Law firms went West, headed South in 2021 to find new markets

The skyline is shown at sunset in Austin, Texas, U.S., October 25, 2021. Picture taken with a drone. REUTERS/Brian Snyder
  • California and Texas attracted the most entrants in 2021
  • Firms also followed clients and talent to cities including Salt Lake City and Denver

(Reuters) - Northern California and Austin, Texas, continued to be top destinations for large U.S. law firms expanding into new markets in 2021, as established and emerging technology clients helped keep those economies humming.

But Utah, Colorado and parts of the Southeast also saw a notable influx, according to a Reuters review of new law firm office reports and announcements. Buchalter; Foley & Lardner; Fragomen, Del Rey Law Group, Bernsen & Loewy; Kirkland & Ellis and Wilson Sonsini Goodrich & Rosati all set up shop in Salt Lake City this year. Berry Appleman & Leiden, Clark Hill and Crowell & Moring each hung a shingle in Denver.

Like Austin, where Oracle Corp moved its headquarters in 2020, those cities have gained traction with technology companies and other businesses looking to court young, educated workers drawn to their regions' relatively cheap costs of living, access to nature and other lifestyle amenities.

John Cashman, president of global legal recruiting firm Major, Lindsey & Africa, said firms are responding to the tight job market and greater flexibility about work location that emerged during the pandemic.

“I think you will continue to see this trend of going to places where the lawyers want to live,” he said, noting that markets in North Carolina, South Carolina and Florida have also seen more firms moving in. "Law firms are going where the talent is," he said.

In addition to Oracle, Texas saw Apple Inc, Google, Hewlett Packard Enterprise Co, SpaceX and Tesla Inc. all expand their operations in the state over the past year.

Law firms have followed. At least seven firms, including Berry Appleman & Leiden, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, Kirkland & Ellis, Latham & Watkins, O'Melveny & Myers, Quinn Emanuel Urquhart & Sullivan and Rimon, opened in Austin in 2021.

In Northern California, meanwhile, the pandemic has weighed down office rents while bolstering the coffers of local tech companies, and high demand for legal services has continued to entice more law firms to the region, said San Francisco-based recruiter Avis Caravello.

"We have the big New York and U.K. firms that have historically resisted opening here - they're shifting gears, and they're entering this market to follow their clients," Caravello said.

London-founded Allen & Overy and Freshfields Bruckhaus Deringer both opened Bay Area offices in 2021, as did New York firms Cleary Gottlieb Steen & Hamilton; Debevoise & Plimpton; and Paul, Weiss, Rifkind, Wharton & Garrison. Midwest-founded Husch Blackwell and Jenner & Block also launched offices in the San Francisco area.

All those new entrants are putting more pressure on the region's "small ecosystem of talent," Caravello said, with implications for the larger California legal market. "We're also seeing some of the firms that have been here for a while venturing into Los Angeles because that could be a more fertile ground for talent," she said.

"In 2022, I don't think the pace will stay the same," said Suzanne Kane, a longtime Bay Area legal recruiter at Macrae. With Northern California "starting to get a little saturated with new firms," she said, it is going to be "a lot of work and a lot of commitment" for more firms to open in the region.

Willkie Farr & Gallagher, which already established a Palo Alto office in 2018 and opened an office in San Francisco the following year, launched a new Los Angeles office in the fall. Allen & Overy and Husch Blackwell both also opened L.A. offices earlier in the year.

According to Leopard Solutions, which tracks hiring at law firms and large companies, the California legal market has attracted the most entrants in 2021 with 75 new offices, followed by Texas with 46 and Florida, which saw 43 offices open last year.

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Xiumei Dong covers legal industry news, with a focus on law firm strategy and growth, in-house counsel and the Washington, D.C., legal market. Reach her at Xiumei.Dong@thomsonreuters.com.