Philadelphia. Photo Credit: Sean Pavone/Shutterstock.com

Premium perks have become more important than square footage when choosing law firm office space in Philadelphia, a recent report on law firm real estate trends suggests.

In "A Shifting Landscape: 2019 North American Legal Sector Trends," real estate services provider CBRE broke down the recent trends for a number of legal markets across the United States. In Philadelphia, it said, large law firms are looking to incorporate "new workplace strategies" when building out their space. And they want long-term leases in "Class A space with high-quality amenities."

Tony Rossi of CBRE said those amenities include concierge service, meeting space and "touchdown" space—places where co-workers can meet informally and collaborate.

"Law firms have a critical eye toward real estate costs and doing whatever they can to reduce them," Rossi said. But at the same time, "They want to be in a best-of-the-best building."

The trade-off comes in more efficient use of space. Rossi said firms are more frequently opening up to the idea of single-size offices, rather than office sizes based on hierarchy. And as they cut square footage, they're making spaces feel more open by opting for glass walls. These changes have allowed law firms to cut square footage by about 20%, he said.

From the third quarter of 2018 through the second quarter of 2019, the study said, law firms have been involved in 512,171-square-feet worth of transactions for their own office space in Philadelphia.

The report said 34.9% of firms in Philadelphia have expanded their space, 24.2% have contracted and 35.4% were stable. Meanwhile, 5.4% of law firm offices were new to the market.

Among those that shrank their space, the average contraction was 26.5%.

According to the report, "firms located in older un-renovated spaces [are] consider[ing] downsizing in new high-quality space amid rising construction costs."

Rossi said law firms have historically used 800 to 1,000 square feet per attorney, and now they've gotten down to 550 to 750 square feet per attorney. The most aggressive firms in this regard will move toward 450 to 600 square feet per attorney in coming years, he said.

The biggest Philadelphia law firm real estate transaction from third-quarter 2018 through second-quarter 2019 was completed by Post & Schell, which renewed its space, but contracted some, leasing 68,738 square feet.

Following behind was DLA Piper, which renewed 50,000 square feet; Holland & Knight, which expanded to 41,571 square feet; Zarwin Baum DeVito Kaplan Schaer Toddy, which expanded to 29,719 square feet; and Eckert Seamans Cherin & Mellot, which renewed and contracted its space in central Pennsylvania, to 29,417 feet, according to CBRE.

CBRE also pointed out some demographic trends regarding Philadelphia's lawyer population. The Philadelphia legal services industry employs 39,224 people, giving it a concentration of 1.3%, greater than the national average of 0.8%, the report said.

A closer look at the numbers suggests that in Philadelphia, legal industry employees who are not lawyers may be growing in number, while the number of lawyers is shrinking.

While that population was just above flat, growing by 0.6% in Philadelphia and 1.6% nationally from 2016 to 2018, it is projected to shrink. According to CBRE, from 2018 to 2023 legal services employment is expected to decrease by 4.6% in Philadelphia, and by 5.5% nationally.

Already, the lawyer population has contracted in Philadelphia. According to the report, there were 18,280 lawyers in Philadelphia, representing a decline of 4.1% in the lawyer population from 2016 to 2018. That contrasts with growth of 3% nationally.

The average lawyer wage in Philadelphia was $152,100, versus a national average of $141,890. The average paralegal wage was $55,740, compared to a national average of $53,910.

Asked what the observed real estate trends say about Philadelphia law firms going forward, particularly heading into a potential economic downturn, Rossi said they'll be well-prepared, as acceptance of single-size offices and downsizing generally increases.

"When the recession comes, they'll be better prepared, and you'll see design for density be more accepted by attorneys," Rossi said.