- Law firms
- Average asking rent in N.Y. has dropped compared to pre-pandemic levels
- Midwest firm Barnes & Thornburg says current office has run out of room
(Reuters) - Barnes & Thornburg said it took advantage of lower New York City real estate costs to ink a new lease for a midtown Manhattan office triple the size of its old one.
The Indianapolis-founded firm, which first entered New York just as the pandemic was arriving in early 2020, saw "significant" savings in signing a 14-year lease for 33,400 square feet at 390 Madison Avenue over the summer, compared to what it would have cost before the pandemic, said Rob Boller, the partner in charge of Barnes & Thornburg's New York office.
"It was beneficial to us, and the timing worked to our advantage," Boller said. He declined to specify the exact cost or other terms of the lease.
Law firm leasing activity in New York rose by 92% from the second quarter to the third quarter of 2021, according to global property agents Savills Inc.
But even as demand has strengthened in the overall New York commercial office market, rent prices have not rebounded to pre-pandemic levels. Average asking rent -- the amount landlords advertise to prospective tenants -- stood at $75.08 per square foot for Class A space in Q3, a 10.5% drop compared to Q1 2020, according to Savills.
Landlords have also been offering more concessions to tenants, which widens the gap between the rental rates landlords are asking for and tenants' actual costs, Savills found.
A bigger Manhattan office was a necessity for Barnes & Thornburg, Boller said. At its current home at 445 Park Avenue, the firm doesn't have enough office space for all of its 22 lawyers. The New York office had three lawyers when it launched in February 2020, Boller said.
"We would have to put people in conference rooms," Boller said. The new office will be able to house more than twice the firm's current New York lawyer head count, plus staffers. "We have room to grow up to 53, and we certainly plan to do that," he said.
Law firm leaders have been rethinking office space needs following the unexpected success of remote work during the COVID-19 pandemic, but also touting enhanced office amenities as a way to lure lawyers back.
There are lawyers working in person at Barnes & Thornburg's current office, a firm spokesperson said, but it has no attendance policy, according to Boller. He said he believes employees will be happy to move into new workspaces in a building that was "recently renovated from the ground up."
The new office is also closer to both Grand Central Terminal and Penn Station, which will ease commutes, Boller said.
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