The Legal Services Sector: Central London

Indeed, our monitor of Central London law firm activity over the past year also clearly shows strategic expansion activity. This bodes well for the future contribution of the legal services sector to Central London’s occupational markets.  There are a number of themes at work: 

US law firms focused on high value work are in expansion mode

US law firms at the higher end of the market are performing particularly well in London. According to Am Law, the number of American Law firms with an office in London has increased by 34 per cent since 2000. 

One such firm is Sidley Austin. Sidley Austin (advised by Knight Frank) took a 100,000 sq ft pre-let at 70 St Mary Axe, EC3 in Q1 2018.

The move will accommodate the continuing expansion of Sidley’s London practice. The firm reported a 14 per cent increase in London revenue over the course of 2017. Separately, Paul Hastings LLP signed a pre-let in March 2018 for a new London office at 100 Bishopsgate after reporting a 28 per cent revenue growth in city turnover.

Another growing US law firm is Kirkland & Ellis, where London office revenue grew by almost 50% in 2017.  In fact, 10% of its lawyers are now based in London, making it the law firm’s third largest office. In response, Kirkland & Ellis has been increasing the amount of space they occupy at 30 St Mary Axe, EC3.  

New entrants creating new demand

Legal service occupiers in Central London are becoming more diverse, with new market entrants opening offices or taking expansion space at the smaller end of the market.

Approximately a quarter of alternative business structures formed in the past year have registered offices in London. This trend is being driven by reduced barriers to entry through the application of technology and client-led demand for new offerings as well as lawyers branching out and creating their own practices.  

Calibrate Law was granted a license in June 2018, with offices in Gresham Street, EC2 the firm offers a mixture of legal and non-legal services. 

Whilst still at an embryonic stage, London is emerging as a centre for LawTech. Examples of leading LawTech companies in London include RAVN, based at 104 Clifton Street, EC2, Luminance, based at 1-3 Strand, WC2 and ThoughtRiver based at 25 Old Broad Street, EC2. 

Not all established law firms are in contraction mode

Bucking the trend of shrinking in London, a handful of established UK law firms expanded their footprint. Memery Crystal acquired 28,000 sq ft at 165 Fleet Street, EC4.

The firm, which is best known for its work with the AIM sector, reported an annual increase in turnover of 21.4 per cent in 2016 – a rate which contributed to the firm outgrowing its previous office. The new space will provide a modern environment for staff and clients. 

Future gazing

We believe expansion-led demand from the legal services sector will come from a select number of US and UK law firms that are growing in the City.

In particular, US West Coast firms are targeting growth in the UK. The recent talk of a merger between Allen & Overy and O’Melveny underlines this point. 

As referenced in our London Report a driver of growth could be Brexit.  Whilst acknowledging that law firms could face Brexit related challenges, it could also be a source of new demand.

As companies seek guidance and assistance in preparing for Brexit, demand for legal services will inevitably grow; in fact, there is also likely to be a considerable ongoing need for legal services as firms navigate the post-Brexit environment. 

London is the perfect place for LawTech to flourish given the city’s strengths in both legal services and technology and a strong track-record of progressive regulation and available capital.  

Indeed, a recent report on London’s AI market found that London’s legal AI supplier base is 70 per cent the size of the Bay Area and ahead of New York and Toronto.

In addition, the British Government is investing in supporting LawTech with measures including a Government-backed industry-led delivery panel to “boost new legal technologies”. 

This will create new entrants who require office space. It will also create demand for collaborative space where law firms and start-ups can come together, as well as potential “third spaces” where established law firms can house innovation and technology teams.

Finally, the form and function of the Central London law firm office will continue to evolve, leading to demand for new fit-for-purpose workplaces.

With back office functions increasingly moving to lower cost locations, the focus will be on locating in an office that can attract and retain talent in front office roles, is able to embody and promote brand values and is more flexible and collaborative.