Along with the general trend of law firms downsizing their office space by introducing new efficiencies, many law firms are considering moving to shared law office space. Our recurring observation is that in general, law firms usually need less space than they think they do – and this is especially important in a city like New York, where tenants will pay between $65 - $90 per sq. ft. for most Class-A commercial office space located in Midtown + Downtown Manhattan. The current average rent in Midtown is $79.00 per sq. ft., and Downtown the average asking rent is now about 58.75 per sq. ft. while in Midtown South it is about $67.50 per sq. ft. For the entire Manhattan market the overall average asking price is currently almost $73.00 per sq. ft. and compared to the third quarter of 2015, overall leasing activity was up almost 17% in the third quarter of 2016.
Many firms are getting squeezed out of the Manhattan commercial office space market simply because of the increasing cost of carrying each attorney. We’re seeing a trend from firms that are headquartered out of town to be giving up the stand-alone satellite office with 1-5 local NYC attorneys, and rather than rent private space they are frequently considering renting shared office space within the premises of another law firm that has extra offices and is willing to share amenities with a “ guest” firm. That has lead to a vibrant market in shared legal office space and we are seeing fairly priced offices and amenity packages renting strongly.
We have a good example at Park Avenue and 47th Street where a firm occupying about 6,500 sq. ft. of beautiful space with Park Avenue views, has a 4 office, plus 5 workstation vacancy because their long time subtenant recently departed. The space has a beautiful windowed reception area and a main conference room with stunning city views up the avenue. In total it is about 6,500 sq. ft. Two of the available offices are huge corner partner offices (that resulted from combining an existing corner office with the neighboring associate office – so in addition to a full complement of legal furnishings, there is a 4-person conference table in each office. Additionally there are two large associate offices and up to 5 workstations immediately outside. The office is professionally staffed, and has 3 conference rooms, shared eat in kitchen, and large fully equipped document preparation area. The space is tastefully decorated and furnished and available as a “suite within a suite” on an immediate basis for a starting rental in the asking range of $18,000 per month.
It relation the the rest of the space, the 4-office sublet plus amenities is equal to a private space of the same caliber of approximately 3,250 sq. ft. (or half of the office). At the monthly asking rental that equates to approximately $66.50 per sq. ft. Asking rents in the building for equivalent space are currently about $75.00 per sq. ft. plus electric charges. The beauty of the shared legal office space concept is that along with “shared space” you also get fully managed or serviced space which can result in a great savings when comparing this to renting private space. This is because of the inclusion of the amenity package.
If your firm were to rent an equivalent 3,250 sq. ft. space at $66.50 per sq. ft., you’d have a number of additional expenses that don’t exist in the equation for the cost of shared law office space. In addition to the base rent, electricity and future escalations and real estate tax increases, your firm would pay for:
- A receptionist ($40,000 p.a.)
- Telephone system and IT – ($18,000 p.a.)
- Kitchen expenses ($1,200 p.a.)
- Copy Machine ($7,200 p.a.)
- Equipment maintenance (3,500 p.a.)
- Miscellaneous Expenses / refurbishing ($7,500 p.a.)
Together this represents an expenditure on top of rent of approximately $77,400 per annum or an additional $23.82 per sq. ft. - - - and not having to pay that overage in addition to base rent (and at this point we’re only looking at the first year where there are generally no escalations, but you can anticipate a combined operating expense and real estate tax increase of at least 5% per annum which (after year 1) will add about $10,800 ($3.33 per sq. ft.) in the second year alone and a little more in subsequent years because this figure compounds annually. So the $23.82 of additional annual expenses in the year 1 example, becomes $27.15 in the second year.
This is a very strong argument for renting shared legal office space rather than leasing private office space, because it lets you solve your problem with someone else’s problem – and it will generally be available with a level of shared services that would run your budget into the red area if you were paying for these services separately and entirely, rather than compensating the “host” firm for your proportionate share of these expenses, which are blended into the monthly rent.
A more efficient physical environment can lead to more productivity, especially if you take into account the possibility of overflow work potentially going in both directions. Often, you’ll also have the ability to expand marginally, if your practice takes on another attorney or employee, during the course of your lease, but without an actual option in advance, you can’t guarantee that there will be extra office(s) available when required by you in the future.
You will choose your new location with your partners and employees in mind from a geographic standpoint, but perhaps more important with respect to a cost standpoint. First you’ll need to determine the type of building that will be required – do you need a Class-A building, and is this appropriate for your practice (clients and employees), or would you be satisfied with a perfectly nice space in an older building with a little less panache? That is the first decision you’ve got to make when the project to look for space begins.
There are 2 other factors to consider when looking for shared law office space. The first is, does the space have to be in a law firm? Could your requirement be satisfied by occupancy in an executive office suite, which is another kind of managed environment, but with perhaps a more generic feel, and where the surrounding tenants are not necessarily attorneys. In most of these situations, you’ll generally be without signage identification other than potentially in the elevator lobby (depending on the building rules). But, with this slightly more anonymous situation you will still get a serviced environment that incorporates all of the amenities you require on a real estate and IT platform that is being managed by a third party operator. This could lead to a more flexible lease term or flexible office count for changing business situations…but it results in a shift of workplace identity and is not appropriate for all situations. Usually it works best for the firm requiring a satellite office, legal address and local phone number – and this can be achieved without even having a full time resident employee, with a virtual office / identity program that is offered by many executive suites with different levels of service, for a monthly fee.
In conclusion, shared office space is becoming a choice for more firms each year. It is fueled by the need to downsize office space and the allocation of rent expenses, as well as the economic advantage you receive when you piggyback on employees and services and amenities like shared conference rooms, that are managed by someone else, but available to your firm as required.
You can find shared law office space (and space in other professional offices) in many different cities on the LookingForSpace.com website. You can view detailed office space listings with photographs and long descriptions as well as the contact information for the advertiser – for free and without the obligation to register.
www.LookingForSpace.com is a “front facing” website where advertisers compensate us for presenting their available space to a vibrant marketplace of attorneys and other professionals looking for space online. Our real estate professionals are available to help you get your extra space rented to another attorney and you can learn more in the FAQ Section of our website as well as the Testimonial Section of the website. Feel free to contact us at 212.986.9100 or by email using This Form.
If your NYC Law Firm has extra offices and you’d like to advertise them to our audience of attorneys looking for space online, you can ADD YOUR LISTING online, and be up and running in 5-10 minutes.