Most law firms likely to renew leases
Singapore
WITH an eye on containing costs, most law firms here are likely to renew their office leases in the months ahead, rather than relocate or expand their premises.
Pressures of stiffer competition and a dip in the amount of legal work have meant that cost control is a significant priority for both local and foreign legal practices in Singapore.
CBRE Research's "Asia Pacific Legal Sector Trends" June 2017 report noted that given that rental costs are estimated to account for about five per cent of many regional firms' total revenue, it is one area the firms can have cost savings.
Most law firms have tended to renew their leases, the report said.
In the past 12 months, global law firms in Singapore like Clifford Chance, Linklaters, and Mayer Brown have renewed their leases.
Legal sources told The Business Times that rental costs for bigger law firms in Singapore in prime areas can be as high as 10 to 20 per cent of revenue.
Office rentals have been declining in recent years, CBRE said. Core central business district (CBD) rents averaged S$8.95 per square foot (psf) a month in the first quarter of 2017, a 9.6 per cent fall from S$9.90 psf per month a year ago.
Given the current low point in the office rental cycle, "any new lettings are likely the result of opportunistic lease acquisitions", the report said, adding that the window for good deals is closing as the market enters a recovery phase.
The report said firms should lock in terms beyond 2021 to avoid escalating rents in the medium term.
With a strong focus on containing costs, law firms globally have started to move towards setting up agile workplaces by better using existing and new office premises.
Hybrid spaces are seen to be the new norm as law firm offices evolve into open plan spaces with flexible workstations that enhance collaboration and integration.
Said David McKellar, senior director, advisory and transactions at CBRE: "This rising concept addresses the more mobile working styles we have today, where an increasing number of people work on the move, resulting in an under-utilisation of office space. By making space more dynamic, this recaptures the latent under-utilised space, which also helps drive greater cost efficiencies."
The report added that while law firms in Asia Pacific are generally still conservative towards workplace planning, a growing number of international law firms like Freshfields are slowly adopting these new space-maximising formats.
