space they have sometimes occupied for decades.

In the past six months, Fried Frank, Novak Druce and Quigg, and Sutherland Asbill & Brennan have signed leases on new office space in the District. Others, including Hunton & Williams, Squire Sanders, Perkins Coie, and Arent Fox have moves underway. Williams Mullen recently moved into a new space in McLean and the American Health Lawyers Association completed its move to the sixth floor at 1620 I St. NW earlier this month.

"I think what's happening with the law firms in particular is that a lot of these moves are happening from spaces that were built out a long time ago," said Thomas M. Fulcher Jr., co-branch manager of tenant advisory firm Studley's Washington office. "It's 'Can I live through a big renovation here?' or 'I can move over the course of a weekend.' " Hunton & Williams decided that when its lease on 1900 K St. NW expired next year, it would be time to move to a building that is configured differently than the space it has occupied for the past 14 years. Office Managing Partner Andrea Bear Field said the firm's new office, which will be in the mixed-use Square 54 project at 2200 Pennsylvania Ave. NW, will be more suited to how the firm has changed by designating less space for libraries, files and secretarial support.

"How you're going to configure the space for the next 15 years is very, very different than when we moved to this space in 1996," Field said.

Fulcher said that firms are realizing that the interior architecture built 20 years ago, which often averages 800 to 900 square feet per attorney, is costly and makes little logistical sense. Spaces in the buildings law firms are currently leasing is often configured to provide about 600 square feet per employee.

Squire Sanders & Dempsey's John A. Burlingame, managing partner of the firm's Washington office, said when the firm decided it would move from its current location in 2011 to two floors at 1200 19th St. NW, a "big impetus was starting from scratch and being able to design the law firm of the future."

The firm's new LEED-certified building will have a conference center, multipurpose room, and a more efficient mix of partner and associate offices, and will move away from the "big cavernous partners' offices" that exist in the firm's current space at 1201 Pennsylvania Ave. NW, which it has leased for the past 30 years.

"For less space than we currently rent today, we're going to have at least the same number of attorney offices for a lot less square feet," Burlingame said.

Fulcher said the leasing deals that are being finalized have more in common than the promise of more efficient space. At the time firms signed the leases that are now expiring, it had become nearly impossible to find large chunks of space in the central business district, so many chose to move east. Now many firms are opting to return to the center of the city.

Landlords are also increasingly willing to offer incentives to entice tenants to move, Fulcher said. Property owners are requiring tenants to put up less lease security, the commercial equivalent of a security deposit, even though the landlord has invested money to renovate the space.

Fulcher said he has also seen a "contracting clause" inked into one deal and requested in others. This type of provision would allow a tenant to drop a percentage of its space from the lease after giving "fairly significant notice" and paying a penalty to help the landlord recoup the cost of renovation -- an attractive incentive in an economy that has resulted in law firms with smaller workforces.

"They build it out in a way that anticipates that happening; it's just one of the thing landlords are doing to be flexible as they get tenants to sign deals," Fulcher said.

Cushman & Wakefield broker Scott Hoffman the flurry of activity is the result of the completion of "pent-up" deals, but he expects to see more large law firms, many of which have leases ending within the next five years, opt to move instead of re-signing leases on current space.

"For a long time, law firms weren't relocating, and renewals were more probable," Hoffman said. "But now construction costs are so low that it makes sense once again to relocate . . . the overall activity is increasing and there is slightly more velocity in the marketplace."