There can be few sectors currently more engaged in a debate about their future direction than the UK’s law firms. As well as the rapidly changing business environment common to all organisations, the legal industry is experiencing a period of unique flux, thanks especially to technological developments, an increasingly well-informed client base, new business models and new market entrants.
It is technology that is the primary catalyst for change, according to PwC’s annual Law Firms’ Survey, the latest edition of which was published last October. While the report acknowledges that law firms had prospered and adapted over its 25 year history, it claims that they must innovate at an accelerated rate just to keep pace with change; especially if they want to exceed the generally moribund levels of profitability that the changing business environment is generating for them. It is no coincidence that the report is subtitled Time for Change and it seems clear that the UK’s legal sector is at something of an inflexion point.
The report concludes that a changing marketplace and technological environment will drive change across the operations of firms including how they interact with clients and integrate the physical and digital workplaces to help recruit and retain talent as well as foster wellbeing and productivity.
Such profound and accelerating changes invariably manifest themselves in the design of an organisation’s offices. The design principles employed by law firms in their offices have helped practices make better use of technology, implement agile working methods, attract talent, rebrand themselves for clients and become leaner and more competitive to address structural changes in the market for legal services.
This striving for competitiveness and the opportunity to cut space afforded by a well-designed agile working environment and mobile workforce inevitably has a knock-on effect for the amount of space taken up by law firms. A report from CBRE published last year found that the number of new leases taken up by the hundred largest law firms in London fell by more than 50 percent in the space of a year and the total space taken through new leases in 2016 was similarly 55 percent down on 2015.
Although Brexit was clearly a factor, as firms decided to stay put or at least defer decisions until they were more certain about the direction of negotiations, the report ascribes this fall in office take-up primarily to the way law firms are rethinking their real estate strategy. In particular, this involves embracing new developments in technology to adopt new forms of activity-based working in their offices with a greater emphasis on collaborative space, agile working and client facing space.
The impact of this shift in thinking is evident in the way new models of office design have impacted profitability – or can do. Even comparatively minor shifts in workplace thinking such as replacing traditional cellular offices with open plan and shared spaces can transform the business model of firms. According to the CBRE report, in open-plan offices there is an average of one fee earner per 269 sq ft, which is some 40 percent less than in more traditional layouts, in which the average density is one fee earner per 439 sq ft. Firms with traditional office layouts pay an average of £21,247 in rent per fee earner which is 35 percent more than the £13,642 per fee earner paid by law firms with open-plan offices.
This shift is likely to be the first step in an ongoing transformation in law firm workplace design. The very near future will see an even greater shift towards flexibility, collaboration and hospitality. This will manifest as significantly more efficient space utilisation and hence greater profitability per square foot.
What is also evident is that law firms are not reacting to these changes but are already reinventing themselves to be ready for them, by designing offices that meet their needs for the changing workplace of today and are flexible enough to anticipate the changes that are set to take place.