Colliers International's Law Firm Services Group: 2018 North America Outlook

North America Report
LAW FIRM SERVICES

2018 NORTH AMERICA OUTLOOK
Law Firm Real Estate Strategy: How to

Achieve Space Efficiency and Control Costs
While Attracting the Best Talent
Overview and Key Themes >> Renewals Present Opportunities: Renewals continue to dominate
law firm leasing activity, in part because of supply constraints but
The North American office market is nearing a potential inflection mostly reflecting the continued drive for cost containment.
point while law firms continue to wrestle with implementing new
real estate standards. With investment of sufficient capital, it can also be possible to
creatively restructure a firm’s existing space, provided it is not
To provide insight into the key real estate trends for law firms to too outmoded to enable efficiency gains.
consider, this report highlights the office market characteristics
and law firm activity in each of the 24 North American real estate >> Local Market Conditions: While the U.S. office market remains
markets covered by Colliers’ Law Firm Services Group largely healthy, tenants could see some localized easing of
market conditions. Rent growth has largely abated and, barring a
>> Space Efficiency in a Competitive Hiring Environment: Despite rebound in demand, there could be upward pressure on vacancy
differences between markets, the drive for space efficiency and until new construction recedes.
creation of the optimal work environment are still consistent
themes. Of the 24 markets that we cover in this report, two are in Canada.
Both Toronto and Vancouver are the premier markets in Canada
Although law firms, and financial and professional services firms and are both in very strong points in their cycle.
in general, continue to focus on bottom-line costs, they are also
competing to attract and retain the best talent, which impacts
premises strategy. For the international firms there is also an
increased focus on global real estate standards.
>> Benefits of Leasing Premium Space: When the opportunity

exists, it can make both financial and business sense to lease the
best new space, but with a reduced footprint and a configuration
that fosters engagement, creativity and collaboration to provide
the best client service.
Implementation of such a strategy is, in part, dependent upon the

availability of new space which is tight in the core office markets.
Here are our observations on the leading market indicators. Deliveries Peaked in 2017
Vacancy Stays Low but Absorption Falls >> While still elevated, the volume of office space under construction
fell slightly for the second successive quarter in Q4 2017,
Over the Year declining from 109 to 107 million square feet. Of this total, 46
million square feet are underway in downtown markets with 61
>> The U.S. office market vacancy rate stands at 12.1% and has
million square feet in the suburbs.
stayed in a 30-basis-point (BPS) range for the past eight
quarters, providing continued evidence that the market has >> There was 71 million square feet of new office space delivered
plateaued. 2017, up from 54 million square feet in 2016. With construction
starts declining, 2017 should represent the peak year for new
>> Downtown markets still maintain an occupancy edge over the
supply in the current cycle.
suburbs. Vacancy stands at 10.8% in downtown markets and
12.8% in the suburbs, with both witnessing a fall of 60 BPS over >> Five metros collectively account for half of the space currently
the year. underway: the San Francisco Bay Area at 15.3 million square
feet, Washington, D.C. at 10.8 million square feet, New York at
>> U.S. office absorption fell for a second successive year in 2017,
10.6 million square feet, Dallas-Fort Worth at 8.9 million square
down by 28% to 42 million square feet following a 40% fall in
feet and Seattle-Puget Sound with 6.8 million square feet.
2016.
>> The volume of space underway is starting to fall in the San
>> Out-performing downtown markets in 2017 included Nashville,
Francisco Bay Area and Dallas-Fort Worth as corporate
where absorption equaled 8.3% of inventory, Raleigh/Durham
campuses in the suburbs are delivered. When current
(6.3%), Seattle (3.7%) and Austin (3.7%.) Among the larger
construction is measured as a share of inventory, Austin leads at
suburban markets, Dallas saw the greatest absorption rate at
6%, followed by the San Francisco Bay Area (5.6%) and Seattle-
2.2% of inventory, reflecting a series of major corporate move-
Puget Sound (4.8%.)
ins in Far North Dallas, followed by 1.9% in both Phoenix and
South Florida.
U.S. Office Market | Q4 2015 - Q4 2017 Quarterly Under Construction Totals
140
35 12.8
120
30
12.6
100
25
12.4
80
20
Vacancy %
Millions SF
12.2
Millions
60
15
12 40
10
20
11.8
5
Q1 2014
Q1 2017
Q1 2010
Q1 2013
Q1 2016
Q3 2006
Q4 2006
Q3 2007
Q4 2007
Q2 2008
Q3 2008
Q4 2008
Q1 2015
Q3 2015
Q4 2005
Q1 2011
Q3 2011
Q4 2011
Q1 2012
Q3 2012
Q4 2012
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q2 2014
Q3 2014
Q4 2014
Q2 2017
Q2 2010
Q3 2010
Q4 2010
Q2 2016
Q3 2017
Q4 2017
Q3 2016
Q4 2016
Q1 2007
Q2 2007
Q2 2013
Q3 2013
Q4 2013
Q1 2006
Q2 2006
Q1 2008
Q2 2015
Q4 2015
Q2 2011
Q2 2012
0 11.6
Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Absorption (MSF) New Supply (MSF) Vacancy Rate (%) Under Construction Average
Source: Colliers International Source: Colliers International
Rents Hold Firm - Growth is Mostly Over

>> Office rent growth slowed in 2017 with only minimal changes
from quarter to quarter. Annual rent growth for 2017 was just
1.8%, only one-third of 2016’s rent growth rate of 5.4%.
>> Average Class A rents stand at $46.40 per square foot in

downtown markets and $29.90 per square foot in the suburbs.
Downtown Class A rents fell by 1.5% in 2017, driven by lower
absorption, while suburban Class A rents rose by 3.6%.
>> The modest fall in downtown Class A rents is a recent
phenomenon, while suburban Class A rent growth primarily
occurred at the beginning of the year with the Q4 2017 growth
rate a mere 0.5%.
>> While average asking rents may move upward in markets where
prime new properties are set for completion in 2018, this growth
should be offset by rising tenant improvement allowances.
2 2018 North America Outlook Report | Law Firm Services Group | Colliers International
Rents are Still Rising in Most Law Firm Markets, but Vacancy is Turning
In the remainder of this report we focus on the office landscape and 1% in 2017. The largest percentage gains took place in Atlanta,
law firm activity in the 24 North American markets represented by Nashville and San Francisco — all of which grew by more than
Colliers’ Law Firm Services. The focus of this analysis is on each 10%.
metro’s downtown office market, where the majority of law firms
are located. Vacancy trends were mixed in 2017. Vacancy fell in 42% of the 24
markets, remained flat in 16% and rose in 42%.
In 2017, Class A office rents ranged from less than $20 per square
foot in Birmingham to almost $85 per square foot in San Francisco. Average vacancy across the markets surveyed was 11.9% in 2017,
The average rent across the 24 markets is $41.02 per square effectively in line with the U.S. national rate of 12.1%. The lowest
foot, with four markets at or above $60 per square foot: Boston, downtown vacancy, by far, is in Toronto at a mere 2.1%. Eight other
Manhattan, San Francisco and Washington, D.C. Five other markets markets have vacancy rates below 10%, led by Manhattan, San
have rents above the average: Chicago, Houston, Los Angeles, Francisco, Seattle and Vancouver. Downtown Dallas has the highest
Seattle and Toronto. vacancy rate at 23.1%. Two other markets have vacancy of 20% or
more – Houston and Los Angeles.
While the overall pace of rent appreciation is slowing, just over
half of the markets surveyed showed Class A rent growth of above
North American Office Markets | Q4 2017

MARKET CLASS A DOWNTOWN ASKING RENT (1) DOWNTOWN VACANCY RATE (2) MARKET SENTIMENT LAW FIRMS SEEKING NEW SPACE (3)
Atlanta, GA $30.34 12.1% Equal Footing Declining

Birmingham, AL $18.80 10.7% Tenants' Market Expanding
Boston, MA $59.83 10.5% Landlords' Market Static
Chicago, IL $44.63 11.6% Landlords' Market Declining
Dallas, TX $27.12 23.1% Landlords' Market Declining
Denver, CO $35.61 14.1% Landlords' Market Static
Houston, TX $44.37 20.6% Tenants' Market Static
Fairfield County, CT (4) $44.51 17.1% Equal Footing Declining
Long Island, NY (4) $30.46 8.4% Landlords' Market Static
Los Angeles, CA $41.57 20.0% Tenants' Market Static
Manhattan, NY $78.30 6.2% Equal Footing Expanding
Milwaukee, WI $21.95 8.2% Tenants' Market Static
Nashville, TN $33.67 7.7% Equal Footing Expanding
Northern New Jersey (4) $29.98 16.1% Tenants' Market Static
Philadelphia, PA $31.62 10.1% Landlords' Market Static
San Diego, CA $35.76 15.9% Equal Footing Static
San Francisco, CA $84.51 6.9% Landlords' Market Expanding
Seattle, WA $46.50 7.1% Landlords' Market Expanding
South Florida, FL $41.38 10.7% Equal Footing Expanding
Tampa, FL $28.72 11.1% Landlords' Market Static
Toronto, ON (5) $46.70 2.1% Landlords' Market Static
Vancouver, BC (5) $39.50 5.1% Landlords' Market Expanding
Washington, D.C. $60.27 11.8% Tenants' Market Declining
Westchester County, NY (4) $28.29 17.7% Landlords’ Market Expanding
Average of Markets $41.02 11.9%
(1) Where the rent change is between -1.0% 10 1.0% the direction is considered to be flat
(2) Where the vacancy rate change is 30 bps or lower the direction is considered to be flat
(3) Change since Q4 2016
(4) These are suburban markets without a distinct Downtown submarket
(5) Converted to USD
Note: Directional indicators reflect YOY change

Source: Colliers International
Renewals Continue to Dominate Law Firm Leasing Activity
Lease renewals continue to dominate the law firm leasing Five of the top six leases across the markets in 2017 were
landscape as the drive for efficiency and cost control continues. renewals. Sidley Austin LLP – who also accounted for 2016’s
Eight of the 10 largest law firm leases signed in 2017 involved largest renewal – recommitted to 352,000 square feet at 787
tenants choosing to stay in place and renew their existing leases. Seventh Avenue in Manhattan. In the process, they reconfigured
Three of these involved a reduction in the amount of space leased. their space to accommodate an additional headcount of 100 people
within the same footprint.
Looking at the three largest law firm leases signed in each market
in 2017, all but two of the markets included at least one renewal. The largest new lease signed in 2017 was at 2100 Pennsylvania
Renewals accounted for all three of the largest 2017 law firm Avenue, NW in Washington, D.C. where WilmerHale leased
leases in numerous major office markets including Atlanta, Chicago, 288,000 square feet.
Dallas, Houston and Manhattan.
Top 10 Law Firm Leases Signed in 2017

LAW FIRM SF LEASED BUILDING NAME ADDRESS MARKET NEW LEASE OR RENEWAL QUARTER
Sidley Austin LLP 352,112 - 787 7th Ave. Manhattan Renewal Q3

King & Spalding LLP 320,000 1180 Peachtree 1180 Peachtree St. Atlanta Renewal & Contraction Q1
WilmerHale 288,000 - 2100 Pennsylvania Ave. NW Washington, D.C. New Lease Q4
Kramer Levin Naftalis & Frankel LLP 265,638 - 1177 Avenue of the Americas Manhattan Renewal Q1
Wachtell, Lipton, Rosen & Katz 250,762 CBS Building 51 W 52nd St. Manhattan Renewal & Expansion Q4
Mintz, Levin, Cohn, Ferris, Glovsky and
205,000 One Financial Center 1 Financial Center Boston Renewal Q1
Popeo, P.C.
Akin Gump Strauss Hauer & Feld LLP 185,000 - 2001 K St. NW Washington, D.C. New Lease & Contraction Q1
Schiff Hardin LLP 181,000 Willis Tower 223 S Wacker Dr. Chicago Renewal Q2
Eversheds Sutherland LLP 175,700 999 Peachtree 999 Peachtree St. NE Atlanta Renewal & Contraction Q3
Torys LLP 172,000 TD Centre 79 Wellington St. W Toronto Renewal Q3
Only a Quarter of Law Firm Markets are Law Firm Real Estate Strategy
Positioned in Tenants’ Favor The last few years have seen many law firms experiment with
To gain insight into market sentiment and the requirements of how the latest global trends in space design might work for them.
law firms actively seeking space to lease, we polled our Law Firm In North America, we’ve even seen the English/Australian open
Services Group on trends in their markets. floor plan gain traction. As we move forward, we expect to see
North American law firms become more deliberate in finding a
50% of respondents view their market as being positioned in bespoke solution for their own firm based on a strategic workplace
the landlords’ favor, with another 25% reporting that landlords solutions plan rather than experimenting with trends. In this
and tenants are on equal footing. Six markets were identified as competitive world, law firms are having to fight for talent, further
favoring tenants, with Houston, Los Angeles and Washington, D.C. their brand strategy and consider their long-term succession
being the most prominent. strategy. Their office space can have a substantial impact to all of
Office Market Sentiment these and more.
Additionally, global law firms are being more considerate of their

bottom line and this has encouraged firms, especially those coming
out of long-term leases in outdated spaces, to consider being more
efficient with their space. A meaningful reduction in square footage
25%
more than offsets the capital cost of building out new space. Many
markets across North America are experiencing a new wave of
50%
office construction which will provide opportunities to firms to put
their real estate strategy into place.
25%
Tenant’s Market Equal Footing Landlords’ Market
Note: Data as of Q4 2016

In terms of law firms seeking new space, the number of markets

where requirements were viewed as being unchanged accounted
for 33% of survey responses. Markets where requirements were
on the rise accounted for 21% of responses and 46% reported law
firm activity as declining.
Law Firms Seeking New Office Space:
Change Since Q4 2016
21%
46%
33%
Increased Static Declined
Note: YOY change as of Q4 2016

The leading markets with an expanding number of law firm

requirements were Manhattan, San Francisco and Seattle. Meeting
these requirements may prove challenging as these three markets
all have tight vacancy rates. Markets with a falling number of
requirements were led by Atlanta, Chicago and Dallas.
ATLANTA
The Atlanta office market saw further gains in 2017 as vacancy fell and rents increased by
almost $2 per square foot from a year ago. While net absorption was down from 2016’s total,
it still remained firmly in the black at over 800,000 square feet for the year. Encouragingly, the
final quarter of 2017 saw the strongest absorption.
Class A vacancy in Midtown, which is the premier location for law firms in Atlanta, has edged
up to 9.9%. However, this is comfortably below the 13.8% Class A vacancy rate for the metro.
Additionally, Midtown saw the greatest absorption among Atlanta’s urban submarkets, out-
pacing Buckhead by a fair margin, and edging out Downtown slightly.
Law firms in Atlanta continue to reduce their office footprints; seeking to improve the
efficiency of their space and to cater to their younger associates. Some of the city’s largest,
and most notable, law firms signed renewals in 2017 with each of them contracting their Q4 2017 Key Indicators | Atlanta
spaces by multiple floors.
Class A Asking Rent (PSF) $30.34
Downtown Vacancy Rate 12.1%
Number of Law Firms in the Market Declining
Market Sentiment Equal Footing
Leading Law Firm Lease Transactions in 2017 | Atlanta

LAW FIRM SF LEASED PROPERTY NAME ADDRESS NEW LEASE OR RENEWAL QUARTER
King & Spalding LLP 320,000 1180 Peachtree 1180 Peachtree St. NE Renewal & Contraction Q1
Eversheds Sutherland LLP 175,700 999 Peachtree 999 Peachtree St. NE Renewal & Contraction Q3
Nelson Mullins Riley & Scarborough LLP 103,156 201 17th Street 201 17th St. NW Renewal Q2
BIRMINGHAM
The Birmingham office market closed out 2017 with an 11.3% vacancy rate. Class A vacancy
is higher at 14.4%. The 11.5 million square feet CBD submarket posted positive absorption in
2017 driven by tenants leasing Class B space.
Class A vacancy in the CBD stands at 13.8% in sharp contrast to a minimal 3.8% for Class B
buildings. Class A asking rates in the CBD in Q4 2017 were $18.90 per square foot compared
with $22.75 for suburban Class A space. There is no office space under construction in the
CBD.
There are two law large firms currently exploring whether to renew in place or lease new
space. Although the market has significant vacancy, there are limited options for large users.
Q4 2017 Key Indicators | Birmingham
Number of Law Firms in the Market Expanding
Market Sentiment Tenants’ Favor
Leading Law Firm Lease Transactions in 2017 | Birmingham

Confidential 18,185 Regions Harbert Plaza 1901 6th Ave. N New Q4
BOSTON
The Downtown Boston office market saw further improvement in 2017 and has become one
of the most dynamic office markets in the U.S. Average Class A asking rates stand at just shy
of $60 per square foot on par with Washington, D.C. and bettered by only Manhattan and San
Francisco.
Seaport remains the strongest of the downtown Boston submarkets with a 7.6% vacancy rate,
comfortably below the 10.5% market average. Class A vacancy in Seaport is a minimal 2.9%.
Vacancy rates in Back Bay and the Financial District are 12.5% and 11.9% respectively. The
latter is the principal location for law firms in Downtown Boston. Vacancy in the upper floors
of the Financial District’s Class A towers is receding as the rental premium over lower floors
has tightened.
A major positive for the Boston office market is the size of tenant requirements (estimated Q4 2017 Key Indicators | Boston
at around six million square feet) in the market with evidence in early 2018 that they are
translating into signed leases. Class A Asking Rent (PSF) $59.83
Major law firms are still right-sizing their operations as leases expire. But smaller firms are Downtown Vacancy Rate 10.5%
growing and taking more space than they have attorneys to fill it.
Number of Law Firms in the Market Static
Market Sentiment Landlord’s Market
Leading Law Firm Lease Transactions in 2017 | Boston

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. 205,000 One Financial Center 1 Financial Center Renewal Q1
Holland & Knight LLP 105,000 10 Saint James Avenue 10 St James Ave. Renewal Q2
Kirkland & Ellis LLP 60,000 200 Clarendon 200 Clarendon St. New Lease Q4
CHICAGO
Chicago’s Downtown office market held firm in 2017. Vacancy reached a 16-year low in
2016 and stayed virtually flat in 2017 rising by only 30 BPS. Downtown Class A asking rents
rose by $2 per square foot in 2017 with the highest rates found in the West Loop, where
trophy properties can command rents above $60 per square foot. There are numerous firms
currently exploring whether to renew or relocate.
There are signs that vacancy may start to increase in 2018. While there are almost 30 large
blocks of over 100,000 square feet available Downtown, half of which are in the West Loop,
there is an additional 6.5 million square feet under construction.
The delivery of new office towers is set to pause after 151 N. Franklin Street, which is due
to complete in Q2 2018. The 807,000-square-foot development by The John Buck Company
Q4 2017 Key Indicators | Chicago
will be anchored by CNA Insurance and Hinshaw Culbertson and is only 53% pre-leased. It is
Class A Asking Rent (PSF) $44.63 seeking rents of around $60 per square foot once the building is fully stabilized.
Downtown Vacancy Rate 11.6% There is a two-year gap before the next new high-rise tower is scheduled to deliver in 2020,
providing 1.45 million square feet at the Hughes Tower, 110 N. Wacker Drive in the West Loop.
Number of Law Firms in the Market Declining Bank of America has pre-leased 500,000 square feet to anchor the new building.
Market Sentiment Landlord’s Market In terms of law firm activity in Chicago, 2017 was a relatively slow year with no firms seeking
over 100,000 square feet. The five largest transactions completed in 2017 all were renewals
Source: Colliers International for either the same space or less.
Leading Law Firm Lease Transactions in 2017 | Chicago

LAW FIRM SF LEASED ADDRESS NEW LEASE OR RENEWAL QUARTER
Schiff Hardin LLP 181,000 223 S Wacker Dr. Renewal Q2
Barack Ferrazzano Kirschbaum & Nagelberg LLP 99,756 200 W Madison St. Renewal Q2
Barnes & Thornburg LLP 95,475 1 N Wacker Dr. Renewal Q4
DALLAS
Downtown Dallas office vacancy increased further in 2017 and is now the second highest
among the markets covered by this report. While net absorption was strong across the
metro at over 4.5 million square feet this was dominated by large move-ins to new corporate
campuses in Far North Dallas. Downtown Dallas saw negative absorption of 200,000 square
feet in 2017.
Rents continued to climb slightly in Downtown Dallas, with average Class A rents just
over $27 per square foot all-in. The Arts District, the closest part of the CBD to Uptown,
commands the highest rates with new trophy properties topping $50 per square foot gross.
The more prestigious and close-in submarkets of Preston Center and Uptown/Turtle Creek
are seeing rents above $50 per square foot and there is speculation that they may break
through $60 per square foot on new trophy space. Despite gross rents Downtown that are
effectively equal to net rents in these submarkets, Downtown Dallas has yet to see any Q4 2017 Key Indicators | Dallas
significant leasing traction. Class A Asking Rent (PSF) $27.12
National law firms are continuing the trend of expanding to Dallas and acquiring local firms
to establish an immediate presence. Recruiting and retention of talent is the primary focus of
every firm. Number of Law Firms in the Market Declining
Leading Law Firm Lease Transactions in 2017 | Dallas

Thompson & Knight LLP 160,000 One Arts Plaza 1722 Routh St. Renewal Q1
Baker Botts LLP 104,000 Trammell Crow Center 2001 Ross Ave. Renewal Q2
Vinson & Elkins LLP 110,000 Trammell Crow Center 2001 Ross Ave. Renewal Q2
DENVER
Downtown Denver’s key indicators saw modest change in 2017. Class A asking rents
increased marginally while the vacancy rate moved up by 130 BPS. Most of net absorption
in 2017 occurred in the Downtown and Southeast submarkets and tenant demand remains
skewed toward the best quality space.
The metro Denver office market added over 2.5 million square feet of inventory in 2017,
three times the total seen in 2016. Current construction activity totals over 4 million
square feet. The CBD is set for delivery of its largest office project in over 30 years at the
660,000-square-foot 1144 Fifteenth.
The majority of Denver law firms took advantage of the depressed market early in the decade
and secured new long-term leases. Hence there has been reduced leasing activity over the
Q4 2017 Key Indicators | Denver last couple of years which is expected to continue.
Leading Law Firm Lease Transactions in 2017 | Denver

Norton Rose Fulbright 18,666 17th Street Plaza 1225 17th St. New Lease Q2
Haynes and Boone, LLP 13,616 Independence Plaza 1050 17th St. New Lease (Sublease) Q2
McElroy, Deutsch, Mulvaney & Carpenter, LLP 12,080 Quebec Corporate Plaza 5600 S Quebec St. Renewal Q2
FAIRFIELD COUNTY, CT
The Fairfield County office market took a small step backwards in 2017. The overall vacancy
rate rose 100 BPS to 17.7% by Q4 2017 from 16.7% last year. Asking lease rates slowly
climbed 1.1% from $35.71 per square foot to $36.09 per square foot, as higher quality space
was brought back to the market.
Occupiers within the legal field were relatively quiet in 2017, with an average deal size of just
over 4,000 square feet. Though velocity was limited, there continues to be a clear preference
for Class A space, with 75% of leasing activity occurring in higher quality properties.
Q4 2017 Key Indicators | Fairfield County

Leading Law Firm Lease Transactions in 2017 | Fairfield County

Chipman, Mazzucco, Land & Pennarola, LLC 7,604 44 Old Ridgebury Rd. New Q3
Shipman & Goodwin LLP 6,050 289 Greenwich Ave. Renewal Q3
Connecticut Legal Services, Inc. 4,806 1000 Lafayette Blvd. New Q2
HOUSTON
The Downtown Houston office market remains stubbornly challenged. Vacancy moved back
above 20% in 2017, while Class A asking rents showed no growth. While not yet sufficient
to drive expansion, the rise in crude oil prices (currently at around $70 per barrel) is an
encouraging sign.
Large blocks of sublease space vacated by energy companies still dominate the market. A key
unknown is how owners will reposition this space with several leases set to expire over the
next two to three years. This space is skewed toward secondary Class B properties built in
the 1980s. If it can be repositioned at attractive rental levels there could be an uplift for the
Downtown market.
Law firm activity in Houston is healthy, with an increasing number of acquisitions of local
Q4 2017 Key Indicators | Houston
firms by newcomers to the Houston market.
Market Sentiment Tenant’s Market
Leading Law Firm Lease Transactions in 2017| Houston

Porter Hedges LLP 105,000 1000 Main 1000 Main St. Renewal Q2
Morgan, Lewis & Bockius LLP 89,500 Wells Fargo Plaza 1000 Louisiana St. Renewal Q2
Jackson Walker LLP 77,015 5 Houston Center 1401 McKinney St. Renewal Q4
LONG ISLAND
The Downtown Long Island office market held firm in 2017 with Class A rents holding steady
and a 20 BPS reduction in the vacancy rate to 8.4%. Similar trends were seen in the overall
market.
Within the Long Island market, Nassau County continues to outperform Suffolk Country.
Vacancy in Nassau is still falling and at 7% and stands at 170 BPS below the Suffolk level.
Nassau accounted for 47% of the total Long Island net absorption in 2017. Leasing activity
was strongest in Western Nassau but turned negative in Central Nassau.
Law firms in Long Island continue to focus on efficiency and productivity. Further mergers
and acquisitions are anticipated.
Q4 2016 Key Indicators | Long Island
Market Sentiment Landlords’ Market
Leading Law Firm Lease Transactions in 2016 | Long Island

LAW FIRM SF LEASED ADDRESS QUARTER
Harris Beach, PLLC 10,000 Mitchell Field, NY Q2
Barnes, Catterson, LoFrumento & Barnes, LLP 5,000 Melville, NY Q3
LOS ANGELES
As predicted in last year’s report, the Greater Los Angeles office market reached equilibrium
in 2017. Vacancy rose by 30 BPS and rents grew by 2%. There is 5.1 million square feet of
new office space under construction focused primarily on Downtown and West Los Angeles.
Downtown Los Angeles is facing challenges from a combination of an elevated vacancy
rate, which remains stubbornly high at 20%, and an onset of new space under construction.
There is 1.4 million square feet of new office space underway in Downtown Los Angeles
in five projects, four of which should deliver in 2018, led by Waterbridge Capital LLC’s
500,000-square-foot project at 801 S. Broadway.
Some residual right-sizing remains, although most of Los Angeles’ law firms have renewed
or relocated out of larger footprints signed in the past decade. The focus going forward
Q4 2017 Key Indicators | Los Angeles will be on modernizing space by blending traditional law firm appeal with amenities and an
atmosphere commensurate with the market’s other main industries —media and technology.
Market Sentiment Tenants’ Market
Leading Law Firm Lease Transactions in 2017 | Los Angeles

Mitchell Silberberg & Knupp LLP 62,482 Century Plaza Towers 2049 Century Park E New Lease Q4
Holland & Knight LLP 41,664 400 South Hope 400 S Hope St. Renewal Q3
Foley & Lardner LLP 36,859 City National Plaza South 515 S Flower St. Renewal & Downsize Q2
MANHATTAN
At 37.1 million square feet, Manhattan leasing volume in 2017 was the second highest since
2003, increasing by 11% year over year. Vacancy held firm at 6.2%, the third lowest of the
markets covered in this report. Average Class A asking rates also held steady at $78.30 per
square foot, second only to San Francisco.
Vacancy rates are firmly in single digits across all of Manhattan, ranging from 1.7% in Hudson
Yards/Manhattan West to 8.9% in the World Trade Center. The shortage of large blocks of
available space persists. Only six contiguous blocks of 250,000 square feet or above are
immediately available in Manhattan, half the total available at the beginning of 2017.
Construction deliveries in 2018 are set to be the highest level in Manhattan in almost 30
years. A further 6.9 million square feet is set to arrive in the remainder of 2018, of which 2.9
million square feet has yet to be leased. The bulk of the available space is in 3 World Trade Q4 2017 Key Indicators | Manhattan
Center. With a clear tenant preference for premium space, this space is not expected to linger Class A Asking Rent (PSF) $78.30
on the market. The larger question is what will be required to fuel an up-tick in leasing activity
to fill the space left behind? Downtown Vacancy Rate 6.2%
In 2017, Manhattan law firm leasing was up 16%, year over year, to 2.7 million square feet, Number of Law Firms in the Market Expanding
the highest volume since 2014. Seven leases of more than 100,000 square feet were signed
in 2017, compared to five in 2016. The focus is on workplace strategies, including fitting more Market Sentiment Equal Footing
lawyers in less space. Retaining and attracting talent is critical in today’s competitive market.
Leading Law Firm Lease Transactions in 2017 | Manhattan

Sidley Austin LLP 352,112 - 787 7th Ave. Renewal Q3
Kramer Levin Naftalis & Frankel LLP 265,638 - 1177 Avenue of the Americas Renewal Q1
Wachtell, Lipton, Rosen & Katz 250,762 CBS Building 51 W 52nd St. Renewal & Expansion Q4
MILWAUKEE
The Milwaukee office market posted solid performance in 2017. The metro office vacancy
rate held steady while vacancy downtown fell from 8.6% to 8.2%. Class A asking rents
moved up to $19.75 per square foot for the overall market and $21.95 per square foot
downtown.
Downtown Milwaukee is at the forefront of market activity. Net absorption in the 19.9-million-
square-foot Downtown market totaled 1.1 million square feet in 2017, out of a metro total of
1.6 million square feet. Downtown is also dominating construction activity. Northwestern
Mutual’s 1.1 million square feet downtown headquarters was completed in Q3 2017 and there
is 620,000 square feet of new space underway downtown in three projects.
The bulk of law firm growth in the Milwaukee market has occurred through mergers and
Q4 2017 Key Indicators | Hartford acquisitions by both local and national firms. While there is a drive for better space by
moving to a new building or development, space efficiency is a key consideration to contain
occupancy costs.
Leading Law Firm Lease Transactions in 2017 | Hartford

Reinhart Boerner Van Deuren s.c. 89,580 1000 North Water 1000 N Water St. Renewal & Reduction Q2
Michael Best & Friedrich LLP 59,000 BMO Tower 790 N Water St. New Lease (Relocation) Q3
Michael Best & Friedrich LLP 28,669 Two Riverwood Place N19W24133 Riverwood Dr. Renewal Q3
NASHVILLE
Nashville is establishing itself as an upper-tier secondary market and was one of the
strongest performing U.S. office markets in 2017. Downtown Nashville led all markets in 2017
in terms of absorption when expressed as a percentage of inventory. Absorption equaled
8.3% of inventory compared with a meager 0.4% for downtown markets across the U.S.
overall. In addition, Downtown Class A rent growth was the greatest of the markets covered
in this report at 11.6%.
Nashville’s strong economic growth, popularity with expanding and relocating companies,
steady population increases, educated work force and reputation as a national hub for the
creative class have all lent support to vibrant demand for office space. According to data from
the Nashville Area Chamber of Commerce, Nashville ranked third nationally for job growth
in 2017. This marks the metro’s sixth consecutive year within the top 10. Competitive rental Q4 2017 Key Indicators | Nashville
rates, year-end absorption totaling over 1.5 million square feet and record new supply in 2017
(now 86% leased) have collectively paved the way for a strong 2018. Class A Asking Rent (PSF) $33.67
Law firms remain active in the Nashville market. Most law firms that have relocated in the Downtown Vacancy Rate 7.7%
last two years have moved into new construction and firms actively looking to relocate
Leading Law Firm Lease Transactions in 2017 | Nashville

Bradley Arant Boult Cummings LLP 105,747 Roundabout Plaza 1600 Division St. Renewal Q3
Lewis, Thomason, King, Krieg, & Waldrop P.C. 27,690 Fifth Third Center 424 Church St. Expansion Q4
Lieff Cabraser Heimann & Bernstein, LLP 8,392 - 222 2nd Ave. S New Q2
NORTHERN NEW JERSEY

While the Northern New Jersey office market has shown signs of incremental improvement
in 2017, corporate relocations and consolidations continued to inhibit sustained growth.
A slowdown in leasing activity together with large new availabilities resulted in negative
absorption for the year. However, the adaptive reuse of older office product had a positive
effect on the vacancy rate, which improved by 80 basis points to 16.1% year over year.
Outside of Newark and the Hudson Waterfront, Northern New Jersey is predominantly
suburban in nature, with the other principal concentrations of office inventory in Morristown
and Parsippany. Newark continues to out-pace the overall market, with an overall vacancy
rate of 14.9% and an average asking rent of $30.47 per square foot — 13.2% higher than the
overall market. Vacancy in both Morristown and Parsippany is elevated and above the overall
Q4 2017 Key Indicators | Northern New Jersey market level.
Class A Asking Rent (PSF) $29.98 Refurbished, older office buildings are attracting law firms seeking a more creative
workspace.
Market Sentiment Tenant’s Market
Leading Law Firm Lease Transactions in 2017 | Northern New Jersey

Gibbons P.C. 111,000 One Gateway Center Newark, NJ Renewal Q2
Brach Eichler LLC 45,000 - 101 Eisenhower Pkwy. Renewal & Expansion Q3
Archer & Greiner P.C. 31,000 - 21 Main St. Renewal Q2
PHILADELPHIA
After falling into single digits in 2016, vacancy in the Philadelphia central business district
(CBD) has inched back up to 10.1%. Class A asking rates are holding steady at approximately
$31.60 per square foot. CBD vacancy is the lowest in the region and comfortably below the
market average of 11.9%.
Looking across all office occupier sectors, four of the region’s largest leases signed in 2017
took place in the CBD. Comcast remains a dominant player both renewing and expanding its
footprint at 1717 Arch Street to 300,000 square feet.
There are fewer large law firms looking for space, but mid-range, full-floor firms have been
active. Firms are continuing to reduce their office footprint by achieving space efficiencies,
more consistent office standards and technology investment. Q4 2017 Key Indicators | Philadelphia
Leading Law Firm Lease Transactions in 2017 | Philadelphia

BakerTilly Virchow Krause, LLP 49,394 One Liberty Place 1650 Market St. Renewal Q4
Tierney 31,214 - 1700 Market St. New Lease Q1
Simon & Simon, PC 30,000 - 1818 Market St. New Lease Q4
SAN DIEGO
The San Diego County Office Market remained steady in 2017. Downtown Class A office
buildings are achieving all-time high asking rates. Downtown landlords are investing more
money in renovating their office projects and adding amenities to attract higher rent-paying
tenants. New high-profile office projects will break ground in 2018 as vacancy continues to
improve. The 1.1-million-square-foot Manchester Pacific Gateway, located downtown on the
San Diego waterfront, is set to break ground in mid-2018.
Refurbishment of many older, obsolete office buildings has attracted law firms due to new
amenities and the provision of a live-work-play environment. Downtown rents are 30% lower
than in UTC, however the parking costs for Downtown continue to increase.
Shifting demographics and advances in technology are causing law firms to rethink
Q4 2017 Key Indicators | San Diego
their office space requirements. Although it has been a slow process, larger law firms
Class A Asking Rent (PSF) $35.76 are beginning to embrace shrinking their footprint by adopting more open layouts and
outsourcing back-office functions, while the smaller firms are already doing so along with
Vacancy Rate 15.9% working remotely.
Leading Law Firm Lease Transactions in 2017 | San Diego

Procopio, Cory, Hargreaves & Savitch LLP 40,325 One Del Mar 12544 High Bluff Dr. Renewal & Expansion Q3
Neil, Dymott, Frank, McFall, Trexler, McCabe & Hudson 17,463 110 Plaza 110 W A St. New Lease Q3
Andrews Lagasse Branch & Bell LLP 13,059 Pacifica Tower 4365 Executive Dr. Renewal & Expansion Q4
SAN FRANCISCO
The San Francisco Bay Area office market remains one of the strongest in the U.S.,
commanding the highest rents among the markets in this report at $84.50 per square foot
and the fifth-lowest vacancy rate. Strong leasing by the tech sector is showing no signs of
abating.
One sign of the market’s strength is that its high rents continue to be underpinned by actual
lease transactions rather than new space entering the market with higher asking rates. Rents
in San Francisco’s core submarkets of the Financial District and SOMA are holding up at
approximately $80 per square foot. The rental delta between Class A and Class B office space
is relatively small, reflecting strong demand and low availability.
The dominance of the tech sector cannot be overstated. Dropbox signed the largest lease in
Q4 2017 Key Indicators | San Francisco
San Francisco market history in Q4 2017, taking 737,000 square feet at 100 Owens Street.
Office space under construction is predominantly pre-leased, further reflecting market Class A Asking Rent (PSF) $84.51
strength.
Law firms remain active in San Francisco with two national firms seeking a combined
150,000 feet of new space. Regional firms are also looking to expand. Number of Law Firms in the Market Expanding
Leading Law Firm Lease Transactions in 2017 | San Francisco

Covington & Burling LLP 77,667 Salesforce Tower 415 Mission St. New Lease Q1
Gibson, Dunn & Crutcher LLP 70,789 555 Mission Street 555 Mission St. Renewal Q4
San Francisco City Attorney's Office 69,400 Fox Plaza 1390 Market St. Renewal Q2
SEATTLE
The Seattle office market continues to post strong performance. Amazon remains at the
center of the story, recently moving into 528,000 square feet across two properties in the
Lake Union submarket, while pre-leasing the entire 720,000-square-foot Rainier Tower II in
the CBD.
Seattle rents are still on the rise. Average asking rents stand at $40.25 per square foot.
The highest Class A asking rates are in the CBD ($46.50 per square foot) and Lake Union
($41.30 per square foot). Steady pre-leasing of new space is driving rent growth and keeping
availability tight.
Construction activity remains elevated with 5.2 million square feet of office space
Q4 2017 Key Indicators | Seattle underway across the Seattle office market, 71% of which is pre-leased. This development
is concentrated in three submarkets: Belltown/Denny Regrade (1.2 million square feet and
Class A Asking Rent (PSF) $46.50 100% pre-leased), Lake Union (2.2 million square feet and 66% pre-leased) and the Seattle
CBD (1.4 million square feet and 52% pre-leased). Given strong, sustained tenant demand in
Downtown Vacancy Rate 7.1% Seattle and the continued growth of the tech sector, we do not perceive any supply-side risk.
Number of Law Firms in the Market Expanding Law firms are becoming more efficient and thus taking less space than they needed 10 years
ago. This includes fewer paralegal stations and consistent private office sizes.
Leading Law Firm Lease Transactions in 2017 | Seattle

Dorsey & Whitney LLP 54,088 Columbia Center 701 5th Ave. Extension Q3
Hagens Berman Sobol Shapiro LLP 31,081 Russell Investments Center 1301 2nd Ave. New Lease Q4
Harrigan Leyh Farmer & Thomsen LLP 13,874 Wells Fargo Center 999 3rd Ave. New Lease Q2
SOUTH FLORIDA
The office market in Miami-Dade County stabilized in 2017 with vacancy running at close
to 9% throughout the year. Class A rental rates stand at $41 per square foot in line with the
average for South Florida as a whole.
The Broward County office market posted solid performance with vacancy falling by a further
130 BPS to 9%. Net absorption exceeded 1 million square feet for a second successive year.
Construction activity remains elevated with almost 700,000 square feet delivered in 2017
with a further half-million square feet still underway.
While demand exists, the shortage of both labor and available quality space are notable
challenges for law firms seeking to expand.
Q4 2017 Key Indicators | South Florida
Leading Law Firm Lease Transactions in 2017 | South Florida

DLA Piper LLP (US) 39,759 Southeast Financial Center 200 S Biscayne Blvd. Renewal Q1
Podhurst Orseck, P.A. 36,102 SunTrust International Center 1 SE 3rd Ave. New Q1
Becker & Poliakoff, P.A. 27,506 1 E Broward 1 E Broward Blvd. Renewal Q3
TAMPA
Vacancy in the Tampa CBD fell by a robust 230 BPS in 2017 to 11.2% while rents held firm at
$28.70 per square foot, which is in line with the overall Tampa Bay average. Rents in the St.
Petersburg CBD are at a similar level, but vacancy is the lowest in Tampa Bay at 7.8%.
Net absorption in 2017 was concentrated in the suburbs and in Westshore in particular.
However, the Tampa CBD is relatively small with total inventory of 6.8 million square feet
compared to 14.5 million square feet in Westshore.
Law firm leasing in Tampa is subdued. National and regional firms are primarily renewing
in place. No national or regional firms have opened new offices in Tampa for the past few
years.
Q4 2017 Key Indicators | Tampa
Leading Law Firm Lease Transactions in 2017 | Tampa

Phelps Dunbar LLC 30,000 Wells Fargo Center 100 Ashley Dr. S Renewal Q1
Lewis Brisbois Bisgaard & Smith LLP 20,000 SunTrust Financial Centre 401 E Jackson St. New Lease/Relocation Q1
Maney | Gordon | Zeller, P.A. 14,000 Bank of America Plaza 101 E Kennedy Blvd. Renewal Q2
TORONTO
Toronto remains one of, if not the, strongest markets covered in our report. The vacancy rate
for the Greater Toronto Area (GTA) has fallen below 5% and availability is at a 17-year low.
While suburban markets are improving, performance is being driven by across-the-board
demand for space Downtown, which is virtually at full occupancy with a mere 2.1% vacancy
rate. As tenants move in to AAA-class buildings, the space left behind is quickly backfilled,
creating a shortage of availabilities for medium to large tenants with upcoming lease
expirations.
This lack of high-end space is fueling growth in Class B rents which rose by 6.5% in 2017
compared to 1.9% in AAA-class buildings. While financial and insurance firms accounted for
45% of space requirements in the market and law firms account for 5%, technology was the
Q4 2017 Key Indicators | Toronto
leading industry occupying space over the past year.
Extremely low vacancy, coupled with spiking rents and limited incentives, is causing law firms Class A Asking Rent (PSF) $46.71
to re-think workplace efficiency from both cost and culture perspectives. Downtown Vacancy Rate 2.1%
Leading Law Firm Lease Transactions in 2017 | Toronto

Torys LLP 172,000 TD Centre 79 Wellington St. W Renewal Q3
Norton Rose Fulbright 98,000 TD Centre 222 Bay St. New Lease Q2
Baker McKenzie LLP 64,000 Brookfield Place 181 Bay St. Renewal & Expansion Q1
VANCOUVER
The Vancouver office market continues to go from strength to strength. The Downtown
vacancy rate sits at a tight 5.2% — the second lowest among all the markets and bettered
only by Toronto. Class A rents posted further gains in 2017 and closed the year at $39.50 per
square foot.
Demand remains strong with 2.2 million square feet of known tenant requirements across
the Greater Vancouver market. Law firms account for 5% of this total. Construction activity
is modest. The 235,000-square-foot Exchange Tower delivered in the Downtown core in late
2017 at 60% pre-leased. Vancouver Center II is the only sizable speculative project on the
horizon and is not expected to deliver until 2021.
Availability is tight and the next wave of construction will not be arriving until 2021 to 2023.
Q4 2017 Key Indicators | Vancouver As a result, there should be a race to be the first in these new buildings to accommodate
Class A Asking Rent (PSF) $39.47 expansion. In the interim, the redesign of existing law firm space is set to continue.
Leading Law Firm Lease Transactions in 2017 | Vancouver

Lawson Lundell LLP 70,000 Cathedral Place 925 W Georgia St. Renewal Q2
Harris & Company LLP 30,000 Bentall 5 550 Burrard St. Renewal Q4
Gowling WLG 10,000 Bentall 5 550 Burrard St. Expansion Q4
WASHINGTON, D.C.
The Washington, D.C. office market (the District) posted mixed performance in 2017. Rents
continued to rise but vacancy is on the increase. Class A asking rates stand at $60.25 per
square foot — the third-highest among the markets addressed by this report.
While the Federal Government and legal sector signs many of the large-scale leases, most
transactions involve an element of contraction and downsizing. Construction activity remains
elevated and rising with 7 million square feet underway in the District, which is the highest
total seen since Q4 2004. There is 4.5 million square feet scheduled for delivery in 2018,
which is 41% pre-leased.
Despite being one of the largest demand drivers in the District, large law firms have
continued to reduce their space requirements. There has been growth in smaller law firm
Q4 2017 Key Indicators | Washington, D.C.
footprints as they start to outgrow their efficient space.
Leading Law Firm Lease Transactions in 2017 | Washington, D.C.

WilmerHale 288,000 2100 Pennsylvania Ave. NW New Lease Q4
Akin Gump Strauss Hauer & Feld LLP 185,000 2001 K St. NW New Lease & Contraction Q1
K&L Gates LLP 126,910 1601 K St. NW Renewal & Contraction Q4
WESTCHESTER COUNTY, NY
Overall, Westchester’s office market was steady in 2017, aside from one significant event.
After falling to 15.4% in Q1 2017, the vacancy rate rose 290 BPS in the second quarter, after
IBM officially marketed their massive 1.1 million square feet former headquarters in Northern
Westchester. Vacancy has declined since, falling to 17.7%. The average asking lease rate
has remained essentially flat, falling just 1.4% since last year to $26.75 per square foot. The
weakening in suburban markets is offset by gains in the White Plains CBD.
This desire to be in a more urban environment was reflected by law firms as well. In 2017,
50% of the leasing activity completed by legal firms was signed in the White Plains CBD
submarket, while almost non-existent in Northern Westchester.
Q4 2017 Key Indicators | Westchester County

Leading Law Firm Lease Transactions in 2017 | Westchester County

Milber Makris Plousadis & Seiden, LLP 29,573 709 Westchester Ave. New Q2
Greenberg Traurig, LLP 26,356 445 Hamilton Ave. Renewal Q2
Goldberg Segalla 21,085 1-11 Martine Ave. Renewal & Expansion Q2
LAW FIRM SERVICES GROUP CONTACTS RESEARCH CONTACT
DANIEL ARENDS STEPHEN NEWBOLD
Principal, National Director,
Office Advisory Group Office Research | USA
+1 312 612 5908 +1 202 534 3630
daniel.arends@colliers.com stephen.newbold@colliers.com
COLIN SCARLETT
Executive Vice President,
Personal Real Estate Corporation
+1 604 661 0879
colin.scarlett@colliers.com
Copyright © 2018 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.

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LAW FIRM SERVICES

Law Firm Real Estate Strategy: How to

>> Benefits of Leasing Premium Space: When the opportunity

Implementation of such a strategy is, in part, dependent upon the

Source: Colliers International Source: Colliers International

Rents Hold Firm - Growth is Mostly Over

>> Average Class A rents stand at $46.40 per square foot in

North American Office Markets | Q4 2017

Atlanta, GA $30.34 12.1% Equal Footing Declining

Note: Directional indicators reflect YOY change

Top 10 Law Firm Leases Signed in 2017

Sidley Austin LLP 352,112 - 787 7th Ave. Manhattan Renewal Q3

Source: Colliers International

Additionally, global law firms are being more considerate of their

Tenant’s Market Equal Footing Landlords’ Market

Note: Data as of Q4 2016

In terms of law firms seeking new space, the number of markets

Increased Static Declined

Note: YOY change as of Q4 2016

The leading markets with an expanding number of law firm

Downtown Vacancy Rate 12.1%

Number of Law Firms in the Market Declining

Market Sentiment Equal Footing

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Atlanta

Source: Colliers International

Downtown Vacancy Rate 10.7%

Number of Law Firms in the Market Expanding

Market Sentiment Tenants’ Favor

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Birmingham

Confidential 18,185 Regions Harbert Plaza 1901 6th Ave. N New Q4

Source: Colliers International

Market Sentiment Landlord’s Market

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Boston

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Chicago

Schiff Hardin LLP 181,000 223 S Wacker Dr. Renewal Q2

Barnes & Thornburg LLP 95,475 1 N Wacker Dr. Renewal Q4

Source: Colliers International

Market Sentiment Landlord’s Market

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Dallas

Source: Colliers International

Downtown Vacancy Rate 14.1%

Number of Law Firms in the Market Static

Market Sentiment Landlord’s Market

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Denver

Source: Colliers International

Q4 2017 Key Indicators | Fairfield County

Downtown Vacancy Rate 17.1%

Number of Law Firms in the Market Declining

Market Sentiment Equal Footing

Source: Colliers International

Leading Law Firm Lease Transactions in 2017 | Fairfield County

Shipman & Goodwin LLP 6,050 289 Greenwich Ave. Renewal Q3

Connecticut Legal Services, Inc. 4,806 1000 Lafayette Blvd. New Q2

Source: Colliers International

Downtown Vacancy Rate 20.6%

Number of Law Firms in the Market Static