Latest news – Office space shrinking; Revenue falls for law firms; Legal assistance coup

[Australasian Law Management Journal,Finance & Accounting,General Management,Marketing & Business Development,Strategy & Leadership] July 22, 2020

Law firm offices shrink as COVID-19 hits home

COVID-19 appears to be accelerating the shift towards law firms with smaller office footprints. While many law firms had already been downsizing their offices before the pandemic hit, the shift to working from home may be fast-tracking that process.

According to a survey conducted by commercial real estate group Cushman & Wakefield in the US, one-third of respondents said they expected their law firms to cut office space by more than 20 per cent in response to COVID-19, which has left offices empty for months in many American cities.

Related media comments from commercial property group CoStar indicate the number of leases nationwide in the US for at least 30,000 square feet (2787 sqm), including renewals, fell 70 per cent during the first five months of 2020 compared with the same period in 2019. There was also a pronounced drop in law firm leasing in the New York area.

Now the attention has turned to the “reimagining” of the modern law office post-COVID-19, with some analysts suggesting that the working-from-home experiment will embolden firms to change. Statistics from Cushman & Wakefield indicate that the legal sector in the US occupies two to three times what any other business sector occupies on a per-employee basis – that is, 300 square feet (27.87 sqm) to 400 square feet (37.16 sqm) per employee. For example, insurance firms and banks work with 150 to 200 square feet per employee, and tech firms use 100 square feet per worker.

Revenue down, cost-cutting up for law firms

About 66 per cent of legal profession respondents in an Australian survey have seen their revenue drop as a result of the COVID-19 crisis.

This compares with an average of just 56 per cent of businesses across all industries. The COVID-19 Business Confidence survey, commissioned by MyBusiness, is an ongoing survey of Australian business leaders and employees that is conducted by research firm Momentum Intelligence.

To date, the survey reveals, only 26 per cent of businesses overall are opting to cut their labour costs, with many of them indicating that assistance from government has helped in the form of the JobKeeper program. At the same time, 36 per cent of legal respondents noted that their respective firms or organisations had decreased their labour costs.

“Clearly many businesses have been impacted severely by COVID-19 and many business owners have had to make difficult decisions to ensure the survival of their business,” said Michael Johnson, head of strategy at Momentum Intelligence.

More than 2800 people responded to the survey.

Funding certainty for legal assistance services

The announcement that the National Legal Assistance Partnership (NLAP) – a five-year funding agreement for the legal assistance sector – will commence has been welcomed by the Law Council of Australia.

Law Council President Pauline Wright said that the agreement provides much-needed financial certainty for legal assistance services and will allow the sector to focus on the delivery of quality legal help to vulnerable communities.

“Recent crises, including the COVID-19 pandemic and the past summer’s bushfires, (have) again shone a spotlight on the immense value of frontline legal service providers and the vital role they play in our society,” Wright says.

“These services deserve the funding certainty that the NLAP brings, and the Law Council hopes that it will provide some comfort to those that are responsible for delivering critical legal support to some of our most disadvantaged community members.

“The Law Council’s 2018 Justice Project Final Report confirmed how critically important it is that we prioritise financial support for accessible legal assistance. Regrettably, that report also highlighted the chronic underfunding of our legal assistance services and confirmed that without a significant funding injection into the sector, legal assistance will remain out of reach for many who may need it most.”

These funding shortfalls were a key focus of the Justice Project, which noted that due to the shortage of funds, although 14 per cent of Australians fell below the poverty line, only 8 per cent qualified for legal aid.

“These are difficult economic times, with tough decisions to be made on how public funds are to be allocated,” Wright says. While pleased that consultations and negotiations with the legal assistance sector and the states and territories has meant that a final agreement has been reached, there still exist concerns over the decision to roll the standalone funding stream for Aboriginal and Torres Strait Islander Legal Services into a single funding mechanism.

“The Law Council is adamant that legal assistance must remain a top priority, and the Law Council will continue to advocate for additional support that will lead to a properly funded legal assistance sector,” she says.