Law firms in Washington outperformed their counterparts in other U.S. regions by several measures including revenue, demand and productivity, according to a quarterly report released by Citi Private Bank Law Firm Watch this month.
During the first three months of 2014, D.C. firms saw 6 percent growth in revenue (compared 4.3 percent across all regions), 1.6 percent growth in demand (compared to 1 percent for all regions) and 3.8 percent growth in productivity (compared to 1.1 percent for all regions), compared to the first three months of 2013. Productivity is measured in the number of hours that lawyers bill.
The report surveyed 177 law firms, including 15 headquartered in the D.C. area. The firms were spread across 11 U.S. regions including New York City, Chicago, Northern and Southern California, the Northeast, the Southeast and Washington, D.C.
“As a legal market, D.C. has been one of the primary locations to benefit from the recovery,” said Brent Smith, a director at Citi. “When we look at the practice areas that are showing the most strength, regulatory continues to be among the top. Washington is one of the locations that would benefit from that.”
Still, Washington firms are being cautious. D.C. was the only region where law firms cut back on expenses during the first quarter of 2014, according to the survey. The dip was slight, just 0.6 percent compared to the first quarter of 2013, but indicates that while firms here are seeing decent growth in revenue, they are spending more conservatively. The data reflects the anecdotal trend of law firms in Washington scaling back on their real estate costs, their second-highest expense after people.
D.C. law firms “are benefiting with nice increase in revenue, but aren’t using that opportunity to start opening up their pocketbooks again,” Smith said. “They’re retrenching, it seems, trying to find ways to be more efficient.”
D.C. firms also shrank in manpower, reporting a 1.4 percent drop in overall lawyers and a 1.6 percent drop in equity partners. D.C. was one of only two regions (the other was the Northeast, which includes Northeastern cities minus New York City and cities in Pennsylvania) that saw drops in both overall lawyers and equity partners. On average, all regions saw 0.7 percent growth in overall lawyers and remained unchanged in equity partners.