2023 was the strongest start to the year for the legal sector since before the pandemic in Q1 2019. The Legal Tenant analyzed law firm transactions over 20,000 square feet (sf) across key U.S. markets and found that leasing activity totaled 1.6 million square feet (msf) in Q1 2023 – a 45.5% jump from Q4 2022 (1.1 msf) and closer to the typical leasing volume of about 1.4 msf. Three out of four leases over 100,000 sf were headquarters locations, which tend to be among the largest for a firm and helped leasing volume pick up significantly.
As 2022 progressed, leasing activity in other sectors began to slow, particularly in Q4. More tenants began to adopt a “wait and see” approach by pausing leasing decisions ahead of a potential recession. With a sudden drop in legal sector leasing in Q4 it was unclear whether this was an early indication of a slowdown for law firms as well. Given that one quarter is too short of a period to make any determinations, the surge in leasing during Q1 2023 suggests that the drop was an anomaly with leasing returning to more typical levels.
Q1 leasing activity was above the average quarterly volume of 1.4 msf seen since the start of the pandemic. The largest transaction of the quarter was completed by Cadwalader, Wickersham & Taft LLP for 225,000 sf in a renewal at their headquarters, 200 Liberty Street in New York City. The firm chose to stay in place but contracted by roughly 34.7% (or 120,000 sf), giving up several floors. The second largest lease was completed by Katten Muchin Rosenman LLP for 204,000 sf at their headquarters at 525 W Monroe Street in Chicago. They also reduced their footprint, though not as drastically as Cadwalader, by returning 7.3% or 16,000 sf of space to their landlord.
