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London - Moscow

Workplace transformation set to have major impact on law firms

Jones Lang LaSalle analysis of law firm real estate trends across Europe, Middle East & Africa


London - Moscow, 1 December 2011 – A new study of the law firm sector in eleven major cities across Europe, Middle East and Africa (EMEA) has been released today by leading global real estate consultant Jones Lang LaSalle.

The Jones Lang LaSalle research – the first EMEA-wide report on the legal sector since 2008 – reveals that conditions are highly variable within the real estate markets at the core of law firm’s real estate portfolios. A number of markets, including Moscow, Milan and Warsaw, have seen rental cost escalation in 2011 driven by the diminishing availability of high quality space options, while others present good opportunities for law firms to enhance their position.

As the economic outlook remains uncertain, this means law firms will need to adopt a forensic approach to the management of their real estate portfolio. This will ensure that assets are optimised and that firms outperform their direct competitors through lowered costs and increased productivity. Whilst the traditional focus on prime locations and trophy buildings will continue, it will also be accompanied by a new emphasis on transformation, workplace productivity and space efficiency.

Rupert Perkins, Head of Law firm Group, EMEA at Jones Lang LaSalle said: “UK law firms are shaking up the traditional legal workplace. With rapidly changing ways of working driven by the younger generations, the old partner offices are being torn down. Alternative workplace strategies and better space utilisation will allow for these firms to meet the various needs of their talent by providing a variety of work spaces.”

Whether an individual works autonomously in a single office, at a client’s office, or from home, or whether an individual works collaboratively in an open workstation. The pressure on law firms to meet these challenges and reconfigure their real estate is only likely to increase in these uncertain economic times.

The Jones Lang LaSalle report indicates that rental prices for law firms have been stable or fallen in eight of the eleven major legal markets in 2011, however prices have continued to rise in Moscow, Milan and Warsaw due to a shortage of quality supply.

Activity from law firms in the Moscow market has increased significantly since early 2010, with major firms including Baker McKenzie and Hogan Lovells returning to the market and several significant transactions completed. Before this period, during the global financial crisis, many law firms in Moscow had to restructure real estate holdings significantly, and much of the growth that had been seen pre-crisis was halted with firms forced to downsize operations.

Kate McMurtrie, Head of International Client Services, Corporate Solutions Group, Jones Lang LaSalle, Russia & CIS, commented: “Headline rents in Moscow fell markedly during the crisis, however limited prime product in the CBD, has meant that the cost of prime properties has been growing quickly over recent quarters. A number of firms were able to lock in at relatively low rents in 2010 but competition for space has increased in the first half of 2011. Some law firms and a number of other international occupiers are now looking at pre-lets as prime options become more limited.”

A tight supply environment for prime buildings in core central Moscow is likely to mean rents will continue to face upward pressure in the short term, and recent planning restrictions are likely to keep new development in central Moscow muted over the medium term.

According to Jones Lang LaSalle research, 3% of office market in Moscow is occupied by law firms against 7% in London City. More than 5,000 sq m is occupied by 4 law firms in Moscow (48 in London City and 59 in Paris).

Top 3 opportunities for law firm in Moscow:

• Construction activity in Moscow City is re-activated and this will provide more choice for law firms in the future.

• Construction of a new high quality project at Belorusskaya Square will provide an additional 64,000 sq m of new premises in 2013 in this new business district that has successfully attracted a number of major auditing, legal, and investment banking tenants.

• Although the mid-term forecast is for rental growth in Prime districts, such growth is not anticipated to be as volatile as in 2007, when prime asking rates rose to USD 1200-1500+ per sq m p.a.

Rupert Perkins continued: “As you would expect, at a country - specific level, there are a myriad of issues affecting law firms. For example, in London, interest in taking new office space has increased, however we have yet to see this translate into transactions. Overall, take-up in London is 50% below levels for the equivalent period of 2010. There is also a growing trend towards more cost-efficient outsourcing of back office functions.”

The Jones Lang LaSalle research also indicates that emerging market firms are beginning to expand their operations into Europe, with China’s second largest law firm, Yingke, setting up operations in Hungary and Italy and poised to open a European HQ in London.

The report contains a detailed breakdown of factors affecting law firms in ten major cities, analysing office uptake, average prices, law firm concentration and composition, major deals and the challenges firms face when dealing with their real estate portfolios.

For editor: Full version of the report available on request


About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.9 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg and Kiev. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010 and 2011 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.For further information, please visit our web site www.joneslanglasalle.ru