San Diego Business Journal

As Leases Expire, Most Law Firms Elect to Stay in Current Sites

REAL ESTATE: Favorable Terms Lead Some to Downtown S.D. Offices By Lou Hirsh Monday, December 19, 2011

Many of the current opportunities, however, are limited to small or medium-size firms, since locations with large blocks of space in one place are dwindling in the major submarkets that draw law firms — downtown, University Towne Center (UTC), Del Mar and Mission Valley, where law firms occupy 13 percent of office space.

They represent nearly 20 percent of the local portfolio of Newport Beach-based Irvine Co. John Turner, a local regional vice president with Irvine, estimates that law firm tenants occupy 1.4 million square feet, out of the company’s total 7.4 million square feet of local office space, primarily in the downtown and UTC markets.

“We are very focused on serving that industry, but there’s no magic to it,” Turner said, noting lease costs are just part of the equation. “Every law firm has different needs, and you just have to listen to what those needs are.”

For instance, he said Irvine was able to make arrangements with Duane Morris that turned out to be much more cost-effective and less time consuming to set up operations at Symphony Towers, than would have been the case had the law firm decided to undergo major retrofits to meet its needs at its current downtown location.

Also deciding to stay put recently was the corporate law firm Goodwin Procter LLP. Jeff Talcott, an administrator with the firm, said it decided to remain in its current UTC office space owned by Irvine Co., signing a five-year lease at favorable terms, after fielding offers from five different locations in the San Diego region.

Talcott said the local climate has significantly turned in favor of tenants since the last time the firm was scouting locations five years ago.

JLL reported that law firm tenants nationally are still able to negotiate discounts of at least five percent for direct-leased space and 25 percent or more for subleased space. The San Diego average effective rent on all law firm deals signed in 2011 has continued to slide and is now $24.12 per square foot, a 30.3 percent decrease from the 2007 peak.

Misty Moore, vice president and co-chair of the law practice group in the San Diego office of Jones Lang LaSalle, said tenants are especially in the catbird’s seat in the downtown market, which has seen a general outflow of law firms in the past decade.

Many of those firms have headed north to be closer to clients in life sciences and other growing high-tech industries.

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