In an auspicious sign, large Southeastern firms reported an average 6% revenue increase for the first nine months of the year, driven by increases in billing rates and client demand that were above the national average, according to a Citi Private Bank Law Firm Group survey.

Revenue growth for the region is outpacing the market and could be on track to do even better for the entire 2019 fiscal year, said Gretta Rusanow, the head of advisory services for Citi Private Bank's Law Firm Group.

The revenue growth rate nationally was 5.1% on average for the 190 Am Law 100, Second Hundred and other firms that participated in the survey, Rusanow said. Citi's survey included 22 large firms in the Southeast, ranging from Virginia to Florida.

For the region, firms increased rates on average by 5.2%, which is above already strong 4.7% average rate increases nationally, Rusanow said, adding that the Southeastern firms' rate increase was the third-highest across the 11 regions that Citi tracks.

"These are the strongest rate increases we've seen in the post-recession years," she said, adding that Citi is not forecasting an economic downturn in 2020.

The 5.2% average rate increase plus a 2.1% increase in client demand—also stronger than the 0.9% industry average—is what drove the Southeastern firms' 6% revenue increase for the first nine months of the year, Rusanow said.

"We are seeing an improving demand environment," she said.

"We saw a very challenging start to the year in the first quarter, driven by the market volatility we saw in the fourth quarter of 2018, followed by the government shutdown," she said. By midyear, demand was "marginally up," Rusanow added, and the 2.1% increase in client demand at the end of the third quarter for Southeastern firms augers well for year-end.

But the collection cycle for Southeastern firms lengthened by 3.3%, compared with the same period last year, she said. On the plus side, Southeastern firms reported a 9.5% increase in inventory for the period, which Rusanow said was the second-highest inventory growth rate nationally.

"These are very positive results," Rusanow said of the strong growth in demand and inventory. "Collections are the big challenge," she added.

Southeastern firms are "doing a good job on managing expenses," Rusanow said, noting that aggregate expense growth for the 22 firms in the region increased 4.2%, below the 4.7% industry average.

A 2.8% increase in operations expenditures, combined with a 5.8% increase in compensation spending, drove the expense growth, she said.

While keeping expense growth a bit lower than the national rate, these firms increased head count by 2.9%, which is above the 2.1% national figure, she added. "There is quite a lot of growth going on among these firms," Rusanow said.

Growth in equity partner head count, at 3.3%, was even stronger for the Southeast, outpacing the 0.3% industry average. "The fact that these firms are adding significantly to their equity partnerships is a positive sign," Rusanow said.

"The Southeast is well set up for a strong 2019," she said, assuming firms are able to pick up the pace on collections. "I think it's going to be a good year. Not with the same results as for 2018, but good."