The Legal Tenant analyzed law firm transactions over 20,000 square feet (sf) across key U.S. markets and found that leasing activity ended the year with mild demand for the sector. Despite picking up some momentum midyear, fourth quarter leasing was slow with 1.1 million square feet (msf), down 31% from leasing during the same period one year ago (1.6 msf).
Tepid leasing activity could be indicative of a slowdown beginning in the sector, but one quarter is too short of a period to confirm whether this is the beginning of a greater trend. Law firms have begun pulling back in a number of ways ahead of a potential economic downturn and it is likely that real estate is one of the many cost items being considered as avenues for potential savings. Leasing decisions have long lead times and the current jitters about the economy may not be the primary driver of a dip in the fourth quarter. Leasing activity over the rest of 2023 will provide more clarity.
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Quarterly leasing volume for the industry has not seen a consistent return to pre-pandemic averages. Two years prior to the pandemic, quarterly leasing activity averaged 1.8 msf. Since 2020, the quarterly leasing activity average has fallen to 1.4 msf.
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