Office vacancies in the city reached 32.4 percent in the first quarter of 2024
Law firms in San Francisco and Los Angeles are increasingly moving their offices out of downtown areas based on recent data on law firm commercial leasing by Jones Lang Lasalle, the ABA Journal reported.
In San Francisco, 74 Am Law 100 firms occupy 4.8 million square feet. Despite this significant occupancy, office vacancies in the city reached a record high of 32.4 percent in the first quarter of 2024.
Los Angeles, home to 86 Am Law 100 firms leasing 4.5 million square feet, also saw a decline in commercial leasing, down 20 percent in the last two consecutive quarters.
"We are in a very complicated market," Kevin Bender, managing director of Jones Lang Lasalle’s Los Angeles office. "Los Angeles, San Francisco, and other urban areas like New York have seen rents agreed to on leases at the highest points in the history of those markets."
Bender highlighted a trend he described as a "flight to quality," where tenants, including law firms, seek more efficient and higher-quality office spaces. This shift is evident in Los Angeles, where firms are moving from Downtown LA to Century City, and in San Francisco, where firms are relocating from "A buildings" to "trophy buildings." These premier commercial real estate spaces are becoming increasingly desirable.
The Jones Lang Lasalle report further noted that more than 30 million square feet of law firm leases in nine key markets are set to expire. The report also indicated that "virtually no" new office construction projects began in the first quarter 2024.
Bender explained that law firms are driving the pursuit of quality, opting for nicer buildings that contribute to a better working environment. This trend reflects a broader movement among tenants to prioritize efficiency and quality over traditional downtown locations.
Overall, the report underscored a significant shift in the commercial real estate market for law firms in major urban areas, with a growing preference for high-quality, efficient office spaces over traditional downtown locations.
