Law firms are the most sought-after tenants, yet often face the least favorable lease terms.

This may seem highly counterintuitive, at first. Per commercial real estate data analytics company, CoStar, law firms are the most attractive and desirable building tenants.

They are some of the most loyal, predictable, reliable and high-quality tenants. Historically they sign long leases and spend heavily to improve the landlord’s building. Their professionals work in the office more than other industries, bringing life, activity, status and restaurant and retail spending that landlords desire. This in turn attracts other first-rate tenants.

One would expect these qualities to result in the best possible lease deals for law firms. Instead, the landlords have gained the upper hand and commanded premium, above-market rents.

CoStar states that of the top five classes of firms—financial services, law firms, consulting firms, tech firms and media companies—law firms pay the second highest average rent but have the longest average lease terms. On average, law firms are signing 8-year leases, though generally top-tier firms are signing 10- or even 15-year leases.

So, why aren’t law firms leveraging their strengths to secure better lease terms?

Given their quality, predictability and investment in their office space, many law firms mistakenly believe they are securing favorable terms, when in fact, the opposite is true.Landlords have gained leverage at the law firms’ expense in large part because they have controlled the narrative in negotiations.

Because law firms invest heavily in customized, high-end space, landlords know that it’s expensive to move, and that nine out of 10 times, the tenant will not consider moving. In fact, the average law firm is in their space for 20+ years. Additionally, unlike tech firms, there are few law firm sublease options available.

Landlords come to the negotiating table confident that law firms are reluctant to move.

How can law firms turn the tide and get the favorable terms they deserve?

Law firms have more negotiating power than they typically use to their advantage.

First, relocating would impose significant costs to the landlord. Due to the highly customized nature of law firm spaces, a vacancy would necessitate a costly and extensive renovation for the landlord. They would have to demolish the space back to shell condition to attract a future tenant at their burden, cost and time without a premium renter.

Were the narrative to shift from “it would be prohibitive for the tenant to move,” to “landlords would face significant financial repercussions if they did,” the law firm would gain tremendous leverage.

Secondly, ahead of their lease expiration, law firms would benefit by building into their strategy how they would reimagine their space and how to communicate that vision and intention to the landlord and the marketplace.

Law firms can frame their current space as outdated and misaligned with their evolving vision. They could rightly claim that they would need to entirely gut and redesign the space, in multiple phases, with untenable pain, disruption and cost. In truth, for many law firms, it would be far more costly to stay in their current building than to craft the space needed elsewhere. In these terms, it puts the landlord on their heels and entirely changes the negotiation dynamics.

Law firms can also “consider” purchasing a building, which throws off landlords and their leasing agents from arbitraging different leasing options—and it creates opacity with purchase timing and renovations, creating leverage with early renewals and relocations.

Further, amidst the uncertainty and increasing vacancies of the post-pandemic real estate market, law firms can gain maximum leverage by partnering with a tenant focused real estate advisor who understands their unique needs and specializes in negotiating a lease or purchase on their behalf.

Lessons to improve your negotiation strength

Though there is no universal strategy, law firms—and indeed, all companies, regardless of industry—should adopt a proactive, strategic and long-term approach to evaluating their office needs.

• What do you want your office space to say about your company?
• What would you change about your current space to fit the vision of your firm?
• How do workforce trends and new ways of working impact your future requirements?
• What is the impact on the next generation of professionals to join your firm during the tenure of the next lease?
• What is the ideal building type?
• What amenities fit your vision?
• How do location and transportation impact your employees’ retention and recruitment?
• How will the geographical area change in the next 10 years?
• How much uncertainty is there in predicting future needs?

With a thorough office needs assessment, firms can align their strategy to their priorities relative to stability, flexibility, improvements and cost while enhancing their negotiating leverage.Whether leasing or buying a new space for their law practice, working with a tenant representation company—not a full-service commercial real estate firm that primarily represents landlords—will minimize the possibility that they will wind up severely shortchanged in terms of broker advocacy. Now, more than ever, companies need a true advocate and fiduciary looking out for their needs, maximizing their flexibility and achieving the best economics possible.

At Hughes Marino, we champion transparency and tenants’ rights. We help firms navigate recurring real estate challenges, highlighting the value of working with an advisor who represents tenants’ best interests.

Our Law Firm Practice Group

We started our tenant representation roots 30 years ago by primarily representing law firms. Since then, we have grown to represent thousands of companies across all industries—locally, nationally and globally. Our level of detail, care and discretion is second to none. We recognize how important our clients’ real estate transactions are for their future success, and as such, we place their sole interests at the forefront.

No matter the size or location, our team understands the specific technicalities that come with the many facets unique to today’s law firms. Our Law Firm Practice Group has the local market knowledge and experience to ensure our clients secure the highest caliber and most cost-effective office space to fit their needs.

Curious to hear more on the topic of law firm leases? Listen to Episode 38 of The Corporate Real Estate Insider Podcast for more in-depth insights from our team, specifically about how we have been helping law firms with their leases for decades!