London law firms step up office hunt amid City space squeeze

London law firms are stepping up the hunt for new offices as a shortage of high-quality space pushes firms to plan ahead. Nearly half of companies hunting for London offices have leases expiring in 2029.

Demand from the legal sector increased 6.1% during the second quarter, according to new data from Knight Frank.

The figures reinforce a growing scramble for premium office space across the City, with law firms paying higher rents and increasingly using their headquarters to compete for talent and clients.

Richard Proctor, Knight Frank's head of UK occupier strategy, said there is a “pronounced mismatch” between demand and supply in the most desirable areas.

“Firms must account not only for future headcount and new ways of working, but also for the risk that preferred buildings will be unavailable if decisions are delayed,” he said.

City squeeze

The pressure is particularly acute in the so-called “City Core”, the central part of the Square Mile around areas including Bank, Liverpool Street and St Paul's, where Knight Frank expects demand for offices to substantially outstrip new supply over the coming years.

The area remains the main destination for law firms moving offices, accounting for eight of the nine legal sector deals recorded during the quarter.

Expansion is also driving the market. Almost three-quarters of recent law firm office deals involved firms taking more space.

RPC made the quarter's largest law firm move, taking almost 60,000 sq ft at 10 Devonshire Square, while Mishcon de Reya inked a 20-year lease for a move to a new London headquarters in 2029.

Sullivan & Cromwell is also reportedly on the lookout for a new London office that would double its footprint in the City.

Mergers move desks

Law firm consolidation is also a dynamic at play as recently merged businesses bring their teams under one roof.

Winston & Strawn's London staff moved into Taylor Wessing's headquarters following the firms' combination, while US firm Bracewell took over Winston & Strawn's former office at 100 Bishopsgate.

Knight Frank partner Jennifer Townsend said: “Real estate quickly becomes a strategic question following a merger.

“Firms must decide which location best represents the combined business, how teams will work together and whether the existing estate can accommodate different cultures, working practices and growth expectations.”

The scramble for high-quality space comes as many of the City's largest law firms continue to grow. Kirkland and Latham both passed $1 billion in London revenue for the first time this year, while several other US firms reported double-digit growth.