MP Roundtable: Part 2

We're back with Part 2 of our Managing Partner Roundtable, broadcasting from The Grill Groom at the Capella Washington DC. Over lunch, we discussed the business and real estate strategies of some of DC's law firm and industry leaders. (Here's Part 1.) EagleBank and Cushman & Wakefield partnered with us on the Roundtable.

Fox Rothschild DC managing partner and national construction law group co-chair Dirk Haire, Cushman & Wakefield executive director John Boland, DLA Piper DC co-managing partner and DC litigation head Mary Gately, Arent Fox executive director Kurt Salisbery, Jackson Campbell president and managing director John Matteo, Cushman & Wakefield legal sector advisory group head Sherry Cushman, and EagleBank SVP Andy Bridge.

What are your biggest real estate concerns?

Kurt: Flexibility is important. That's why I tell people that if you do a build-out of office space that's perfect on day one, you've failed. Because the business of law is evolving, and you need to have space that can evolve with it.

Sherry: The biggest issue the legal sector is having is maintaining profitability and controlling overhead. It's no longer about the lawyers; business, clients and technology are driving how law firms are looking at their real estate. It's important to effect change and get consensus with the older generation because there's still a fundamental delta on the "we versus me." The legal industry still occupies two to three times the square foot per employee of any other industry out there.

John Matteo: One of our big issues is, what will we do in five years when the lease is up? We've been in our building since it was built 35 years ago. In 2008, a couple of years before our lease was up, we looked to a build-out that would decrease our partner offices. In our next lease, we will need to have more flexibility.

Mary: Amenities are a factor too, in terms of being competitive for our associates. We have a cafeteria, a gym, and space where we can entertain. There's a nice community feel to the space and that's a big plus for us. We also get a lot of requests from clients and outside organizations to come in and use it. Technology is also a big factor. 

Have you considered hoteling?

Sherry: In the legal sector, hoteling isn't telling lawyers not to come into the office. It starts with lawyers who are in the office one to three days a week and don't need an office five days a week. As firms grow, you're going to see them say, "I'm not going to take another square foot of space; I'm simply going to implement more technology and more hoteling."

What are the up-and-coming locations in DC?

Sherry: Capital Crossing—it's the air rights above 395, a 1.3M SF site close to Venable and Arnold & Porter and across from Georgetown Law School. I think you will see a law firm signed to anchor one of those buildings in the next 12-18 months. The Wharf is going to be the new world-class waterfront. They're going spec on eight buildings. It all delivers end of 2017. I bet a law firm will go to that project; it probably won't be a big-name firm, but it might be a boutique firm in DC. 

As a managing partner, what do you need to make a bold real estate move?

John Matteo: We get people from all over the place, so our biggest challenge is always what's the most convenient location.

Sherry: The average firm in DC stays in their building for about 22 years, so you're not making this decision for you—you're making it for the younger generation. The younger generation values amenities and work-life balance; they want to eat, sleep, live, work out, all in a five-block proximity. Smart firms will be letting those decisions be driven more and more by the younger generation. 

Aside from a more efficient use of space, what positive impact did you see from moving offices?

Kurt: As executive director, I try to see as many of the partners and associates as possible, so I move my office every few months within the firm. At 1050 Connecticut Ave, I found that a move would be from one end of the floor to the other, because I'd go months without seeing people, even though we'd be on the same floor. Moving to 1717 K, we have much smaller floor plates with much less internal space, and the internal space we have is more dense. The accounting and support departments are intermingled on the floor with paralegals and secretaries. People enjoy it a lot more. In the old space, they felt isolated.

Sherry: Arent Fox also took advantage of the streetscape—they're branded on the street. It also has a fabulous auditorium that seats 150. People are using it for clients, but also for charity events, seminars, symposiums, political events, whatever it may be.

Mary: We have the branded DLA Piper entrance on the E Street side. We moved nine years ago and the office is light and open with high ceilings, it's a delight to work there. We added a cafeteria, which is a social collaborative aspect of working that has substantially increased the quality of life there. 

How do you feel about open floor plans?

Kurt: We moved two years ago and I put everyone who wasn't an attorney in an open floor plan. People were concerned it would be noisy and a distraction, but they acclimated. It's amazing, the floors are actually quieter now than they were in the old building where everyone had their own workspace. 

There's a growing trend of using off-site locations for some functions. Does your firm use that?

Dirk: We're in separate space outside of Philadelphia for those functions. Because we're adding a lot on the West Coast right now and have a good size office in Las Vegas, we're actually looking at Nevada for some off-site technology.

Sherry: We were working with a large firm's Atlanta office, where it employs 135 staff attorneys. When the office moved into a trophy class building, it moved the staff attorneys two blocks away to an almost C plus building, where they're almost all in cubes. Another example is that accounting for Pillsbury used to be in DC, now it's in Nashville; that allowed them to go to a smaller floor plate in DC.

Mary: Our accounting departments and record-keeping is in Tampa. We have document support out in North Dakota.

In managing a firm in the changing legal industry, what business strategies does it take to be successful?

Sherry: One of the biggest shifts we're seeing is a leadership shift, with highly paid non-attorney executives coming in from other industries to bring their wealth of expertise; someone from the tech or finance industry who comes in with a completely fresh eye.

Mary: I think part of being successful is fixed fee arrangements, and we're approaching that much more like a business and systemically evaluating it. As part of our approach, we have hired specialists from accounting and consulting firms on the management side who are tracking and managing it.