Real Estate Roundup: Latest Leases Cap Busy Year
After personnel, real estate costs generally constitute the second-largest expense faced by many large law firms. Am Law 100 shops such as Mayer Brown and Hughes Hubbard & Reed were reminded of that this week when they inked new leases for their New York offices.
In one of the city’s biggest commercial real estate deals so far this year, Hughes Hubbard renewed a lease for 226,416 square feet of space at its downtown headquarters at One Battery Park Plaza for 20 years, according to sibling publication GlobeSt.
GlobeSt also reports that Mayer Brown is set to move its 200-lawyer New York office late next year from its present home at 1675 Broadway to the McGraw-Hill Building at 1221 Avenue of the Americas. The move will be a massive undertaking for the firm, which in 2005 signed a lease for 200,000 square feet of space at its old home near Times Square (where it has been for more than a decade), as it prepares to transition to 187,000 square feet at its new home.
Robert Flippin, an executive vice president with real estate brokerage CBRE, advised Mayer Brown on its hunt for a new Manhattan location. Flippin, who has worked with the firm on previous real estate matters, declined to comment on how much the firm is paying for the new space, citing confidentiality provisions he signs with all of his clients.
Mayer Brown's impeding move comes amid what a recent study by architectural and consulting firm Gensler—which frequently designs office space for large firms—describes as a trend among many firms away from traditional layouts toward more collaborative “flex” spaces in an effort to cut their “real estate footprint” and, ultimately, costs.
In announcing its new lease, Mayer Brown—the subject of a New Republic feature story this summer—attached itself to that trend by saying that its new office space “will encompass a modern design with the goal of maximizing efficiencies throughout, and will include first-class conference facilities with cutting-edge technology.”
Flippin says Mayer Brown was shopping for a new Manhattan lease for two years, a standard amount of time for a large firm keen on doing new construction, especially in a crowded city like New York.
“Firms are looking to create efficiencies for their space as they look to relocate,” Flippin adds. “There are good opportunities for tenants, but the market is getting stronger.”
Mayer Brown and Hughes Hubbard aren’t the only firms to find new Manhattan space this year. Cahill Gordon & Reindel took on an additional 13,500 square feet at 80 Pine Street—just down the block from The American Lawyer’s own offices—by leasing the entire 26th floor of the 38-story building, according to Real Estate Weekly. (Cahill already has 250,000 square feet across nine floors at its Manhattan headquarters.)
New York’s Patterson Belknap Webb & Tyler, an Am Law 200 firm whose sole office lease was set to expire in December 2014, renewed a 20-year lease for 200,000 square feet of space at 1133 Sixth Avenue earlier this year, according to the Commercial Observer.
Simpson Thacher & Bartlett also renewed the lease on its Manhattan office earlier this year, locking in 595,000 square feet of space at 425 Lexington Avenue, according to GlobeSt. That deal will provide a steady stream of income to JPMorgan Chase Asset Management—which bought the 31-story midtown skyscraper from real estate development firm Hines for a reported $750 million after Simpson signed on the dotted line—for the next 20 years.
CBRE’s Flippin says downtown Manhattan—where Brookfield Office Properties is marketing a bevy of new office space, including 400,000 square feet that Jones Day is reportedly planning to lease—and midtown's Hudson Yards development are among the neighborhoods attracting the interest of office-shopping firms.
Drinker Biddle & Reath, whose downtown Manhattan offices were devastated by the tragedy of September 11, 2001, stayed downtown by doubling the amount of space it occupies in the city earlier this year, signing a lease for 15,375 square feet on the 38th floor of Larry Silverstein’s office tower at 1177 Sixth Avenue, according to the Commercial Observer.
Drinker Biddle, which now has 30,750 square feet in the 50-story building, has also signed new leases this year on its office in Florham Park, New Jersey, and its headquarters in Philadelphia. The firm reduced its space at the latter location from 206,000 square feet to 155,000 square feet, according to Philly.com.
Some law firm leases can become onerous. Law360 reported this week that Weil, Gotshal & Manges's long-term office deal in Dallas is exacerbating the firm's Lone Star State woes. K&L Gates, meanwhile, is confronting its own real estate headaches in London—where payouts to partners have surpassed profits—by seeking to reduce its exposure to the city’s high rental costs, according to U.K. publication Legal Week.
Other leases can even haunt firms that have died. Witness the situation now playing out involving the suit filed last month by Dewey & LeBoeuf’s former New York landlord against 450 former partners of the now-bankrupt firm, according to our previous reports.
Two other Am Law 100 firms addressing their London real estate needs are Willkie Farr & Gallagher and Winston & Strawn, with both signing new leases this year at CityPoint, a 36-story office tower with a troubled financial history that is also home to the local offices of Cravath, Swaine & Moore, Simpson, and Vinson & Elkins.
DLA Piper, which is poised to save on rent by relocating its Sydney office after signing a new 10-year lease earlier this year, also hopes to consolidate its two London offices into one building as it searches for 200,000 square feet of space, according to Legal Week.
Back on this side of the Atlantic, DLA announced this year that it would relocate its office in Wilmington to the 21st floor of the 23-story Chase Manhattan Center, Delaware's tallest building. (Earlier this year Fox Rothschild also signed a new 11-year lease for 20,184 square feet at Wilmington’s Citizens Bank Center.)
DLA, which is in litigation with two real estate services businesses in Chicago over an office remodeling, also inked a lease this summer in the Windy City for 175,000 square feet of space in a 45-story skyscraper under construction in the West Loop area. McDermott Will & Emery signed up to become the building’s anchor tenant, taking 225,000 square feet of space in what Bloomberg reports is Chicago’s largest office project since 2008.
For its part, Winston reduced the size of its hometown Chicago offices 19 percent earlier this year by putting 75,000 square feet of space back on the market, according to Chicago Real Estate Daily.
Skadden, Arps, Slate, Meagher & Flom—which had its hand in a different kind of real estate deal when it advised Sony on the $1.1 billion sale of its Manhattan headquarters earlier this year—announced in July the relocation of its Boston office by downsizing to 47,000 square feet of space in a building in the city's Back Bay neighborhood. Clifford Naeve, the managing partner of Skadden’s base in Washington, D.C., spoke with sibling publication The Blog of Legal Times earlier this year about his firm’s decision to renew its lease two years ago in the nation’s capital.
Elsewhere in D.C., The BLT reported in August on Sidley Austin’s extension of its lease for 289,000 square feet of space through 2031 in the city. And Pillsbury Winthrop Shaw Pittman agreed earlier this year to become an anchor tenant of a new building going up at 1200 17th Street NW by taking 168,000 square feet at the property.
Miller & Chevalier joined the D.C. real estate parade this week by signing a 15-year lease for 84,000 square feet of space to become the anchor tenant of a building two blocks from the White House, according to The BLT. (Covington & Burling inked a deal late last year to become the anchor tenant at a brand new Beltway building, although presumably none of these firms have the D.C. office ducks for which Crowell & Moring has become famous.)
The Am Law Daily reported earlier this year on how Am Law 100 firms such as Arnold & Porter, Cooley, Goodwin Procter, and Sidley Austin were scoping out new space in Washington, D.C., Boston, and Houston, respectively.
Since then, other large firms across the country have been making plans for future moves of their own.
Day Pitney set up shop this summer in a stately Victorian property in Greenwich, Connecticut, while Wilson Elser Moskowitz Edelman & Dicker has moved its headquarters in suburban White Plains, New York, after signing a large lease back in December 2011.
Down south, Jones Day and Sedgwick have signed leases, respectively, in Miami at Brickell World Plaza and One Biscayne Tower, according to the sibling publication the Daily Business Review. The Tampa Bay Business Journal reported in May that Jackson Lewis had agreed to take 6,277 square feet of space at Tampa’s Wells Fargo Center. The firm opened its Tampa office in February with temporary space.
In Richmond, McGuireWoods signed on in January to become the anchor tenant of a new 15-story building in its hometown by taking 217,000 square feet of space at Gateway Plaza. Local—and Am Law 100—rival Hunton & Williams has secured a new lease for 257,400 square feet of space at nearby Riverfront Plaza, while Troutman Sanders has renewed a lease for 100,000 square feet of space at the Riverside on the James, a mixed-use development in downtown Richmond.
Baker, Donelson, Bearman, Caldwell & Berkowitz announced in May the renewal and expansion of its lease for 107,000 square feet of space at the First Tennessee Building in the city’s downtown. (Baker Donelson can also boast of having a unique office layout in Birmingham.)
Cooley, which moved into historic new D.C. digs in January, announced in March the relocation of its Seattle office with the signing a 10-year lease for 22,822 square feet of space. Elsewhere to the west, Gordon & Rees signed a lease in May for 24,000 square feet in Oakland, a deal the San Francisco Business Times reported might be a sign of spillover from an overheated Bay Area real estate market. (Shook, Hardy & Bacon unveiled this summer the designs for its new San Francisco office space.)
And finally, in Los Angeles, where Greenberg Traurig and Alston & Bird signed large new leases last year, Gibson, Dunn & Crutcher extended its lease in January for 268,000 square feet of space at the Wells Fargo Tower in the city’s Bunker Hill area.
As for Mayer Brown, the firm followed the lead of many U.S. businesses that tout their offices' green energy credentials—also known as Leadership in Energy and Environmental Design (LEED)—when signing new leases.
In announcing its new Manhattan digs, Mayer Brown notes that the space is “among the largest buildings in Manhattan to achieve LEED certification by the U.S. Green Building Council.”
Akin Gump Strauss Hauer & Feld made a similar proclamation in 2006 when it signed a 15-year lease for more than 203,000 square feet spread across six floors at the 51-story Bank of America Tower under construction in midtown Manhattan.
Alas, the building, located at One Bryant Park and completed in 2009, is actually something of an energy hog, according to a report by The New Republic that drew a strong response from the U.S. Green Building Council and other LEED advocates.