A little knowledge goes a long way when choosing law firm real estate
Whether you run an independent practice from home or operate a large firm, office space must top the list of your business decisions. When choosing law firm real estate, you have more options that you might realize. Even if you already have office space, it makes sense to review your options periodically.
Let’s take a look at the basics:
Cost of Commercial Real Estate
The size of your firm dictates how much space you will need to operate comfortably and efficiently. Commercial real estate site LoopNet says the size you need:
“…will depend on factors like how many staff members you have and whether you’ll be receiving clients at your office. A good rule of thumb is to estimate around 150 to 200 square feet of space per employee.”
That site outlines a variety of office leases, including net lease, full-service lease and percentage leases, and the type of lease will impact your overall monthly cost. That cost includes base rent, plus other built-in expenses, such as property tax, insurance premiums, common areas (lobby/reception, etc.) and more.
Mile High CRE reports that the average office rent in the Denver-Boulder area reached $28.43 per square foot as of Q2 2019. The Denver-Boulder market ranked 15th in the country for office rents.
Based on that average, and assuming a minimum of 150 square feet per employee, a law firm with 20 employees can expect to pay about $85,000 per year for office space. An office downtown or in a central business district will cost more, while suburbs and outlying areas will offer more affordable leases. Of course, location makes a big difference in business, so many firms will opt for the visibility and accessibility of a CBD over a less expensive area.
Pros and Cons of Traditional Office Leases
Opting for a traditional office lease offers a number of pros and cons, including:
- Dedicated, long-term space
- Ability to design to suit, in many cases
- Conference rooms and existing building amenities
- Tied into a long-term lease of several years, in many cases
- Space is not flexible with changing needs of your firm
- Overhead cost
Before signing a lease, carefully weigh the pros and cons. You should also consider some alternatives to traditional leases.
Alternatives for Small Law Firms
Independent lawyers and small law firms have a wide range of options available, including:
- Home office, which requires a separate space for privacy requirements
- Single office space in a larger building
- Shared office setting or coworking space (such as LawBank)
A home office can give you a great start as an independent practitioner, but you must then decide how and where to conduct client meetings. In addition, you might incur additional expenses by hiring a virtual receptionist or assistant.
Even renting a single office can come with hidden costs, such as additional fees for conference room rentals or receptionist services.
For small law firms, the flexibility and affordability of a shared office space or coworking space often makes the most financial sense. These offices offer a professional setting, conference space, receptionists and other included amenities for a much lower cost than a traditional lease. Most importantly, someone else handles the logistics of managing those business services so you can focus on your client work.
Alternatives for Large Law Firms
Traditional office space becomes more of a necessity for larger law firms; however, even firms with more staff can find creative approaches to their law firm real estate needs. Some alternatives include:
- Standardizing the square footage allotted to each partner and associate (see this great piece on Denver’s Hogan Lovells making such a move)
- Offering remote work options to associates and staff, which allows for a smaller office footprint (see examples of firms who use this practice)
- Subleasing existing, unused office space
The latter option, subleasing, allows a firm to retain control of an entire space while recouping some real estate costs.
Of course, before subleasing, you must determine that your lease allows for such an arrangement. You will also need to create a solid tenant lease and vet potential tenants to ensure the right fit, especially in regard to client privacy. Working with a law firm real estate expert who can manage the vetting and leasing process for you can help eliminate some of the work associated with setting up a sublease.