New York City law firms take a step back from rampant leasing activity

The average quarterly leasing activity for local law firms this year is down to 300,000 square feet, just below the 400,000-square-foot quarterly average for the first two years of the pandemic, in 2020 and 2021, and well below the two years before the pandemic, in 2018 and 2019, which reported a quarterly average of 700,000 square feet of activity, according to Savills.

In 2020 and 2021, law firms accounted for 11% of all office leases in the city, but their market share fell to 6.7% for the first three quarters of 2022, according to the data.

By comparison, the share of tech leases dropped by eight percentage points, to 8.5%, while financial services leases grew by 13 percentage points, to 43%.

The largest law firm lease inked in the city last quarter was from Freshfields Bruckhaus Deringer for a 180,000-square-foot office at Silverstein Properties’ 3 World Trade Center.

The Freshfields lease puts the law firm in a building that was finished in 2018, which is more than 20 years newer than the one it’s leaving behind at Boston Properties’ 601 Lexington Ave.—evidence of the flight-to-quality trend, which sees companies looking for offices in newer buildings with more amenities.

Freshields signed on for 15 years at the World Trade Center and will move there in early 2024.

The second-largest lease during that period was O’Melveny & Myers’ relocation to 142,000 square feet at Paramount Group’s 1301 Sixth Ave. That deal, however, is a contraction. The firm leased 355,000 square feet in its last space, at 7 Times Square, but has been decreasing its footprint over time and was down to 150,000 square feet before signing the new deal on Sixth Ave.

Meanwhile Kirkland & Ellis signed a 60.513-square-foot lease expansion at 601 Lexington Ave.

Year to date, New York has reported the largest volume of law firm leasing activity in the country, with just over 1 million square feet of space taken across 16 deals. During the first half of 2019, law firms signed under 1 million square feet of lease deals, Savills data showed.