Are firms looking outside The Loop?
Some firms are looking outside of Chicago’s Loop, namely in the extremely sought-after Fulton market which has been legitimized for legal occupiers by Greenberg Traurig’s 92,000 sf and Norton Rose Fulbright’s 17,000 sf commitment in the submarket. Even though it didn’t exist 10 years ago, Fulton Market has been seen as a corporate headquarters and tech hub from its inception. It was able to attract Google, and soon after, McDonald’s, Mondelez International, Kimberly-Clark and Boston Consulting Group. Just as Google spurred a gravitational pull of tenants out of downtown Chicago, it is expected that Greenberg Traurig will have a similar magnetic draw by attracting other law firms to the area.
Flexibility, rightsizing and legal leasing activity.
It’s not only high tenant improvement (TI) packages and free rent concessions that are driving legal tenants to act in Chicago’s tenant friendly market. It’s also flexibility, and flexibility is highly coveted by law firms in Chicago right now. Well-capitalized landlords of trophy buildings have been catering to the need of flexibility and immediate savings that legal occupiers desire and it has given them a competitive advantage in the market. Tenants are showing a strong preference to work with landlords who can accommodate various timelines. For example, there are several recent instances of landlords allowing early or delayed occupancy for legal tenants with great credit.
Rightsizing is becoming very common for legal occupiers in Chicago as many of them have been carrying too much space. From the beginning of the pandemic to now, Chicago law firms that have downsized have decreased by 23% on average. Interestingly, reduced office footprints are not correlated with shrinking headcounts for Chicago law firms. In fact, some of the firms that have recently downsized are growing and have the same number of people returning to the office at the same time. To be able to grow attorney counts and still downsize office space, firms are managing office resources more efficiently and not necessarily building out their space to handle 100% of their people coming in at any given time. Unlike other markets, Chicago law firms are not necessarily shrinking individual office sizes, or placing offices on the interior, they’re adapting to hybrid work schedules and an understanding that it’s unlikely to have 100% of their people in office on a given workday.
The share of Chicago’s leasing activity being done by law firms has been higher over the past three years, accounting for 9.4% of leasing in 2021 and 7.4% in the first half of 2023. Chicago actually saw the highest amount of legal sector leasing activity (1.4 msf) on record in 2021. This year is on pace to be another strong year, with 426,000 sf of leasing by legal sector occupiers in the first two quarters of 2023. Some of the notable leases signed in 2023 include: Katten Muchin Rosenman LLP (247,000 sf), Burke, Warren, Mackay & Serritella (47,000 sf) and Corboy & Demetrio PC (27,000 sf).
