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New research from JLL suggests that law firms have intensified their focus on productivity, efficiency and innovation. It has also identified that the global economic outlook into 2015 and through 2017 will provide law firms with ample opportunity to broaden and diversify their revenue streams in traditional and emerging markets through both acquisition strategies and organic growth.
Commenting on JLL’s Global Law Firm Perspective research, Alexander Low, director, UK Markets Corporate Solutions, JLL, said: “As we head into 2015, momentum in the economy is expected to pick-up, providing revenue growth and diversification opportunities for many law firms. Productivity, efficiency and innovation is now at the top of the agenda and real estate is now even more critical.”
Other key themes from the research are as follows:
• Merger and acquisition activity has surged with firms focused on laterally recruiting profitable lawyers, practice groups and firms to expand their revenue potential. As a result, consolidation in the legal sector is expected to increase even further.
• Many London-based firms are now diversifying their exposure and gaining access to new clients and markets abroad. These emerging markets present sizeable opportunity, particularly in Africa, Asia and Latin America. Routes to entry in these markets vary with preferred routes including partnerships with local firms, opening offices in new markets, working out of satellite offices or mergers and acquisitions with established local firms.
• With a greater emphasis on value and growing resistance to traditional billing and fee models, efficiency and productivity programmes look set to stay. The question now for many firms is what their alternative sourcing or shoring strategy should be. Options include using more contract lawyers, outsourcing or locating certain staff in lower-cost locations. It could be a combination of all these options.
• Technology will serve as a tool for recruitment and retention of talent. Video conferencing, document-sharing and more effective remote/mobile team working will become the norm for many firms enabling increased productivity and efficiency, reducing costs over the longer term and meeting rising client expectations.
• Office fit-out is increasingly under scrutiny. Law firms have traditionally favoured cellular layouts, particularly in London, given the need to guarantee privacy. However, there is now a move towards more modern, collaborative and generic fit-outs that enable spend to be diverted towards the creation of impressive client areas. Many international firms acquiring and fitting out space in London have begun to follow suit spurred on by the risk that they may fall behind the competition.
Jeremy Attfield, director, UK Office Agency, JLL, added: “Law firms face several challenges in terms of location including the hardening of rent free incentives and tightening of office stock which are driving rents upwards and reducing the availability of preferred space. Firms will therefore need to examine their real estate portfolios in light of cost and efficiency pressures and evaluate options such as lower-cost centres for those employees doing more process-driven work. In terms of lease renewals, older space is often incompatible with new working styles consequently firms will be seeking to minimise capital expenditure while embracing these new working methods.”
Alexander Low concluded: “There appears to be plenty of opportunity for the global legal sector provided firms adopt a combined approach to their real estate strategies. This includes taking advantage of pre-let activity to create offices fit for the future with an emphasis on open, flexible and collaborative space that can deliver improved efficiency, collegiality and cost savings. Additionally, firms should be forward planning by preparing for 2019-2020 lease expirations and considering pre-let options and lastly, technology should be utilised to increase efficiency, reduce space requirements and retain talent. If such an approach is adopted, the slow-growth performance that numerous firms have been accustomed to in recent years will likely accelerate into a more dynamic outlook ahead.”
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