Issuu

LAW FIRM REAL ESTATE Expertise SPECIALIZING IN LAW FIRM TENANT REPRESENTATION SERVICES INCLUDING RELOCATION, RENEWAL, EXPANSION, RESTRUCTURING & SUBLEASING

A Tenant Advocate for Every Real Estate Decision For a law firm, real estate is one of the largest and longest-lasting financial commitments the practice will make. Every decision around it affects profit per partner, the firm’s brand, the ability to attract and retain talent, and the effectiveness with which the firm operates.

Three Decades Serving Law Firms Hughes Marino is a corporate real estate advisory firm that represents tenants and owner-user buyers of commercial real estate. We began over three decades ago by primarily representing law firms, given their natural sensitivities to independence and the inherent conflicts of interest of those firms that primarily represent building owners and purport to represent tenants at the same time. We have since grown to represent thousands of companies annually across all industries with their local, national or global real estate portfolios. The bespoke service we bring to every engagement means our level of detail, care and discretion is second to none. Our advisors are backed by an in-house team of architects, designers, construction project managers and financial analysts who collaborate on every engagement. The team acts as one accountable end-to-end integrated practice, fully equipped to optimize every aspect of your real estate needs. In contrast to traditional real estate salespeople serving a law firm client, this depth of talent evaluates and negotiates a firm's real estate from every perspective including the financial, operational, cultural and strategic. For a law firm, that means real estate advice made with the same rigor you bring to your own client work. 1 | L AW F I R M R E A L E S TAT E E X P E R T I S E

Law Firm Expertise Our team has extensive experience advising firms across the legal industry as they lease and buy office space, placing the following details at the forefront: • Strategic planning • Law firm benchmarking including: • Occupancy costs per attorney/year • Office space per attorney • Construction costs • Financial analytics, including: • Lowering costs per attorney/year • Strategies to eradicate up-front law firm CapEx for move costs & FF&E • Site selection • Negotiation leadership • Proposals, counterproposals, LOIs & lease negotiations • Design & construction due diligence to provide adequate time & allowance to lower CapEx before you commit to a final occupancy path

The Full Range of What We Handle • Renewals & restructurings • Relocations • Expansions & consolidations • Lease buyouts & terminations • Lease vs. purchase evaluation

WE ELIMINATE CONFLICT OF INTEREST by only

REPRESENTING TENANTS The legal profession is the most attuned to conflicts of interest, actual and potential. Surprisingly, commercial real estate is the only industry where such conflicts are routine and obvious, yet tenants are often swayed by someone who “knows the landlord” or “knows the market” over fiduciary duty. The large “full-service” brokerage firms were built a century ago to provide a full suite of services to landlords to lease, sell, manage, finance, appraise and invest in commercial real estate. The biggest brokerage firms have investment funds to invest directly into commercial real estate and are often landlords themselves. Every attorney knows they cannot ethically represent a party whose interests are adverse to their client without informed, written consent… which for good reason is rarely pursued or obtained. In commercial real estate, dual agency is common, and sometimes even invited. While not illegal, it creates the exact divided loyalty the legal profession seeks to eliminate. That matters more for law firms, not less, as the stakes are high, and real estate is a firm's second-largest fixed cost behind payroll, which is not the case in most industries.

Consider the broker who tells you “I will get you a better deal as I know the landlord’s bottom line.” That inherently means that the broker will breach their duty to the landlord by sharing this confidential information with you as the tenant. Is that just good marketing, or a real betrayal to their largest customer? When they tell you “we do all of the deals and know all of the comps,” do they promise you the norm of average market results, or something customized and future-focused? Hughes Marino seeks to be a market maker and not a market taker, only representing you as the tenant to take advantage of the market at a moment in time, maximize your leverage, and be transparent and inclusive with your opportunities. We hold no landlord listings and no competing ownership interests—no landlord has power over us. We are among the national pioneers of tenant-only representation, and we built our full-service practice specifically for you as a tenant, to remove the conflicts that sit at the center of most commercial real estate.

hughesmarino.com | 2

LAW FIRM TRENDS Law firm space needs are evolving in several ways that set the legal industry apart from other office tenants. Here is what we are seeing from our work with law firms across the country.

1. Law Firms Are Renewing & Retaining Space Unlike many office tenants, small to medium local and regional firms have largely held onto their space since Covid, with roughly as many firms expanding as shrinking. This makes the legal industry an outlier: while tech and other service businesses often shed space as remote work took hold, law firms have continued to renew more often than not. Their real estate stability tends to reflect the long operating histories of the firms themselves.

2. Attorneys Are Back in the Office Most firms are in the office a minimum of three days a week, and a majority are there four to five. Remote work exists at the margins, but attorneys generally prefer working in person more than professionals in other industries do. That preference shapes how much space firms need and how they use it.

3 | L AW F I R M R E A L E S TAT E E X P E R T I S E

3. Private Offices on the Window Line Remain the Standard Despite the broader industry move toward open plans, most firms have kept private offices for their attorneys, positioned primarily along the window line. Some firms explored shifting lawyer offices to the interior, but the majority have not embraced it. The private perimeter office remains the standard in legal space.

4. Contemporary Design Is Replacing Traditional Most firms are steadily moving away from the traditional look of dark wood and mahogany. In its place is a more contemporary aesthetic built around upgraded lighting, more natural light and greater use of interior glass. The result is a brighter, more modern feel that still reads as a law firm.

5. Break Rooms Have Become Community Spaces The old break room, sequestered on the interior of the space, is giving way to activated break areas that function as the firm's cafe and gathering space. Rather than a place to grab coffee and leave, these spaces are designed to bring the team together. It reflects a broader shift toward space that supports community rather than isolating it.

6. Libraries & Central Filing Have Been Virtually Eliminated Technology has all but eliminated the need for physical libraries and central filing within firms. Research and records that once required dedicated rooms now live in digital databases. That shift has freed up space that firms are redirecting toward other uses.

7. Leaner Support Staff per Attorney Many firms are carrying fewer support staff per attorney than they have historically. As lawyers become more technology-enabled through AI and voice-to-text tools, they are less dependent on the traditional support roles that once surrounded them. This gradually changes the makeup of the team that occupies the space.

8. More Conference Rooms, Especially Smaller Ones As depositions, discovery and client meetings increasingly happen virtually, firms need more conference rooms than before, especially more small ones. These smaller rooms give attorneys space to take video calls, often with multiple

people, without tying up a large boardroom. Demand for this kind of flexible meeting space continues to grow.

THE TOP 5 QUESTIONS WE’RE ASKED Q: How should partner retirement and succession factor into our lease term? A: This is one of the most overlooked questions in law firm real estate, and one almost unique to your industry. Many firms have partners who are significant revenue producers now weighing when they will retire. A lease term should be evaluated against their retirement horizon and the firm's strategy for carrying revenue beyond their departure. Committing to a long term without that conversation can leave a firm holding space and obligations that no longer match its economics. We align the lease term with where the firm is headed, not just where it is today.

Q: How do we keep partners from absorbing move and build-out costs out of this year's profits? A: In most firms, annual partner compensation is tied to what is left in the bank at year end, which makes the timing of real estate move and fixturization costs a real concern. Improvements, furniture, technology and relocation costs are spent in the calendar year of the move itself, while the benefit is spread across the lease term, so without careful structuring, those costs come straight out of current partner profits. We structure the timing of free rent, moving allowances and improvement allowances against your cash outlays, and we push obligations like prepaid and first month's rent into the year the lease actually commences. Our goal is to keep the current year’s costs, which reflect a long-term investment, from landing entirely on this year's partners. 5 | L AW F I R M R E A L E S TAT E E X P E R T I S E

Q: Why is it even more important for a law firm to go to market early? A: Law firms tend to sign longer leases than other tenants for two reasons. First, their businesses are generally more stable, which lets them lock in longer-term economics, and second, their build-out costs are higher than a typical office tenant. A law firm improvement can run $125 to $200 a foot versus $80 to $100 for a building-standard tenant. That invested capital also makes firms harder to move at the end of the lease, and many firms end up renewing in space that is 20 years old and dated, often due to the tenant improvement costs elsewhere. Going to market roughly 18 months before expiration with real alternatives in hand is what creates the leverage to change that.

Q: I'm a tenant in a building and I know the landlord is having financial problems. Should I be concerned? A: It's understandable to be concerned, but it does not necessarily put your lease at risk. Even if a landlord defaults or is foreclosed on, a scenario that has become more common, leases are binding contracts and the lender will usually honor them to protect the building's value. The rare exceptions are situations like a redevelopment or change of use, where leases can be terminated, typically with little notice. It is worth assessing your specific situation with an advisor, but most of the time your lease stays intact and your firm keeps operating without disruption. However, this does open a renegotiation and restructuring opportunity if your lease expires within the next two years, if you need to expand or if you have more than one floor in a building.

Q: My lease is expiring soon, and with uncertainty around our firm's future, I'm not sure whether to commit to another long term. What should I be thinking about? A: You likely have more leverage than you realize. Office markets remain soft in most metro areas, and many landlords are open to shorter two- to threeyear renewals, especially once they know you are exploring alternatives. With your own advisor and real alternatives in hand, you can go to market and structure a term that fits where the firm is actually headed, and if your current landlord will not agree to a shorter renewal, others will. In many markets today, particularly in most downtown markets around the United States, there is tremendous second-generation law firm space available to choose from where a firm can relocate into a three- to five-year lease elsewhere.

hughesmarino.com | 6

Corporate Headquarters 1450 Front Street, San Diego, CA 92101 844.662.6635 hughesmarino.com N AT I O N A L A N D G LO B A L R E P R E S E N TAT I O N W I T H O F F I C E S AC R O S S T H E U N I T E D S TAT E S

M A K I N G YO U R VI S I O N A R E A LIT Y

FROM CONCEPT TO RESULTS Hughes Marino is a global corporate real estate advisory firm that represents tenants and buyers—not landlords. We provide a full suite of services for occupiers of commercial real estate on an integrated and turnkey basis. Whether you need help with real estate strategy, site selection, lease negotiations, renewals, expansions, relocations, subleasing, construction project management, planning and design, operating expense reviews or lease administration, our team has the expertise. We solve complex real estate challenges for law firms of any size and at every stage of the real estate lifecycle.

OU R SERVICES TENANT & BUYER REPRESENTATION We work for occupiers of space, not landlords. REAL ESTATE STRATEGY Experts in the full lifecycle of tenants’ real estate needs. TRANSACTION MANAGEMENT Site selection, financial modeling, documentation and negotiations, to renewals, expansions and relocations. CONSTRUCTION MANAGEMENT Oversee planning, design, build-outs and renovations. LEASE ADMINISTRATION & OPERATING EXPENSE REVIEW Analyze leases, find cost-saving opportunities and portfolio management. GLOBAL REACH We advise companies of all sizes around the globe.