Almost 20 per cent of office take up in Cardiff last year involved law firms – the UK’s highest proportion, according to new research published by property consultancy Knight Frank.
According to Knight Frank’s ‘Your Future Now’ research, the legal services sector accounted for 19.2 percent of total Cardiff office take up in 2016.
The report highlighted new technologies, disruptive market entrants and shifting client demands as powerful forces transforming what lawyers do and how they operate.
Matt Phillips, head of Knight Frank’s Cardiff office, said:
“As a result, the law firm of the future will need to be more innovative, nimble, lean and tech focused. This, in turn, will transform the property requirements of the legal services sector.”
The study highlighted five trends that would shape the future of the sector – rapid advances in technology, the competitive threat to mid-tier firms, the arrival of more new market entrants, a radical change to the organisational structure and talent requirements of law firms, and a need to demonstrate skill, productivity and on-going innovation rather than simply scale.
These trends would dictate a different property requirement. Lee Elliott, head of Commercial Research at Knight Frank, said: “Law firms have been an integral part of the development and, in some instances, re-birth of regional office markets across the UK. Despite multiple pressures on the operating model of legal services firms, we firmly believe the sector will continue to be strongly represented across the UK regional markets.”
The competitive threat to the mid-tier firms would intensify in the future, with their market share threatened by dual pressures from top-tier law firms which had capital to invest in technology and which would increase their focus on high-end work, and from more agile market entrants able to offer process-driven work at a lower cost.
The report quotes the acquisition in October last year of MLM Cartwright Solicitors by Hugh James Solicitors, in the largest law firm acquisition deal in Wales. The deal saw Cardiff-based MLM Cartwright joining Hugh James’ existing business services and property teams. Alun Jones, Managing Partner, said the agreement was part of an acquisitive and organic growth strategy to confirm Hugh James as offering the “strongest commercial legal team in Wales with a growing city presence.”
According to Knight Frank’s report, the legal services landscape would become more crowded as alternative business structures gained traction by offering clients greater efficiency, quality and service.
The impact of these changes on the property requirements of the legal services sector would be significant.
Matt Phillips said:
“In Cardiff we are already clearly seeing the move to satisfy these new requirements by law firms.
“The flight to quality, with amenity-rich properties and locations that reﬂect brand and values, is evident in the demand by the legal services sector for the very highest-quality office buildings in central Cardiff.”
A key example was the decision by Hugh James to relocate to Central Square. The law firm signed up to 100,000 sq ft at the under-construction Two Central Square office scheme which is scheduled for completion in August 2018. Hugh James currently occupies two separate offices in the city.
The decision was driven by rapid growth and a focus on staff retention and attraction.
In addition, Blake Morgan took occupation of 28,077 sq ft at One Central Square, being the first occupier to commit to Phase I in the wider Central Square project that will eventually see up to one million sq ft of new office, residential and retail space built.
Matt Philips said:
“The tenant was previously in older Grade B accommodation, so the move to the top two floors in this prime building marks a transition towards higher quality space.”
Slater & Gordon had also relocated to 16,498 sq ft in Haywood House, South Dumfries Place, to enable staff to consolidate into new and enhanced single offices.
The report also found that other changes in property requirements would include a holistic view of real estate costs, more efficient use of space, and the incorporation of collaborative, client-centric and welfare space.
Matt Phillips commented:
“Although all this change is challenging to firms in the legal services sector there is a real possibility that Cardiff as a whole could benefit. As the growth of legal process outsourcing companies seeking to operate from more cost-effective locations takes hold regional markets such as Cardiff, where both a rental and operational cost discount to central London is clear, become extremely attractive.”