Toronto real estate is still a deal for law firms according to new report by Jones Lang LaSalle
Jones Lang LaSalle’s new Global Law Firm Office Perspective advises law firms that office space options will thin as demand picks up and that prudent law firms should act now to find the best long-term deals in the market.
“Law firm occupiers are a significant force in real estate absorption, and the sector’s leasing activity may be seen as a barometer for the commercial real estate recovery status,” said Jones Lang LaSalle vice president Phil Dowd Senior. “Approximately 4.1 per cent of Toronto’s office market is occupied by law firms and of the 640 tracked in the report almost 90 per cent are located downtown. The top 25 (occupying more than 50,000 square feet) are located within the financial core.”
Toronto’s office market is still favourable for tenants with average Class A asking rents at $23.89 per square foot along with the discounts on sublease space at 40 per cent. Tenants can still negotiate sizeable discounts on rental rates and tenant inducements.
“South of the boarder, tenants are negotiating some very respectable rental rates. In cities such as Dallas with average rental discounts in the 12-15 per cent range or Miami and St. Louis at 20 per cent. However in Chicago it is more difficult to secure such negotiations where discounts are negligible, as well as Washington D.C where five per cent is typical,” said Dowd.
Law firm tenants in Toronto have stepped up their leasing activity over the past year. The recent uptick in leasing coupled with limited new development means that over the next 12 to 18 months there could be limited space options for large users. Current conditions for law firms and other tenants remain favourable across most parts of the continent, but the question is: for how long?
“For the remainder of this year and into 2011, law firms in most North American markets will maintain the upper hand. However, like Toronto the best space in core markets such as Washington D.C and San Francisco is already being leased,” said Richard Haig, senior vice president, Jones Lang LaSalle. “It makes sense to take advantage of favourable rates while the best space options are still available. In Toronto the competition amongst law firms is less aggressive with only six per cent of the law firms actively seeking space. In the last few years many of Toronto’s large law firms have completed lease transactions with substantial investments in leasehold improvements. In many cases they have relocated to contemporary LEED certified buildings.”
The report, which looks at law firm hubs across the globe, finds that in Washington D.C. where the real estate market comprises 73 law firms that occupy more than 50,000 square feet, North America’s largest concentration, comprises 35 per cent of the overall market. More than one third of those law firms are actively looking for space. Silicon Valley ranks second where 34.3 per cent of the market is made up of law firms followed by Miami at 25.6 per cent. While New York, Chicago and Boston have the most law firms leasing 50,000 square feet or more, Philadelphia has 25.5 per cent of its law firm tenants actively seeking space and Los Angeles has 20 per cent.
|
City |
Percent of city occupied by law firms |
Number of law firms occupying more than 50,000 s.f. |
Percent of firms compromising overall active requirements in the market: |
|
Atlanta |
3.5% |
26 |
16.3% |
|
Boston |
12.2% |
31 |
16.6% |
|
Chicago |
12.4% |
53 |
8.0% |
|
Dallas |
4.7% |
22 |
1.0% |
|
Hong Kong |
9.9% |
4 |
15.0% |
|
Houston |
18.2% |
22 |
4.8% |
|
London |
7.0% |
64 |
13.0% |
|
Los Angeles |
17.5% |
43 |
20.0% |
|
Miami |
25.6% |
6 |
14.1% |
|
New York |
12.1% |
117 |
15.0% |
|
Philadelphia |
22.7% |
19 |
25.5% |
|
San Diego |
15.5% |
17 |
10.0% |
|
San Francisco |
7.8% |
23 |
13.8% |
|
Silicon Valley |
34.2% |
12 |
18.0% |
|
St. Louis |
6.3% |
11 |
7.0% |
|
Toronto |
4.1% |
24 |
6.0% |
|
Washington, DC |
35% |
73 |
31.5% |