NEW YORK CITY—With employment at its highest level since 2008, the legal services sector posted its highest leasing volume here in well over a decade, according to a report released by Colliers International.
The brokerage firm reports that Manhattan law firms leased 2.67 million square feet in 2017, up 16.1% over 2016’s leasing levels. Last year’s leasing activity was the highest in Manhattan since 2014 when the legal sector amassed 3.65 million square feet of lease deals.
Law firms accounted for 7.2% of all Manhattan leasing last year, up from 6.9% in 2016. Most of the activity centered on lease renewals and renewals and expansions, which most often included less generous concession packages as compared to new lease transactions, Colliers states.
A total of seven law firms inked lease deals in excess of 100,000 square feet in 2017—led by Sidley Austin’s 352,000-square-foot renewal at 787 Seventh Ave., Kramer Levin’s 266,000-square-foot renewal at 1177 Ave. of the Americas and Wachtell Lipton’s 251,000-square-foot renewal at 51 W. 52nd St.
Colliers reports legal services employment increased 1.9% in 2017 as compared to a year earlier. In comparison, the financial services sector grew its job base by 2.8% last year.
Employment in the legal services sector stood at approximately 81,000 at year’s-end 2017, the highest level the sector has registered since December 2008.
The legal services sector’s preferred address is Midtown Manhattan. Midtown accounted for 77% of all lease deals in 2017, up nine percentage points as compared to its market share in 2016. Midtown South accounted for 13% of lease deals last year, followed by Downtown at 10%.
Colliers in its report predicts Midtown will remain the top choice for law firms in coming years, “With 3.54 million square feet of new construction/major renovations scheduled to be delivered by 2020 in Midtown, along with 7.39 million square feet of large (100,000 square feet or more) blocks scheduled to be vacated by existing tenants through 2023, almost exclusively in class A buildings, law firms looking to make or keep Midtown as their home will have many options for the foreseeable future.”
Other key takeaways from the Colliers law firms’ research report include:
- The weighted average taking rent for law firms in Manhattan at year’s-end 2017 was $73.11-per-square-foot, down 2.2% from 2016, but 4.7% higher than the 2017 average for all other industries in the borough.
- The weighted average rental abatement period for law firms last year was down from 9.4 months in 2016 to 8.2 months in 2017.
- The weighted average tenant work allowance for law firms in 2017 declined by 2.7% to $60.82-per-square-foot. The 2017 weighted average tenant work allowance for all other industries in Manhattan was $72.75-per-square-foot.