London law firms go sky high, but who pays?

London law firms go sky high, but who pays?

As law firm revenues and profits continue to reach new heights so do the buildings which house their industrious lawyers, most especially in London. The scope and scale of this vaulting ambition can be measured by the architectural majesty of their newly opened offices, or those which they soon plan to occupy.

In a competitive landscape, every extra vertical metre of steel and glass has become a statement of intent. But it also provokes a question: cui bono?

Thousands of lawyers now work at an increasingly elevated level. Globally, more than 5,000 buildings stand above 150m tall — most of them built in the past decade. According to the Skyscraper Center, an online database, thousands more are planned.

No data exists on how many are occupied in part by law firms, but in London the number is disproportionate compared to most other cities. Before the millennium, Londoners had fiercely resisted the proliferation of skyscrapers which have long dominated big city skylines in the US and are increasingly prevalent across Asia and the Middle East. Just visit Dubai or Shanghai for visible evidence of this trend.

Although London has no plans for a Burj Khalifa (828m) or a Shanghai Tower (632m), the number of new tall buildings (at least 20 storeys) planned for London has increased to 541, thanks to a glut of planning approvals. According to The New London Architecture (NLA) London Tall Buildings Survey 2018, they have become the new normal. Despite Sadiq Khan’s recent rejection of the 300m Tulip, only eight tall buildings were refused permission at the planning committee stage last year. 

However, given the much-heralded use of outsourcing, offshoring, nearshoring, and flexible working, logic would suggest that law firms need less space in the City of London or Canary Wharf rather than more of it. After all, it’s much cheaper to run your back office in Belfast, Manchester or Mumbai as opposed to Bishopsgate or Moorgate.  

But increasing their City footprint continues to be a law firm mantra. The finite nature of prime commercial locations means that growth is skyward. US law firm Cooley is the latest to announce a big move – into the 22 Bishopsgate tower, set to become the second-tallest building in Western Europe at 278m when completed. Down the road, Freshfields Bruckhaus Deringer will shortly be moving into 100 Bishopsgate (174m) after relinquishing its Fleet Street head office. Meanwhile Sidley Austin will also be relocating to 60 St Mary Axe, whose basement will house 328 bike places and 32 showers.

The argument is that a new high-tech office can provide everything that clients could possibly need in a fully digitised environment: what marketeers like to call a seamless offering. Having spent a year (2014-15) ensconced in Freshfields’ rather tired 1980s marble-clad building, I can understand the rationale. Compared to the other magic circle law firms – Allen & Overy (One Bishops Square), Clifford Chance (Upper Bank Street), Linklaters (Silk Street), and Slaughter and May (Bunhill Row) – the Freshfields working environment was somewhat less appealing.

For all the marketing speak, the critical benefit of spanking new offices is for lawyers (particularly young lawyers) who have to spend so many hours working there. On its UK graduates page, much is made of Freshfields’ relocation to Bishopsgate: ‘We will be occupying 12 floors of the 37-storey building, with Royal Bank of Canada and global investment bank Jefferies as our co-tenants. You’ll benefit from more modern working spaces, as well as the same amenities – dedicated fitness centre, staff restaurant – we have today. There’s never been a more exciting time to join the firm!’ Further details of the building include: 900 bicycle spaces, 50 showers and so on.

Beyond cycling to work and always having an available shower to pop into, law firms compete for the best by offering the best possible working environment: a key factor for having a first-rate office lies in attracting talent. Why else would Clifford Chance have a swimming pool? The firm’s signature perk, known to every would-be lawyer, remains a PR triumph. As the head lessee of a 31-story skyscraper, the firm also has a music room, complete with a grand piano.

And then there are the views. Try Bird & Bird for one of the best. When I was taken on a tour of the firm when they moved into Fetter Lane in 2017, it was hard not to be impressed by London’s beauty, visible from every window. The same goes for Kirkland & Ellis whose London office is spread over six floors of one of the capital’s most iconic new buildings, the Gherkin. Norton Rose Fulbright is equally spectacular: next to City Hall and right on the Thames, it looks across at the Walkie Talkie, the Cheesegrater and a panorama of the City skyline.

Of course, Allen & Overy can boast three roof terraces while the view from the 32nd floor of the Broadgate Tower, home to Reed Smith, offers one of the most dramatic vistas in the City. Moving inside, Linklaters has an onsite gym (as do several other firms) which is quite outstanding. Resident doctors, dental care packages, physios, shops, hairdressers, dry-cleaning services, free tennis lessons and taxi rides after 9pm: staff facilities of the bigger firms can begin to resemble what’s on offer at a five-star hotel.

And then there is the money. Newly-qualified associates at Linklaters and Freshfields have recently been bumped up to £100,000 as a starting rate of pay. This is to try and keep within touching distance of a raft of US law firms with London offices. The largest, White & Case, hires 50 trainees a year in London, who are paid £105,000 on qualification. Others offer considerably more, reaching £143,000 per year at the leading quartet: Akin Gump, Debevoise & Plimpton; Kirkland & Ellis and Latham & Watkins.

So whatever long hours are endured by young City lawyers, they can take comfort from the fact that the pay, the working conditions and the job security are largely without equal.

In all of this, it should not be forgotten that law firm clients ultimately foot the bill. When they enter the pristine, picture perfect vision of efficient modernity that most City now firms now aspire to, and indeed realise, they cannot help but be impressed: immense reception areas, immaculate uniformed receptionists, hi-tech security guards, high speed glass lifts, and capacious meeting rooms overlooking many of the City’s finest buildings – all at only £70-£80 per sq. ft.   

The next generation of lawyers will increasingly populate these gleaming new towers, based on sophisticated architects’ models, as they continue to rise. Remarkably, so do law firm profits. Sound management and best use of technology? To a point, yes, they play a part. But the money that fuels the ability to rent some of the finest skyscrapers known to man in the most expensive part of Europe’s most expensive city comes down to law firms’ collective ability to charge top dollar for what they do.

Does having thousands and thousands of square feet of extremely expensive office space always guarantee the best value for the client? Is it really necessary? Cui bono? As general counsel continue to ask themselves whether the gleaming image is matched by the reality of the service delivered, more managing partners should be asking themselves whether the business model on which their real estate choices are made are sustainable, or a bubble set to burst.

Dominic Carman

Written by:

Dominic Carman, journalist, writer and legal commentator.

Author: Dominic Carman