Law Firm Perspective Global 2012
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Law Firm Perspective Global 2012

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Conditions remain highly variable within the real estate markets at ...

Conditions remain highly variable within the real estate markets at
the core of global law firm portfolios. A number of markets are seeing
diminishing availability of high quality space options, while others
present good opportunities for law firms to enhance their position.
As clouds remain on the macroeconomic horizon, and caution persists,
law firms will need to adopt a forensic approach to the management of
their real estate portfolio. This will ensure that assets are optimised and
that firms outperform their direct competitors.
Opportunism will be evident in some real estate markets as law
firms react to the changing environment. The traditional focus on
prime locations and trophy buildings will remain, but it will also be
accompanied by a new emphasis on workplace productivity and
space efficiency.

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    Law Firm Perspective Global 2012 Law Firm Perspective Global 2012 Document Transcript

    • Law Firm PerspectiveGlobal 2012Preparing for growthConditions remain highly variable within the real estate markets atthe core of global law firm portfolios. A number of markets are seeingdiminishing availability of high quality space options, while otherspresent good opportunities for law firms to enhance their position.As clouds remain on the macroeconomic horizon, and caution persists,law firms will need to adopt a forensic approach to the management oftheir real estate portfolio. This will ensure that assets are optimised andthat firms outperform their direct competitors.Opportunism will be evident in some real estate markets as lawfirms react to the changing environment. The traditional focus onprime locations and trophy buildings will remain, but it will also beaccompanied by a new emphasis on workplace productivity andspace efficiency.
    • With pressure on firms to improve the efficiency and utilisation of their office space, and a growing number of firms exploring more open plan workplaces with a less cellular structure, many law firms are finding that today’s demands are testing... their existing buildings.
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 3
    • 4 Law Firm Perspective • Global • 2012 Jones Lang LaSalleJones Lang LaSalle Law Firm GroupIn the challenging economic environment we live in today, those occupancy services to our law firm clients, nationally and globally. Thewho are tasked with management responsibility for global, national team understands the importance of providing timely, accurate andor regional law firms increasingly find themselves in the real estate relevant market information to our clients to enable them to efficientlybusiness as a matter of sound firm management. The amount of time manage their real estate in such a way as to generate maximumrequired to deal with portfolios in multiple offices in different cities and/ productivity while mitigating cost.or countries has increased, and has become ever more complex withcritical events arising on a regular basis. These events are nearly Accordingly, we are proud to present the latest version of our globalalways contextual; accordingly, they require a deep understanding of market perspective. This annual report provides information on 30+local market conditions for proper evaluation and action. major markets across the Americas, Asia Pacific and Europe, the Middle East and Africa. The report details market trends for law firmsWith over 1,000 offices in 70 countries worldwide, Jones Lang LaSalle around the globe, with the goal of assisting you and your firm inhas the scope and platform to have a robust firm understanding of navigating the increasingly complex global marketplace.those issues and events. We trust you will find this information useful and solicit your feedback ifThe Jones Lang LaSalle Law Firm Group concentrates on developing there are areas, that you would like to see expanded in the future.occupancy strategies, executing transactions and providing related
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 5In this reportJones Lang LaSalle Law Firm Group  4 Melbourne  28In this report  5 Shanghai  29Global overview  6 Singapore  30Law firm market map  8 Sydney  31Global office property clock  9 Tokyo  32Americas  10 EMEA  33 Atlanta  11 Amsterdam  34 Boston  12 Brussels  35 Chicago  13 Dubai & Abu Dhabi  36 Dallas  14 Germany  37 Houston  15 London City  39 Los Angeles  16 Madrid  40 Miami  17 Milan  41 New York  18 Moscow  42 Philadelphia  19 Paris  43 San Francisco  20 Warsaw  44 Washington, DC  21 Contacts  45 Montréal  22 Toronto  23 Vancouver  24Asia Pacific  25 Beijing  26 Hong Kong  27
    • 6 Law Firm Perspective • Global • 2012 Jones Lang LaSalleLaw Firm Global PerspectiveLaw firms continue to face a tough global operating environment, with become increasingly critical growth drivers for all business sectors -macroeconomic pressures and uncertainty bearing down on many including law firms.of the business sectors they serve. After a period of internationalexpansion and growth prior to the global financial crisis, the last four Emerging market expansion returning to the agendayears have seen contraction and restructuring in the sector, with those Firms are increasingly looking to Asia for growth opportunities, withfirms previously dependent on financial services, particularly heavily a cluster of M&A activity between US, UK and established Australianimpacted. The fall of Dewey & LeBoeuf is perhaps the most notable firms as international firms seek to grow their presence in Asia. Africa isexample of the financial pressure faced by international firms but many also emerging as a nascent destination for law firms seeking to partnerothers have had to restructure, shed lawyers and pare back expansion with the growing number of corporate clients growing their businessesplans in light of the more challenging operating environment. in the region. Morocco has been one particular area of focus for law firms over the past year with activity including Bird &Bird forming anMargin pressure and tougher operating conditions have had an explicit association with El Amari & Associés, a legal services provider inand pronounced impact on the real estate strategies of law firms. A Casablanca. Istanbul has been another market of focus, while manymore proactive management of real estate as a tool to both reduce established firms in Moscow are seeing solid growth in businessoperating costs and improve productivity is being realised by many derived from domestic Russian clients.managing partners in law firms in the US, UK and beyond. Consolidation and lease events drive demand in mature marketsThis report assesses the real estate market conditions for law firms Lease events remain a key driver of real estate activity in maturein over 30 mature and emerging locations around the globe - the markets, in the absence of expansionary demand, acting as catalystsopportunities and challenges vary widely. For those firms operating for change and analysis of real estate options and strategy. Leasein multiple regions a clear understanding of this variance is becoming regears, renewals and renegotiations have been seen widely incritical to achieving sustainable growth. European markets, as firms have sought to take advantage of softer real estate market conditions and improve the terms of existing leases.Clouds remain on the economic horizonAfter a promising start to 2012, prospects have become gloomier In markets such as the UK consolidation is being widely seen amongacross the global economy. Once more it is problems in the developed mid-tier firms, with a number of firms linking up with regional andworld that are causing concern. Recent weeks have brought both national contemporaries to benefit from greater economies of scale.greater optimism and new fears in the Eurozone. The ECB’s new plan Such moves have been driving a consistent level of activity in realfor bond purchases and German support for additional ESM funds estate markets as firms take the opportunity to review existing realmean that the euro area at last has a credible strategy to ease market estate and optimise portfolios for the shape of the new business.speculation. At the same time, the deteriorating situation in Spain isan uncomfortable reminder that economic concerns will not disappear Larger, established firms have also shown an appetite to leverage theovernight. Such macroeconomic uncertainty has had a corrosive effect reduction in operating costs that active management of the real estateon corporate sentiment, and confidence remains fragile. portfolio can bring. Cost-saving and space-saving solutions are being widely explored with a some leading firms adopting the more open-The legacy of the financial crisis remains a yawning performance plan, efficient work spaces that many other companies have adopted ingap between advanced and emerging economies. Within a global other business sectors.expansion of 2.4% over the year, GDP growth in developed economiesis projected to be 1.3% during 2012 as deleveraging continues. Building obsolescence an issue to watchProspects for emerging markets are slower than last year, but the With pressure on firms to improve the efficiency and utilisation of theirdecline leaves growth at an enviable 5% year-on-year. This underlines office space, and a growing number of firms exploring more openthe fact that the emerging markets, particularly those in Asia, will plan workplaces with a less cellular structure, many law firms are
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 7finding that today’s demands are testing their existing buildings. Thesepressures are compounded by an increasing focus on sustainabilityand CSR objectives – areas in which real estate can make a significantand tangible impact. Over the coming years, and across a range ofglobal markets, building obsolescence will emerge a key issue forcingrelocation and impacting real estate strategy.Onshore, Nearshore, Offshore?Some law firms have also been assessing opportunities for locatingbusiness functions in lower cost nearshore or offshore locations as afurther way of reducing real estate costs in prime head office locations.After magic circle firms such as Clifford Chance and Allen & Overyexplored shared service centres in India and Belfast, in 2007 and 2011respectively, other large firms have been considering such moves,although perhaps not at the pace initially anticipated by manyindustry observers.There is also a growing trend to outsource low grade legal work withmany corporates looking to hand over routine legal work to lower-costsuppliers. Some big corporations, including Rio Tinto, are outsourcingroutine legal tasks, fuelling rapid growth at outsourced providers likeAxiom, CPA Global and Pangea3, which was acquired by ThomsonReuters. The outsourcing of legal services is likely to continue apaceimpacting real estate requirements and strategy.Real estate strategy to influence competitive position andfirm performanceThe tough economic and operating conditions firms have faced sincethe global financial crisis of 2008 have forced many businesses tomanage operating costs more actively. Law firms have clearly not beenimmune to that pressure. The value of real estate and effective portfoliomanagement as a tool to manage costs and improve productivity,has seen it move up the agenda for many companies. This reporthighlights the challenges and opportunities facing law firms in the widerange of international markets many now operate. As we move into2013, a considered and forensic approach to real estate strategy anddecision making will become increasingly critical for law firms seekingto outperform their competitors and maximise their own performance.
    • 8 Law Firm Perspective • Global • 2012 Jones Lang LaSalleLaw firm market map Mosow Amsterdam Germany London City Vancouver Toronto Montreal Paris Brussels Warsaw Chicago Boston Milan San Francisco Philadelphia New York Beijing Madrid Dallas Washington DC Los Angeles Tokyo Atlanta Shanghai Houston Miami Dubai & Hong Kong Abu Dhabi Singapore Sydney Melbourne
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 9Global office property clock Amsterdam Paris CBD Shanghai London, Melbourne Stuttgart Singapore Moscow, Warsaw, Berlin, Düsseldorf, Vancouver Rental Growth Rents Hong Kong Hamburg, Toronto Slowing Falling Beijing Cologne, San Francisco Munich, Montréal Houston Rental Growth Rents Accelerating Bottoming Out Sydney Abu Dhabi Dallas Dubai New York Washington DC Madrid Boston, Philadelphia Brussels Tokyo, Los Angeles Frankfurt, Istanbul, Milan Rome, Atlanta, Chicago, MiamiAmericasAsia PacificEMEAThe clock diagram illustrates where Jones Lang LaSalle estimates each position refers to prime face rental values. Markets with a “step pattern”prime office market is within its individual rental cycle as at end of the of rental growth do not tend to follow conventional cycles and are likelysecond quarter 2012. to move between the “hours” of 9 and 12 o’clock only, with 9 o’clock representing a jump in rental levels following a period of stability.Markets can move around the clock at different speeds and directions.The diagram is a convenient method of comparing the relative positionof markets in their rental cycle. Their position is not necessarilyrepresentative of investment or development market prospects. Their
    • 10 Law Firm Perspective • Global • 2012 Jones Lang LaSalleAmericasJones Land LaSalle’s law firm index selection. Finally, overall office leverage for tenants has little bearingThis index measures the environment for legal tenants within both a on the legal sector. High-scoring markets, for example, range fromgiven market and comparatively among markets throughout the United Washington, DC, which is moving further into tenant-favourableStates. Three component scores comprise the Jones Lang LaSalle territory, and New York, the tightest market nationally in termslaw firm index. These three main categories quantify the quality of of vacancy.talent within a metro area and footprint of firms in the area (presencein the market), pricing and concessions favourability across cities and Large presence Moderate presence Small presenceavailability of space and leverage across markets. The index, which Index score:takes into account 30 different metrics and data points among the three Flexible pricing Moderate pricing Limited pricingmajor buckets, ranks markets that score highly as the most favourable 46.6for firms to occupy, relocate to and/or expand. Large availability Moderate availability Limited availabilityMajor gateway markets tend to fall near the top of the list as a large Tier 1 markets: Tier 2 markets: Tier 3 markets:catchment base and status as international gateways are key factors • Law firm friendly • Somewhat law firm • Not law firm friendly • Strong presence of law friendly • Small legal footprintfor firms deciding where to maintain offices. Overall trends factor into firms in metro area • Concentration of law compared to overallthe index as well: most markets are seeing stagnant to declining levels • Growing or stable legal firms, but not a key office marketof legal employment, both in overall volume and as a percentage of services employment user of office space • Declining legal • Legal services • Stable or slightly services employmentoffice-using and total employment, as well as continued downsizing to comprises significant declining legal services in most casesmaximise efficiency. portion of office jobs employment • Legal services • Variety of block • Legal services comprises a small options and occupier- comprises an average fraction of office jobsAt the same time, cities with significant premiums for Class A and favourable leverage portion of office jobs • Limited blockTrophy space manage to outrank their peers, indicating that other • Block options exist, but availability and not readily available landlord-favourablefactors are more at play in the minds of legal tenants for market leverage
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 11Atlanta Index score: 52.9 Moderate presence Flexible pricing 8.4% Percent of Class A market 10.0% Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: Law firms in Atlanta are located in the Central BusinessDistrict along the Peachtree corridor in A-plus tower space, especiallyin Midtown. Some firms opt for Downtown for easy access to the city’s 18 Number of law firms occupying 22 Number of AmLaw 100 firms withcourthouses and government agencies, while to the north, Buckhead’s financial greater than 50,000 sq ft offices locallydistrict has also attracted some of Atlanta’s most visible firms. 2012 Law firm completed transactionsLaw firm activity has been relatively quiet in 2012 after a year in which some of thecity’s biggest firms committed to relocating or renewing existing space. ‘Givebacks’ Alston & Bird 1201 West Peachtree Street of space seem to have stabilised, with many firms keeping the same footprint or 366,000 sq fteven adding small amounts of space. There are no ‘big game hunters’ in the market Relocationon par with what was seen in 2010 and 2011. Activity has been concentrated in theBuckhead and Midtown submarkets with a handful of renewals occurring Downtown. Paul Hastings Conditions generally remain in favour of occupiers, and particularly for this highly 1170 Peachtree Street sought-after tenant sector. 75,000 sq ft RelocationNonetheless, large firms seeking premium high-floor Trophy space in Buckhead willfind options limited. Demand is likely to funnel towards Midtown given the Class A Bondurant Mixson & Elmorevacancies that remain elevated there. Overall, law firm growth appears to be neutral 1201 West Peachtree Streetin Atlanta. 35,000 sq ft Renewal with expansion Active Law Firm Requirements in the market (sq ft) Bryan Cave 90,000 Hunton & Williams 70,000 Burr & Forman 40,000 OUTLOOK Top challenges for law firms • Particularly in Buckhead, there is limited availability of large contiguous blocks PRICING AND incentives of premium space in the Trophy towers, which will cause pricing conditions to tighten sooner than other urban submarkets. Overall • Space options are further limited for law firms unwilling to relocate into buildings Average Class A asking rent $25.10 already occupied by competing legal groups. % annual change in Class A asking rent 2.2% Top opportunities for law firms Average % rent discount for negotiated rent 4.3% • Midtown, Atlanta’s traditional legal corridor, still has plenty of choices for top-tier Average % rent premium for Trophy space 12.0% blocks of space, and thus landlords remain generally aggressive on concessions here. Average % rent discount for sublease space 24.0% • One of the most highly sought-after tenant sectors, law firms can capitalise on Average annual escalation or bump 2.8% market conditions that overall, across the region, remain tenant-favourable as owners fight to lure tenants. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $54.00/$23.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 12/4 Landlord-favourable market
    • 12 Law Firm Perspective • Global • 2012 Jones Lang LaSalleBoston Index score: 51.3 Large presence Moderate pricing 20.0% 16.3% Percent of Class A market Percent of law firms comprising Moderate availability occupied by law firms active tenants in the marketLocational preference: The city’s premier law firms occupy space at the mostprestigious office towers in Boston’s Back Bay, Financial and Seaport Districts.Over the course of the past year, some law firms that have been traditionally 33 Number of law firms occupying 29Number of AmLaw 100 firms with greater than 50,000 sq ft offices locallylocated in the suburbs or Cambridge have chosen to move to theSeaport District. 2012 Law firm completed transactionsIt was a rather quiet year for the legal services industry in the Boston area. With Mintz Levin limited large lease expirations and the volatility in the greater economy, rightsizing One Financial Center was still a trend for those firms transacting. While some law firms have cut 245,000 sq ft headcount over the past few years, many are realising their current spaces are Renewalnot as efficient as they could be. Gone are the days where large law libraries areneeded. Law firms are now looking towards technology to provide greater workplace Pepper Hamilton solutions and this is reducing space needs by close to 20.0 percent in many cases. 125 High Street With the high cost to fit-out space versus the amount landlords will contribute in 42,105 sq ft tenant improvement allowances, law firms are faced with the economic challenge of Renewal with expansionobsolete work space or increased capital expenditures to make a change. Collora Boston still remains a core real estate market and a market that many national law 100 High Street firms continue to add a presence to. Comprising approximately 20.0 percent of the 18,698 sq ft RelocationClass A market, along with just over 16.0 percent of active tenants in the market, lawfirms will still play a significant role in real estate activity this year and their decisionswill continue to shape the future of ever-changing occupier trends. Active Law Firm Requirements in the market (sq ft) Goodwin Procter 360,000 Goulston & Storrs 140,000 Riemer & Braunstein 60,000 OUTLOOK Top challenges for law firms • Firms in obsolete space face economic challenges due to a jump in rents for PRICING AND incentives quality, efficient footprints. • Premier large blocks of space are dwindling. Overall Average Class A asking rent $52.24 % annual change in Class A asking rent 6.7% Top opportunities for law firms Average % rent discount for negotiated rent 10.0% • Tenants still have a small window of opportunity to find real value in CBD low and Average % rent premium for Trophy space 22.0% mid-rise space options. • Larger, creditworthy firms can partake in potential build-to-suit opportunities in the Average % rent discount for sublease space 35.0% developing Seaport District. Average annual escalation or bump 2.0% New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $60.00/$35.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 5/2 Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 13Chicago Index score: 58.4 Large presence Moderate pricing 16.5% 20.0% Percent of Class A market Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: The majority of Chicago’s law firm tenants are located inthe West Loop and Central Loop submarkets. However, two new office towersin River North have attracted law firms north of the river. 54 Number of law firms occupying 36Number of AmLaw 100 firms with greater than 50,000 sq ft offices locallyFor many firms, economic realities have fundamentally changed the legal industryin what seems to be a permanent way. Lower and more competitive fee structures 2012 Law firm completed transactionshave affected margins, causing firms to re-examine all expenses including real Foley estate. In addition, firms with second-generation or older space are finding that 321 N Clark Street it is no longer conducive to how they practise law. The firms that have made the 173,000 sq ft commitment to build modern space are benefitting from the investment, but there Renewal with contractionare significant capital barriers that prevent others from doing the same. Latham & Watkins The Chicago market remains largely tenant favourable; however indicators are 330 N Wabash Avenue showing early signs of the environment trending towards more neutral conditions. 137,000 sq ft The exception to this is large users, including many law firms, which have dealt with Relocationa dearth of large block options for some time and are already feeling the impact ofa leverage shift. Though several developers have plans to break ground in the near Perkins Coie future, delivery of a new building is still several years away. 131 S Dearborn Street 104,000 sq ft Continued economic uncertainty, as well as merger and acquisition activity, have Renewal with expansionleft some decision-makers cautious when considering future space plans and howto accommodate the seemingly inevitable fluctuations in office needs. No matter thesize of the firm, negotiating flexible lease terms will be paramount to law firms Active Law Firm Requirements in the market (sq ft)going forward. McDermott 250,000 DLA Piper 225,000 SNR Denton 125,000 OUTLOOK Top challenges for law firms • Large tenants are beginning to feel the effects of a tightening big block market, PRICING AND incentives resulting in a shift in leverage in favour of landlords. • The field of viable options for large users will continue to narrow in the coming Overall years as new development is four to five years away from delivery. Average Class A asking rent $35.87 % annual change in Class A asking rent 8.0% Top opportunities for law firms Average % rent discount for negotiated rent 5.0% • Small- and mid-sized law firms still have an abundance of options in the market, Average % rent premium for Trophy space 34.0% allowing them to more easily secure transactions that reduce operating costs. • An increasing number of law firms are considering aggressive space standards, Average % rent discount for sublease space 30.0% including universal office sizes for attorneys, which along with several other Average annual escalation or bump 2.5% efficiency initiatives, has helped firms give back approximately 17.0 percent of space when they relocate locally. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $65.00/$45.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 9/5 Landlord-favourable market
    • 14 Law Firm Perspective • Global • 2012 Jones Lang LaSalleDallas Index score: 53.0 Large presence Flexible pricing 14.0% 5.0% Percent of Class A market Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: Approximately 80.0 percent of law firms are located inthe Dallas CBD and Uptown submarkets, with some additional firms located inPreston Center, N Central Expressway and Far North Dallas. 23 Number of law firms occupying 19Number of AmLaw 100 firms with greater than 50,000 sq ft offices locallyIn the next few years there will a great deal of churn in the law firm space as manyfirms have leases expiring in the 2013 to 2016 time frame. Typically firms are 2012 Law firm completed transactionslocated in second-generation Class A buildings in the Dallas CBD and will need tomake the decision to renew at the older, less desirable locations or move to newer, Baron & Budd 3102 Oak Lawn Avenue more expensive locations (i.e. Uptown). This next wave of lease expirations in 2013 47,030 sq ft already has several of these firms actively pursuing spaces in the market. Renewal with expansionThere is a great deal of churn anticipated over the next few years with law firms Hallett & Perrin in older spaces more likely to move (buildings like Lincoln Plaza, Trammell Crow 1445 Ross Avenue Center, 2100 Ross, and Fountain Place are expected to benefit), while law firms in 23,427 sq ft more modern space are more likely to renew. RelocationNew construction in Uptown is an attractive draw, but the economics of Class A Jackson Lewis space in the CBD will win out in many cases, where rents are 30.0 to 40.0 500 North Akard Street percent lower. 19,647 sq ft Relocation Active Law Firm Requirements in the market (sq ft) Locke Lord 180,000 Jones Day 140,000 Jackson Walker 120,000 OUTLOOK Top challenges for law firms • The overall market has shifted from strongly tenant-favourable to more neutral PRICING AND incentives conditions and net effective rents are rising, especially in Uptown. • Limited new construction over the next few years will force law firms with near- Overall term lease expirations to renew in place or consider second-generation space. Average Class A asking rent $21.25 • Financing constraints for new development will push construction levels below historic norms. % annual change in Class A asking rent 1.5% Top opportunities for law firms Average % rent discount for negotiated rent 12.0% • An abundance of full-floor or smaller blocks of space remain available for Average % rent premium for Trophy space 30.0% smaller firms. • One or two new construction projects may begin construction in the intermediate Average % rent discount for sublease space 40.0% term, which could deliver in the next 24 to 30 months. Average annual escalation or bump 2.5% • The increase in institutional ownership in the CBD makes existing properties more attractive to law firms. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $45.00/$20.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 12/0 Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 15Houston Index score: 49.8 Large presence Moderate pricing 15.0% 2.0% Percent of Class A market Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: The majority of law firms are located in the CBD, Galleria andGreenway Plaza submarkets. Firms tend to prefer Trophy or Class A space in closeproximity to energy clients, as well as those buildings near the CBD courthouse with 28 Number of law firms occupying 44Number of AmLaw 100 firms withmarketable and well-known addresses. Due to the current scarcity of large blocks greater than 50,000 sq ft offices locallyof available space in the preferred submarkets, as well as the recent shift of newconstruction and clients to the West Houston submarkets, law firms will soon be 2012 Law firm completed transactionsforced to expand their search for space towards these suburban areas. Morgan Lewis 1000 Louisiana Street Houston’s status as a global energy leader has enabled a large influx of law firms to 89,518 sq ft locate in Houston and the CBD. Centrally located near the Houston City Hall and city Renewaland county court houses, the CBD attracts and retains boutique law firms specialisingin commercial and global energy practice litigation. The CBD remains Houston’s Crain Caton & James predominant location for law firm tenants, with over 4.4 million square feet being 1401 McKinney Street occupied by notable tenants such as Vinson & Elkins, Fulbright & Jaworski and Baker 29,558 sq ft Botts, among many others. RenewalLaw firm tenants in the market have remained active despite the recent economic Strasburger Price slowdown. While we have recently seen several notable lease transactions, such as 909 Fannin Street Morgan Lewis’ renewal of nearly 90,000 square feet at the iconic Wells Fargo Plaza 28,226 sq ft (1000 Louisiana), the current trend among Houston law firms is to downsize and give Expansionback space. For example, Locke Lord recently gave back four floors of space totaling110,000 square feet at Chase Tower (600 Travis). Furthermore, it has been noted thatLocke Lord temporarily ceased the subsidisation of its associates’ parking; all a move to Active Law Firm Requirements in the market (sq ft)cut costs in light of the national economic downturn. Susman Godfrey 75,000Law firm tenants continue to proceed in a cautiously optimistic manner, and cost control Coats Rose 60,000seems to be the key objective of many firms in the area. However, we expect activity toincrease in the coming years as many law firm leases are set to expire over the next 24 BakerHostetler 50,000to 36 months. This will result in an increased competition for quality, second-generationspace. While construction costs for commercial law firm build-outs are increasing, they OUTLOOKhave held fairly steady over the past 12 months. For renovations of second-generationoffice space, hard construction costs for upgraded law firm projects range from $40 per Top challenges for law firmssquare foot on the low end to $80 per square foot on the higher end. • Large blocks of space available in choice submarkets (CBD, Greenway Plaza) will continue to decline as no new developments are in the pipeline. PRICING AND incentives • Landlords will continue to raise asking rents and scale back concession Overall packages in prime Class A buildings as Houston’s economy continues to grow. • In order to secure the most favourable rates on available space, law firms must Average Class A asking rent $37.89 be willing to enter the market sooner despite future-term lease expirations. % annual change in Class A asking rent 4.0% Top opportunities for law firms Average % rent discount for negotiated rent 5.0% • Over the next 18 to 36 months, new Class A buildings are coming online in the Average % rent premium for Trophy space 11.0% Galleria/West Loop and West Houston submarkets, offering firms the chance to Average % rent discount for sublease space 20.0% move into higher-quality spaces with premier amenities. • Energy-focused law firms will continue to see growth as a result of the booming Average annual escalation or bump 1.8% energy market in Houston and in South Texas (Eagle Ford Shale Play). New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $40.00/$35.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 6/2 Landlord-favourable market
    • 16 Law Firm Perspective • Global • 2012 Jones Lang LaSalleLos Angeles Index score: 61.9 Large presence Flexible pricing 19.4% 23.0% Percent of Class A market Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: A majority of CBD law firms are located on Bunker Hilland the Financial District. A large number of Westside legal tenants tend tobe concentrated in Century City and in the Water Garden in Santa Monica. 80 Number of law firms occupying 51 Number of AmLaw 100 firms with greater than 50,000 sq ft offices locallyDowntown’s financial core could attract well-entrenched Bunker Hill law firms asthe area continues to benefit from retail-led revitalisation. The Westside marketcould see a shift away from pricier submarkets such as Beverly Hills and Santa 2012 Law firm completed transactionsMonica, to Century City, which currently has a higher vacancy. Lewis Brisbois Bisgaard & Smith 221 N Figueroa Street Los Angeles-based law firm tenants are once again thinking in terms of recruitment 160,415 sq ft and seeking locations that appeal to their employee base. Law firm Morrison RenewalForester has relocated from Bunker Hill to the amenity-rich Financial District andwe anticipate other large downtown relocations in the next couple of quarters. We Alston & Bird also expect to see more long-term leases signed as companies gain increasing 333 S Hope Street confidence in the regional economic outlook. 80,000 sq ft RenewalOn the Westside, law firms choosing to locate in Santa Monica, which has thelowest vacancy in the region, will face strong competition for Class A space. Morrison Foerster Entertainment, technology and media companies have driven recent growth. On the 707 Wilshire Boulevard other hand, Century City will continue to offer prime location opportunities for those 77,300 sq ft Relocationlaw firms wishing to trade up.The Downtown market could see a dramatic change in ownership with one of itslargest owners placing its entire 7.3 million-square-foot portfolio, comprised of 37.0 Active Law Firm Requirements in the market (sq ft)percent of the downtown Class A market, on the market for sale. Should an existing Sedgwick 80,000large downtown landlord acquire the entire portfolio, the new ownership wouldstand to gain substantial leverage, and we could see even greater pricing discipline Pepper Hamilton 25,000exerted in the market. Consequently, the window of opportunity to lock in favourable Polsinelli Shughart 25,000rates could be more limited. OUTLOOK Top challenges for law firms • Potential disposition and sales of the MPG Portfolio to a local competitor could PRICING AND incentives instill more market discipline and cause rents to increase. • Low vacancy in Santa Monica could compel landlords to increase rents further. Overall • Cash-strapped owners remain unable to offer high tenant improvement Average Class A asking rent $41.64 allowances. % annual change in Class A asking rent 1.3% Top opportunities for law firms Average % rent discount for negotiated rent 10.0% • A large number of contiguous blocks of space available in Downtown and Average % rent premium for Trophy space 17.3% Century City will provide firms with ongoing leverage. • Los Angeles continues to offer law firms great value in terms of rent, relative to Average % rent discount for sublease space 20.0% other gateway markets. Average annual escalation or bump 3.5% • Now is a great opportunity to trade-up to Trophy assets or amenity-rich locations. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $60.00/$30.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 10/4 Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 17Miami Index score: 47.8 Large presence Moderate pricing 17.0% 41.7% Percent of Class A market Percent of law firms comprising Moderate availability occupied by law firms active tenants in the marketLocational preference: Miami’s CBD is comprised of two submarkets, Brickelland Downtown. 71.0 percent of Class A law firm users occupy space withinthe Downtown sector of the urban core. Up to 600,000 square feet of demand 6Number of law firms occupying 20Number of AmLaw 100 firms with greater than 50,000 sq ft offices locallyis expected from this industry sector. Of this, nearly 344,000 square feet areactively touring market wide – 85.0 percent of which are CBD requirements.Look to another 249,000 square feet not yet touring, but up for renewal – all of 2012 Law firm completed transactionswhich will remain in the CBD. Hogan Lovells 600 Brickell Avenue Despite the dissolutions and defections among law partners and the bleak job 40,000 sq ft market for new law school graduates, Miami’s legal tenants have still managed to Relocationrenew, expand and open new offices. Market-wide, Trophy product has capturedover 80.0 percent of all law firm transactions, with the bulk of occupancy on a Diaz Reus square footage basis occurring in Downtown. On the ‘mega’ tour activity front 100 S.E. Second Street (requirements at or above the 40,000-square-foot benchmark) over one-quarter or 14,500 sq ft 545,000 square feet of all Miami’s tours fell within this range. While several industry Renewal and expansionsectors made up these tours, the largest in order of size were law firms. Stroock One of the first noted transactions to be publicly announced going into third quarter 200 S. Biscayne Boulevard tracks along the same trend – demand for prime spaces within the CBD and some 14,500 sq ft Renewalof its largest occupiers emanating from the legal industry. During the first quarter,Hogan Lovells (AmLaw’s sixth-ranked firm) signed a short-term lease for 21,000square feet in Downtown at Florida’s largest Trophy asset (Southeast Financial Active Law Firm Requirements in the market (sq ft)Center). By third quarter, recent press coverage indicated a long-term commitmentin the CBD’s newest Trophy tower, Brickell World Plaza. The building, located in the Holland & Knight 100,000Brickell sector, will see Hogan occupy 40,000 square feet. Gunster 25,000 The Ferraro Law Firm 20,000 OUTLOOK Top challenges for law firms • ‘View space’ for law firms remains limited even in some of the new developments PRICING AND incentives that delivered vacant during the last cycle. • Space properly sized to accommodate new criteria. Overall • Efficient use of space due to new technology (no more big libraries, mailrooms). Average Class A asking rent $40.77 % annual change in Class A asking rent -2.3% Top opportunities for law firms Average % rent discount for negotiated rent 4.0% • The lease environment remains overall favourable, if not excellent, for Average % rent premium for Trophy space 10.0% premium space. • Net rents continue to be driven down due to oversupply via new development in Average % rent discount for sublease space 11.5% the last cycle. Average annual escalation or bump 3.0% • New buildings and upgrades from existing product offer high-end finishes, increased amenities and efficiencies. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $40.00/$35.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 7/7 Landlord-favourable market
    • 18 Law Firm Perspective • Global • 2012 Jones Lang LaSalleNew York Index score: 61.5 Large presence Flexible pricing 11.7% 16.9% Percent of Class A market Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: The majority of law firms in New York are located inthe Midtown and Downtown submarkets. Specifically, firms gravitate to newerClass A and Trophy buildings within the Financial District, Columbus Circle, 118 Number of law firms occupying 83 Number of AmLaw 100 firms withGrand Central, Plaza District and Times Square. There is a migration of firms greater than 50,000 sq ft offices locallymoving to the west side of Midtown and Downtown. With large blocks of ClassA and Trophy space becoming available Downtown at a significant discount to 2012 Law firm completed transactionsMidtown rents, Downtown provides an attractive alternative for firms to relocate.Many top firms, however, chose to remain in the Plaza District. Chadbourne & Parke 1301 Avenue of the Americas 200,000 sq ft Despite a handful of high-profile transactions this year, total occupancy in the legal Relocationservices industry has been receding in Manhattan as many firms contract, both inhead count and square feet per employee. Year-to-date, law firm leasing activity Wilson Sonsini Goodrich & Rosati represents just 5.3 percent of total, compared to 17.0 percent in 2007. 1301 Avenue of the Americas 48,980 sq ft Top New York law firms are facing flat to declining profits, as a result of a contraction Renewalin overall business volume (in specific, dramatically reduced transaction activity onWall Street), increased competition, outsourcing of low margin work and insourcing, Akerman with companies increasingly relying on in-house legal staff. Dewey & LeBoeuf—in 666 Fifth Avenue business for more than a century-filed for bankruptcy in early 2012 and vacated 48,166 sq ft 475,000 square feet at 1301 Avenue of the Americas. Chadbourne & Parke recently Relocationsigned a direct lease to take 200,000 square feet of Dewey’s space. Chadbournewill fully rebuild Dewey’s space to adopt new law firm standards and efficiencies. Active Law Firm Requirements in the market (sq ft)Many legal firms are opting to renew, often several years in advance, to lock-in White & Case 400,000current terms and avoid the upfront costs of relocation and existing asset write-offs. Kaye Scholer, however, signed a letter of intent to take 260,000 square feet in Kaye Scholer 250,000Boston Properties’ new development at 250 West 55th Street in what may prove to Mayer Brown 250,000be the largest transaction of 2012. A bright spot in the industry has been the modestrebound in M&A activity and growth in the new media and technology industries,which provides opportunities for firms that specialise in those fields. OUTLOOK Top challenges for law firms • Legal services has been one of the slowest industries to recover from the downturn, PRICING AND incentives with employment still down 8.5 percent in Manhattan since the 2008 peak. • Rising Trophy rents, coupled with lower profits, are forcing firms, which have Overall traditionally occupied the top end of the market, to consider more cost- Average Class A asking rent $65.62 effective options. % annual change in Class A asking rent 7.4% Top opportunities for law firms • By becoming more efficient, law firms that have relocated have been able to Average % rent discount for negotiated rent 15.0% shed approximately 15 percent of their footprint. Average % rent premium for Trophy space 20.7% • Even with decreased vacancy rates, viable options are available, particularly in Average % rent discount for sublease space 19.3% Midtown West and Downtown, which have a significant amount of new construction. Average annual escalation or bump 1.7% • With the growth of the new media and technology industry, there is opportunity New/Renewal (assuming 10-year term) for firms that specialise in those sectors. Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $51.69/$31.47 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 7/6 Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 19Philadelphia Index score: 50.5 Large presence Moderate pricing 20.3% 26.1% Percent of Class A market Percent of law firms comprising Moderate availability occupied by law firms active tenants in the marketLocational preference: The majority of Philadelphia’s law firms are located inthe CBD’s Market Street West submarket. This location provides easy accessto abundant amenities and immediate proximity to the city’s concentration 23 Number of law firms occupying 18Number of AmLaw 100 firms with greater than 50,000 sq ft offices locallyof professional services companies. Despite the declined availability oflarge contiguous blocks and rental rate increases in Market Street West, thesubmarket will remain the core location for law firms. 2012 Law firm completed transactions Morgan Lewis Law firm activity spiked in 2012 as Market Street West’s largest law firms completed 1701 Market Street transactions. In light of tightened Trophy conditions, large tenants have come 289,432 sq ft to market two to three years ahead of expiration, finalising leasing decisions as Renewalfar out as 2015. As year-end 2011 approached, Reed Smith’s market-moving115,000-square-foot lease at Three Logan Square created a window of opportunity Cozen O’Connor for Cozen O’Connor to upgrade its space. The Philadelphia-based firm recently 1650 Market Street signed a long-term lease to occupy Reed’s One Liberty vacated space upon its 200,000 sq ft relocation. Morgan Lewis and Ballard Spahr also finalised leasing decisions Relocationthis year. Ballard Spahr While Morgan Lewis renewed in place, many of Philadelphia’s CBD law firms are 1735 Market Street rightsizing existing footprints; by 13.0 percent on average. Ballard Spahr will shed 179,000 sq ft Renewal with contractiontwo floors of space at 1735 Market Street, and Reed Smith is decreasing its footprintby more than 25.0 percent.Accelerated law firm transaction volumes drove a year-on-year decline in sector Active Law Firm Requirements in the market (sq ft)requirements by nearly 50.0 percent. Now, with 440,000 square feet of active firms Pepper Hamilton 220,000in the market, the majority is comprised of small firms, less than 10,000 squarefeet requirements. Finalised relocation decisions have decreased high-quality, Drinker Biddle 175,000contiguous blocks of available space, pushing large requirements-focused on Harkins Cunningham 9,000Trophy-to consider new proposed developments. Simultaneously, consolidations arecreating availabilities at Trophy assets, bringing opportunity to small- and mid-sizedfirms. OUTLOOK Top challenges for law firms • Strong Trophy landlord leverage is driving increased rental rates. PRICING AND incentives • With no new office development, large law firms will be faced with limited contiguous blocks at high-quality assets. Overall • Landlords closely monitoring small- to mid-sized law firm credit. Average Class A asking rent $27.92 % annual change in Class A asking rent 2.1% Top opportunities for law firms Average % rent discount for negotiated rent 10.0% • Market Street West’s occupancy-constrained, Class A properties are willing to do Average % rent premium for Trophy space 21.3% aggressive deals. • Trophy tenant consolidations have yielded new availabilities for small- to mid- Average % rent discount for sublease space 10.3% sized users. Average annual escalation or bump 2.5% • Class A availabilities are very conducive for half- to full-floor law firms. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $45.00/$22.50 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 8/4 Landlord-favourable market
    • 20 Law Firm Perspective • Global • 2012 Jones Lang LaSalleSan Francisco Index score: 38.2 Large presence Limited pricing 5.2% Percent of Class A market 8.6% Percent of law firms comprising Moderate availability occupied by law firms active tenants in the marketLocational preference:The majority of law firms in San Francisco are located inthe North and South Financial Districts where premier Class A properties areconcentrated and where law firms can be in close proximity to other businesses 16 Number of law firms occupying 41 Number of AmLaw 100 firms withand clients. The centre of San Francisco’s business district has shifted in recent greater than 50,000 sq ft offices locallyyears towards the South Financial District as companies look to take advantageof newer office buildings and closer proximity to multiple forms of public 2012 Law firm completed transactionstransportation. Additionally, redevelopment of the Transbay Terminal and thefuture extension of the Caltrain rail line are drawing more companies to Lewis Brisbois Bisgaard & Smith this submarket. 333 Bush Street 52,000 sq ft Relocation with contractionOver the past four years, the legal industry in San Francisco has experienceda significant decline in occupied space as law firms have been among some of Jackson Lewis the most adversely affected companies during the recession. As a result, many 50 California Street have shed hundreds of thousands of square feet in an effort to reduce costs and 18,878 sq ft streamline business. Although many large deals have been signed in recent years, Relocationmost involved downsizing or renewing in place - entering the market simply becauseof impending lease expirations. Mintz Levin 44 Montgomery Street Today, however, there are a handful of firms in the market for expansion space, but 15,666 sq ft rightsizing and creating a more efficient workplace continue to dominate leasing New deal to the marketactivity in this industry. Active Law Firm Requirements in the market (sq ft) Coblentz Patch Duffy & West 85,000 Gordon & Rees 80,000 Fenwick & West 60,000 OUTLOOK Top challenges for law firms • Large block availability is dwindling significantly with new supply still 6 to 18 months PRICING AND incentives away from delivery. • Law firms in the market for large blocks are facing stiff competition from technology Overall companies, which is the fastest growing industry in the market. Average Class A asking rent $51.74 • Rents have increased significantly and continue to rise, placing pressure on tenants to either act now or make shorter-term deals to holdover. % annual change in Class A asking rent 17.5% Top opportunities for law firms Average % rent discount for negotiated rent 5.0% • Many landlords have begun to build out ‘open’ workspace to appeal to tech tenants; Average % rent premium for Trophy space 24.3% these spaces could work for law firms seeking efficiencies. • New developments in the South Financial District will open up opportunities for tenants Average % rent discount for sublease space 32.0% to relocate from the North Financial District into newer, more efficient space. Average annual escalation or bump 3.0% • Popularity of the South Financial District and South of Market among tech firms has left New/Renewal (assuming 10-year term) more large blocks in the North Financial District, where many law firms occupy space. Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $50.00/$25.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 4/2 Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 21Washington, DC Index score: 68.3 Large presence Flexible pricing 44.6% 47.4% Percent of Class A market Percent of law firms comprising Large availability occupied by law firms active tenants in the marketLocational preference: The majority of law firms are located in the CBD, East Endand Capitol Hill submarkets. New developments with efficient floorplates havebeen favoured by most law firms recently. Due to an overall lack of large blocks of 91 Number of law firms occupying 95Number of AmLaw 100 firms withspace available in new, modern Trophy and Class A+ buildings in the West End, greater than 50,000 sq ft offices locallyCBD and East End, law firms are looking to new and proposed developments inthe East End and the emerging Mount Vernon Triangle micromarket. 2012 Law firm completed transactionsThe traditional catalysts of Washington, DC, law firm demand – regulatory activity Covington & Burling 800 & 850 10th Street NW and lobbying – eroded in 2012 amid Congressional gridlock and the pending election 415,000 sq ft cycle. Additionally, the dissolution of another key law firm tenant, Dewey & LeBoeuf, Relocationresulted in 125,000 square feet of space being released back to the market at 1101New York Avenue NW. Dewey’s implosion dealt another blow to the East End, which Gibson Dunn had been impacted earlier by Howrey’s 300,000-square-foot collapse at the Warner 1050 Connecticut Avenue NW Building and several other downsizings and relocations. McDermott Will is set to move 204,705 sq ft in December 2012, vacating approximately 235,000 square feet at 600 13th Street NW Renewalas part of its move into approximately 160,000 square feet at 500 N. Capitol StreetNW. The continued push by tenants across the market to maximise space efficiency, McKenna Long & Aldridge has depressed space demand by 24.7 percent market-wide, and the lack of near-term 1900 K Street NW lease expirations has presented minimal competition to tenants in the market. 172,701 sq ft RenewalDespite the general malaise seen throughout most of the market, leasing activitygained momentum in the summer of 2012. Landlords competed aggressively fortenants and began offering unprecedented levels of concessions. Vornado assumed Active Law Firm Requirements in the market (sq ft)Cooley’s remaining lease liability at 777 6th Street NW to help backfill Howrey’s space Sidley 250,000at the Warner, and several of the city’s largest law firms – including Covington, Arnold& Porter and Pillsbury – signed letters of intent at new developments. Nixon Peabody 75,000Given the overall state of the market, now is an optimal time to act for many tenants, Willkie 75,000as concession packages remain elevated, yet quality space options are quickly beingremoved from the market. The pullback in new construction should gradually create a OUTLOOKlandlord-favourable market by 2015. Top challenges for law firms • A sharp slowdown in new speculative construction is on the horizon. PRICING AND incentives • Quality blocks of space are dwindling and new buildings delivering in 2013 are already 61.7 percent preleased. Overall • Potential for rent increases exists once the current oversupply in the market Average Class A asking rent $55.30 is reduced. % annual change in Class A asking rent -2.1% Top opportunities for law firms Average % rent discount for negotiated rent -6.5% • Concession packages have increased to all-time highs, and generous free-rent Average % rent premium for Trophy space 30.8% and tenant improvement allowances have driven net effective rents sharply lower. • Dissolutions and sublease dispositions have created additional space options Average % rent discount for Sublease space -19.6% for tenants. Average annual escalation or bump 2.5% • Competition in the marketplace is limited by a finite number of near-term lease expirations. New/Renewal (assuming 10-year term) Tenant-favourable market Class A tenant improvement allowance ($ price per sq ft) $90.00/$55.00 2012 2013 2014 2015 2016 Neutral market Class A free rent (months) 10/5 Landlord-favourable market
    • 22 Law Firm Perspective • Global • 2012 Jones Lang LaSalleMontréalLocational preference: The majority of law frms are located in DowntownMontréal. Primarily in the Downtown Core, with some in the Downtown Southnode for corporate law firms and in Old Montréal for litigating lawyers, due toits proximity to the Court House and Court of Appeal. Other firms have opted to 7.3% Percent of Class A CBD market 6Number of law firms occupyinglocate themselves in the Suburb of Laval, which has a large courthouse and a occupied by law firms > 100,000 SF in the marketsignificant cluster of Class A buildings.Top-tier law firms in Montréal are located primarilly in the Downtown Core followed Recent Law Firm Completed Transactionsby the Downtown South node, with Old Montréal having a heavy concentration ofsmaller litigating law firms. While 2011 proved to be a slow year for law firms, 2012 Heenan Blaikiesaw a spike in activity, characterised by renewals and relocations. Unlike other 1250 Rene-Levesqueoccupiers, law firms remain less likely to switch to open office spaces, partially due 130,571 sq ftto the requiremnt for confidentiality. As a result, consolidations and reductions in Relocationspace have tended to be minimal. With the mergers and acquisitions and insolvencypractices continuing to grow organically, most law firms are either maintaining theiroffice footprint or growing. Miller Thomson 1000 de la Gauchetière St. W.Law firms, are currently facing the same dilemma as other tenants in Downtown 48,006 sq ftMontréal. There continues to be a lack of large blocks of available space coupled Relocationwith a low vacancy rate, giving tenants little leverage in negotiations with landlords.As a result, most law firms are choosing to renew in place, rather than relocate forlittle or no rent reduction. Law firms with requirements larger than 50,000 sq ft will Speigel Sohmerhave to look at the new construction market for opportunities however; this will not 1010 Ste-Catherine St. W.come without a premium in rent, as most new buildings will be LEED certified. 26,963 sq ft Relocation PRICING AND incentives Overall Average Class A CBD asking rent $21.32 % annual change in Class A CBD asking rent 4.9% Average % CBD rent discount for negotiated rent 15.0% OUTLOOKTop 3 challenges for law firms1. The lack of direct available large blocks of contiguous space in Downtown Montréal will make it dificult for law firms looking to relocate. Quality blocks of space are dwindling and new buildings to be delivered in 2013 are already 61.7 percent preleased.2. Rental rates continue to escalate, especially in the Trophy segment of the market, making relocations unattractive.3. With Downtown Class A vacancy at 5.4 percent, there is little ‘swing space’ available for tenants looking to expand.Top 3 opportunities for law firms1. With two new towers confirmed, law firms with expirations after 2014 can look to the new construction market for space requirements2. The increase in sublease space on the market has created opportunities for tenants with requirements under 50,000 sq ft willing to sublease.3. As office buildings currentlly in preleasing begin construction, law firms will find themselves with LEED certified space options. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 23TorontoLocational preference: The majority of law firms are located in the CBD,specifically, in the financial core, East, West and North ends. Firms gravitate tobuildings within the financial core where major clients are located; Union stationprovides the best transportation accessibility in the province, and there is a 11.74% 18 Percent of Class A market Number of Law firms occupyingsense of prestige being on or near Bay street. occupied by law firms over 100,000 sq ft Toronto’s downtown market continues to be recognised as one of the most Recent Law Firm Completed Transactionssignificant legal markets in the world. In recent years we have seen an influx oflarge multinational law firms to the city, particularly in the financial core. The past Oslerfew years have also seen a trend in industry consolidation between foreign and 100 King Street Westdomestic firms such as UK-based Norton Rose and Montréal-based national law 200,000 sq ftfirm Ogilvy Renault. In addition, London-based Clyde & Co., has merged with Renewalinsurance-law boutique Nicholl Paskell-Mede.As of mid-September 2012 at least three major lease renewals, in aggregate over Bennett Jones450,000 sq ft, had closed. Several law firms are getting close to their lease expiries, 100 King Street Westwhich will spark relocation and renewal activity over the next two or three years. 165,000 sq ftThe continued tightening of the downtown market will have many law firms opting to Renewalrenew early to lock-in current cost structures. Class A vacancy is expected to lingeraround the 4 percent mark at the end of 2013 with few options for tenants seeking Fogler, Rubinoffspace greater than 50,000 sq ft. 77 King Street West 91,984 sq ftAlthough the downtown core is currently experiencing its largest building boom since New leasethe early 1990s only one confirmed new development is located in the financial core,where the majority of Toronto’s law firms are located. The new developments willcertainly have landlords reconsidering ‘asking rates’ as tenants are looking at moreoptions to renew, expand, or relocate on favourable terms. However, it is unlikely PRICING AND incentivesthat we will see a migration of law firms from the financial core to other parts of the Overalldowntown core as law firms are willing to pay a premium to be close to the courts,clients, amenities and public transportation. Average Class A CBD asking rent $22.36 % annual change in Class A CBD asking rent 5.2% Average % rent discount for negotiated rent 15.0% OUTLOOKTop 3 challenges for law firms1. Tightening space availability, along with new developments coming to market, will have law firms looking to act.2. While the staff to attorney ratio has doubled from 1:2 to 2:4, legal firms are also looking for ways to reduce their footprint per employee.3. Attraction and retention of talent.Top 3 opportunities for law firms1. 2014 will be the start of new space being introduced and many firms may take advantage of leasing opportunities.2. Large blocks of space will become available as several large leases will expire in the next 4 - 6 quarters.3. Law firms willing to move south of the financial core have plenty of opportunity in the upcoming years. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 24 Law Firm Perspective • Global • 2012 Jones Lang LaSalleVancouverLocational preference: The 27 largest law firms in Greater Vancouver arelocated in the Central Business District. Of the 12 firms that occupy over 50,000square feet, the majority are concentrated within four-block stretches of twostreets: five of the largest firms are located on West Georgia Street, four occupy 13.2% 1 Percent of Class A CBD market Number of law firms occupyingbuildings on Burrard Street; and a total of five can be found within a block of the occupied by law firms >100,000 sq ft in the marketBurrard and West Georgia intersection.With seven large firms currently in the market, and another five having recently Recent Law Firm Completed Transactionscompleted deals, law firms have been very active over the last 12 months.Six confirmed new office towers, and several other proposed developments in Bull Housserpreleasing or other stages of the development process, have been the catalyst for 1055 West Georgia Streetthe sector’s increased market activity compared to the year prior. Several large 67,000 sq ftfirms feel that the ‘window of opportunity’ to explore relocation and early renewal Relocationoptions is now.Downtown tenants have had little to no leverage in recent years due to the Clark Wilsoncombination of low class A vacancy and minimal development activity. For firms 885 West Georgia Streetexploring early renewal options, the impending new supply offers the potential to 43,000 sq ftmitigate future rental rate increases by committing to second-generation space while Renewallarge blocks remain available for preleasing in new buildings. In contrast, two firmshave already committed to new developments and others are considering preleasingspace in order to take advantage of the opportunity for a cultural change, increasing Harper Greyefficiencies and the enjoyment of the newest building technologies. 650 West Georgia Street 37,000 sq ft Renewal PRICING AND incentives Overall Average Class A CBD asking rent $34.58 % annual change in Class A CBD asking rent 15.0% Average % rent discount for negotiated rent 13.0% OUTLOOKTop 3 challenges for law firms1. There are very few expansion and relocation options over 10,000 square feet in existing CBD buildings due to a very competitve leasing market and minimal new inventory over the last 10 years.2. Law firms with lease expiries prior to Q3 2014 will face significant logistical challenges if they wish to consider relocating to a new development, due to the length of fixturing period required for law firms.3. An abundance of firms currently in the market, combined with limited space options, will likely result in competition for space among the legal community.Top 3 opportunities for law firms1. New construction is being leveraged to negotiate renewals years in advance of lease expiries, a trend that we expect to continue in a market that has been characterised by rising rental rates and scarce large block options due to a lack of new supply.2. Continued preleasing activity in new developments will create additional relocation options in the form of Class A backfill opportunities.3. Firms with lease expiries in 2016 or later will be able to negotiate their next deal with the benefit of at least a 12% increase in class A inventory due to the timing of the first wave of development. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 25Asia Pacific
    • 26 Law Firm Perspective • Global • 2012 Jones Lang LaSalleBeijingLocational preference: Most foreign law firms are located in the CBD,particularly in China Central Place, China World, Kerry Centre and Yintai.Local firms tend to be more dispersed, with offices in the CBD and DongchengDistrict as well as Finance Street. 1.8% Percent of market occupied by 5Number of law firms occupying law firms > 5,000 sq m in the marketBeijing has seen it all; from the unfortunate demise of Dewey & LeBoeuf toMallesons merging with King & Wood, 2012 has had its share of activity. In betweenthese two events there have been several leasing transactions, including new Recent Law Firm Completed Transactionsentrants to the market such as Sheppard Mullin and Proskauer Rose. New leasingsfrom law firms include 1,700 gross sq m taken up in China World Trade 3 by Allen Allen & Overy& Overy, 336 sq m in China World Trade Center 2 by Ince & Co, and 500 sq m in China World Tower III China World Trade Tower 1 by Sheppard Mullin. The Taiwanese law firm Lee & 1,700 sq m Li renewed their lease for 1300 sq m in Beijing Oriental Plaza and Morgan Lewis Relocation & expansionsigned a renewal for 900 sq m in the Kerry Center.Factors such as record-high rents, increasingly limited vacant space in the market, Lee & Li reduced growth forecasts for the Chinese economy and uncertainty in the global Beijing Oriental Plazaeconomy, have all led to reduced demand in the second quarter of 2012. However, 1,300 sq m net absorption remained positive at 146,000 sq m in the first half of 2012. As most of Renewalthe well-established buildings in the city are almost fully occupied, the majority of thetake-up has occurred in recently completed projects. Baker & McKenzieJust one new project, a building in Finance Street, is expected to be launched in China World Tower IIthe remainder of 2012, which will add just 22,900 sq m to the market. It is likely, 3,500 sq m therefore, that as vacant space becomes increasingly limited, firms looking to lease Renewalspace in Beijing will be forced into decentralised, non-established districts. PRICING AND incentives Overall Prime rents (RMB per sq m per month) $326-417 Grade A vacancy rate 6.8% Prime Grade A vacancy rate 13.1% OUTLOOKTop 3 challenges for law firms1. Limited availability of prime stock.2. Rightsizing the amount of space.3. Limited 2-3 year pipeline of new office stock.Top 3 opportunities for law firms1. Significant amount of stock to be developed over the next 5 years.2. Shorter lease terms (2-3 years) allow for more flexibility.3. Strategic planning while waiting for new stock to be built. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 27Hong KongLocational preference: Law firms have traditionally been located in core Centralacross the older buildings within the Hongkong Land portfolio (largest Centrallandlord). Ease of access to major banking clients (for corporate practices)scattered around the Central walkway is a key consideration to location. As the 7.0% Percent of Central market 2Number of law firms occupyinglegal market has grown, firms have spread to the periphery of greater Central, occupied by law firms > 5,000 sq m in the marketto Admiralty and Sheung Wan, which are a short distance to the traditional core.Law firms with a conservative budget continue to take up premises in buildings Recent Law Firm Completed Transactionslocated in Central’s periphery, where rents are more cost effective. The legal sectorhas been actively growing over the past 24 months with new entrants and existing RPCfirms growing considerably. Operating costs for Hong Kong law firms are increasing Three Exchange Square as real estate overheads inflate with employment costs. At the same time there has 997 sq m been a significant drop off in IPO and corporate work. New leaseFor those firms seeking to relocate, office options are limited as vacancy is still low,and the development pipeline remains constrained until at least 2016. Hong Kong International law firmlaw firms are first looking to densification as a natural cost saver, as traditional Edinburgh Towerspace utilisation has changed little in Hong Kong, comparative to other markets. As 1,196 sq m there is little confirmed new supply in Central, it is likely that the high-end service New leasesector will look further East on Hong Kong Island to lower cost districts that cansatisfy business requirements. We see both Wan Chai and Causeway Bay asnatural locations to fit this trend in the short term.Rents are high, but have softened in recent months. Forecasts predict furthershort-term decline, but overall growth in 2013. Firms would be prudent to positionthemselves in the market in Q4 2012 - Q1 2013, where possible, to capture what islikely to be a short-term bottom of the rental market. PRICING AND incentives Overall Prime rents (HK$ per sq ft) $80-$150 Description of available incentives 2-3 months rent free Grade A vacancy rate 3.4% Overall Central vacancy rate 4.6% OUTLOOKTop 3 challenges for law firms1. With low vacancy rates and a constrained development pipeline, the ability to expand or relocate to reduce costs is limited.2. Following considerable expansion and challenging economic conditions, firms are increasingly exposed to surplus accommodation.3. Operating costs for law firms continue to rise.Top 3 opportunities for law firms1. Short-term softer conditions in the Central district, and real ‘first mover’ opportunities in nearby districts.2. Law firms have an opportunity to modernise their working environments creatively and cost effectively to reduce space requirements.3. New entrants to the market will benefit from flexible second-hand stock. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 28 Law Firm Perspective • Global • 2012 Jones Lang LaSalleMelbourneLocational preference: The major law firms in Melbourne are all located inthe CBD. Many firms are congregated in the city’s legal precinct surroundingthe courts in the west end of the city, with premium and Grade-A buildings onCollins Street, Bourke Street and William Street accommodating many legal 4.4% Percent of market occupied by 18 Number of law firms occupyingfirms. Some prominent firms are located in the east end of the city on Collins law firms > 5,000 sq m in the marketStreet. This is considered a prestigous part of the city with many banking andfinance firms also located here. Both areas are well served by trains, tramsand retail amenities. Despite Melbourne’s CBD extending to Docklands and Recent Law Firm Completed TransactionsSouthbank precincts, the legal fraternity are yet to embrace these locations. GadensThe Melbourne property market has become relatively subdued in recent months, 600 Bourke Streetwith economic sentiment reflected in a general slowdown in transactions in the 6,600 sq m market. This change in the market dynamic, coupled with recently completed Renewaldevelopments adding to the supply of office stock and an increase in organisationsstreamlining and consolidating office space, has led to market conditions favouringtenants. This time last year predictions were for the market to shift towardss Lander & Rogerslandlord-favourable conditions in 2013, however we believe that the market will 600 Bourke Streeteither be in balance or favour the tenant until 2016. 5,400 sq m RenewalThere is a general sense among major law firms operating in Australia that theyhave ‘topped out’ in terms of overall size. In other words, the large firms are notanticipating future growth in numbers. Indeed several have trimmed staff numbersin the last three years. Factors influencing this include a strong desire to maintainprofitability for the existing partners and a focus on making the size and structureattractive for mergers with international firms.A number of changes in the ‘top end’ landscape have occurred in the last threeyears as a result of a range of mergers and alliances. In addition, international firms PRICING AND incentivesAllen & Overy and Clifford Chance have recently established Australian offices. OnlyClayton Utz, Minter Ellison and Corrs remain as purely ‘local’ among the national OverallAustralian firms. At the smaller level, there has been a continuation of mergers and Prime rents (A$ per sq m per annum) 517 (Gross rents)acquisitions. Few of the large firms will appear in the market for office premises overthe next period as most either have a number of years to run on their current leases 20% based on first year’s net rent Description of available incentivesor have yet to take up space in new developments which they have committed to over a 10-year termover the last three years. Most major law firms are not captive to property cycles/ Grade A vacancy rate 6.0%availability of space as they tend to go to market in sufficient time to enable newdevelopment to take place. Overall vacancy rate 7.9% OUTLOOKTop 3 challenges for law firms1. The decision whether to merge with international firms will impact cost metrics and place pressure on firms productivity, impacting the efficiency of office space.2. Limited new supply of suitable buildings, with respect to location and contiguous space, may result in more firms renewing rather than relocating in the interim.3. A general business slowdown will limit the growth of firms and the need to expand office premises.Top 3 opportunities for law firms1. A tenant-favourable market creates good opportunities for firms to commit to an early renewal or relocate to capitalise on high incentives on offer.2. Melbourne CBD rents are considerably lower than other East Coast capitals, making Melbourne a good place to expand operations and accommodate back- office functions.3. Consider alternative workplace models to bring space usage per person more in line with other professional services firms and to improve space efficiency. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 29ShanghaiLocational preference: Most foreign law firms are located in the CBD,particularly in the financial district in Lujiazui, Pudong and West Nanjing Roadin Puxi. Local firms tend to be more dispersed, with offices in the CBD.However the three biggest domestic law firms have now relocated to premium 3 Number of law firms occupyingGrade A offices. > 5,000 sq m in the marketOver the past year, law firms have slowed down their expansion plans in Shanghaias economic uncertainty has contributed to a slower growth environment. While Recent Law Firm Completed Transactionsoverall leasing demand has been subdued, a small percentage of law firms,especially domestic firms, have remained active in the Grade A and Premium International law firmmarkets. For example, two domestic law firms have leased over 3,000 sq m each in Two ifcthe soon-to-be-completed Jing An Kerry Center Tower 3. Many domestic law firms 1,600 sq m are now looking to upgrade their office space from lower-quality buildings in an effort Relocationto improve their image and focus more on their client-facing services.Law firms have traditionally preferred to locate in the core-CBD areas of Puxi and International law firmPudong, which allows them to be close to the financial sector firms and major Two ifcMNCs, which are their primary clients. In the remainder of 2012 and 2013, space in 900 sq m this core-CBD area will be limited, meaning that law firms looking to expand may be Relocationhard-pressed to find adequate lettable supply.As economic stimulus measures slowly improve sentiment and the basic need Chinese law firmfor legal services grows, we expect that law firms will resume plans to expand or Jing An Kerry Center Tower 3upgrade over the next 12 months. 3,420 sq m Relocation PRICING AND incentives Overall Prime rents (RMB per sq m per month) $273.70 Prime Grade A rents ($ per sq ft per month) $323.90 Grade A vacancy rate 5.3% Prime Grade A vacancy rate 6.9% OUTLOOKTop 3 challenges for law firms1. Low vacancy in existing premium Grade A buildings.2. Pudong and Lujiazui have limited premium Grade A space from now until end Q4 2013.3. Rightsizing the amount of space.Top 3 opportunities for law firms1. Large amount of stock to be developed over the next 5 years.2. Strategic planning while waiting for new stock to be built.3. Greater leverage as landlords compete to attract law firms. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 30 Law Firm Perspective • Global • 2012 Jones Lang LaSalleSingaporeLocational preference: The majority of law firms in Singapore are located in theCentral Business District to be close to their client base. A high concentrationof these are in prime office space in the Raffles Place CBD sub-district. Thetrend over the last 3-4 years has been for the larger international and domestic 3.5% Percent of market occupied by 4Number of law firms occupyinglaw firms to relocate their operations to the new developments in Marina Bay. law firms > 5,000 sq m in the marketWhile typical floorplates in Raffles Place range from 8,000- 15,000 per squarefoot, the newer Downtown Developments can offer larger, more efficientfloorplates of approximately 25,000-30,000 sq ft. Recent Law Firm Completed TransactionsSingapore is an important business, financial and legal hub for South East Asia, Freshfields Bruckhaus Deringer with a large number of international companies having set up their Asia Pacific Ocean Financial Centre headquarters in the city state. The majority of multinational businesses see Asia as 700 sq m the major driver for revenue growth, and this has increased the demand for legal New leaseadvisory services.In 2008 Singapore granted licences to a handful of ‘Qualifying Foreign Law Clyde & Co Practices’ (QFLP) including White & Case LLP, Latham & Watkins, Clifford Chance, Marina Bay Financial Centre Tower III Herbert Smith, Allen & Overy and Norton Rose. The Singapore government has 1,400 sq m continued to liberalise the legal sector and in August 2012 the Singapore Ministry of New lease relocation & expansionLaw closed the second round of submissions with over 23 firms filing applications.The Licences will only be granted based on the quality of the applicants that committo recruiting locally and hitting specific revenue targets. Announcements on the Milbank Tweed successful firms are likely to revealed over the next 3-6 months. Marina Bay Financial Centre Tower III 1,300 sq m The overall market conditions remained stable in the first half 2012 as most New lease relocation & expansionbusiness sectors have maintained their headcount and tried to limit capitalexpenditure. There has been positive net absorption supported by expansion ofexisting tenants and from new entrants to Singapore. PRICING AND incentivesRental rates have dropped off modertately since mid-2011 but the decline is slowing. OverallDue to the completion of a number of new office buildings, this has increased the Prime rents (SGD $ per sq ft) $9.00-$12.00overall supply and provided more choice to occupiers looking to expand orrelocate. Prime office space in Singapore can now be secured from SGD $9-12 per Typically through rent free during Description of available incentivessquare feet per month. the initial period of the lease. Grade A vacancy rate 11.8% Overall vacancy rate 6.5% OUTLOOKTop 3 challenges for law firms1. Limited talent pool in Singapore due to the increase in new firms opening offices in Singapore.2. Increase in competition in the market.3. Rightsizing and making sure firm has sufficient space to accommodate potential growth, while maintinaing flexibility.Top 3 opportunities for law firms1. Greater space availability.2. Rents likely to continue their declines in Core CBD untill mid-2013.3. Increase in landlord incentives. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 31SydneyLocational preference: Top-tier law firms are predominantly located in premiumtowers with expansive harbour views within the CBD core. Ashurst are thefirst major firm to commit to an alternative premises solution being the lowrise, large floorplate, heritage refurbishment of 5 Martin Place. Barangaroo, 4.2% Percent of market occupied by 18 Number of law firms occupyingessentially the Canary Wharf of Sydney, has yet to gain a law firm commitment law firms > 5,000 sq m in the marketahead of its 2015/2016 completion. Gilbert & Tobin (10,000 sq m) is felt likely tobe the leading contender to make such a move. Recent Law Firm Completed TransactionsThere is a general sense among major law firms operating in Australia that theyhave ‘topped out’ in terms of overall size. In other words, the large firms are not Ashurstanticipating future growth in numbers. Indeed several have trimmed staff numbers in 5 Martin Place the last three years. Factors influencing this include: 15,000 sq m Relocation• A strong desire to maintain profitability for the existing partners; and• A focus on making their size and structure attractive for mergers with international firms. Corrs Chambers Westgarth 8 Chifley PlaceA number of changes in the ‘top end’ landscape have occurred in the last three 10,000 sq m years as a result of a range of mergers and alliances. In addition, international firms RelocationAllen & Overy and Clifford Chance have recently established Australian offices. OnlyClayton Utz, Minter Ellison and Corrs remain as purely ‘local’ among the nationalAustralian firms. At the smaller level, there has been a continuation of mergers and TressCoxacquisitions. Few of the large firms will appear in the market for office premises over 19 Martin Placethe next period as most either have a number of years to run on their current leases 3,500 sq m or have yet to take up space in new developments which they have committed to Relocationover the last three years. Most major law firms are not captive to property cycles/availability of space as they tend to go to market in sufficient time to enable newdevelopment to take place. PRICING AND incentivesSydney rents reflect a two-tiered structure where existing Grade-A stock is relatively Overallplentiful with several opportunities with tenants of up to 8,000-10,000 sq m, at a Prime rents (A$ per sq m per annum) 925 (Gross rents)discount to replacement costs. New developments, by their nature, reflect a pre-commitment rental which covers the cost of development. Current rentals in Sydney 26 to 30% of the gross rental basedfor premium grade properties range from A$900 to A$1300/sq m administrative, Description of available incentives on first year’s rental multiplied by the term in yearswith incentives of around 25% of gross face rentals. Grade-A rentals sit in the rangeA$600 to A$1000/sq m administrative with incentives of up to 30% of gross face. Grade A vacancy rate 9.3%There has been an almost universal change in the ratio of lawyers to support staff,with most firms now operating at up to five lawyers per admin support, and many Overall vacancy rate 8.6%firms are targetting a ratio of 7:1. OUTLOOKTop 3 challenges for law firms1. Dealing with reduced ratio of legal to support staff while maintaining an ‘open feel’ to office fitouts.2. Many firms face similar expiry profiles in the coming years, leading to firms needing to evaluate needs with sufficient planning.3. Impact of international firms and mergers placing increased pressure on productivity and revenue, leading to real estate costs needing to be more closely monitored.Top 3 opportunities for law firms1. Relocation of firms to Barangaroo site in the coming years will create good back-fill opportunities within the CBD for legal firms.2. Large incentives on offer for firms looking to commit to space in a tenant favoured to neutral market dynamic.3. Blurred and expanding ‘core CBD’ area shifting further south and westwards should help constrain rental growth. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 32 Law Firm Perspective • Global • 2012 Jones Lang LaSalleTokyoLocational preference: The legal sector in Tokyo shadows the financial sectorand major firms are located in and around the large banking and financialinstitutions. The favoured locations are Chiyoda ku and Minato ku with popularlocations being Marunouchi, Otemachi (average Grade A rent – JPY 38,264 per 1.5% Percent of market occupied by 5Number of law firms occupyingtsubo per annum inc CAM) Akasaka and Roppongi (average Grade A Rent JPY law firms > 5,000 sq m in the market32,900 per tsubo per month inc CAM).The first half of 2012 has seen a continuation in the ‘flight to quality and safety’ Recent Law Firm Completed Transactionswhich defined 2011. Rentals in the CBD appear to have bottomed out, and over2011 and in 2012 companies have seized the opportunity to relocate and upgrade US Law firmthe quality of their space, forcing down vacancy rates across Tokyo and forcing up Ark Hills Sengokuyama Mori Tower vacancy in Grade B space. The average age of the Tokyo Grade A stock remains 5,000 sq m comparatively old, albeit that many central office districts have been regenerated Relocationover the last 10 years. For the majority of tenants this represents good news, withlarger floorplates and more efficient buildings. US Law firm However, the legal industry still favours perimeter offices and the trend for larger, Ark Hills Sengokuyama Mori Tower deeper and more efficient floorplates has negatively impacted on their layout 1,500 sq m and floor design with fewer external offices per sq m and a less efficient space Relocationutilisation for law firms. Tenants in office buildings with smaller floorplates requireapproximately 50 sq m per perimeter office, and tenants in larger buildings withdeeper floor plates require approximately 60 sq m per perimeter office.Activity in the legal sector over recent years has been driven more by lease eventsrather than expansion in law firms’ operations. Most law firms have stable spacerequirements and are looking for cost savings through lease renegotiations. Recentactivity has focused on new developments where deep discounts are on offer. PRICING AND incentives Overall Prime rents ($ price per sq ft per year) $116.00 Description of available incentives 9 - 12 months rent-free Grade A CBD vacancy rate 3.55% OUTLOOKTop 3 challenges for law firms1. Limited availability of prime stock.2. Rightsizing the amount of space.3. Limited 2-3 year pipeline of new office stock.Top 3 opportunities for law firms1. Strong longer-term supply pipeline for Tokyo.2. Preleasing in a slow market.3. Increasing vacancies in older high-quality Grade A properties. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 33EMEA
    • 34 Law Firm Perspective • Global • 2012 Jones Lang LaSalleAmsterdamLocational preference: The largest international and domestic law firms aregenerally located in the Zuidas district. The Zuidas district is home to law firmsincluding Baker & McKenzie, Brauw Blackstone Westbroek, Loyens & Loeffamong others, with exception for Allen & Overy and Lexence which are located 11.9% 11 Percent of market occupied by Number of law firms occupyingin adjacent South district. The Zuidas can be characterized as a multi-functional law firms > 5,000 sq m in the marketlocation with good accessibility by road and public transport. Many smaller lawfirms are located in the city centre of Amsterdam especially around the canalsat Herengracht and Keizersgracht. The buildings here have a modern classical Recent Law Firm Completed Transactionsimage which suits the law firm occupier. Boekel De NeréeAfter small signs of a recovery in the Dutch office market, occupier activity has 11400 sq m lfadeclined again. In the Amsterdam market, competition for office space in the Renewalsubmarket of Zuidas decreased in 2011, down 66% on 2010. Demand from lawfirms is subdued. Besides the cost containment focus of occupiers, law firms areincreasingly adopting the trend of flexible working, which is likely to result in adeclining demand for any expansion of their office space. Nevertheless, there are Allen & Overysigns of positive activity in the legal real estate market, with two significant firms in 9913 sq m lfalatter stages of negotiation to relocate their offices to new office buildings.The overall Amsterdam market is still characterised by a large amount of oversupply,particularly in more peripheral areas, where choice is inflated by less suitableaccommodation and a lack of alternative functions. However, in the last year, themunicipality was agreed on several conversions of office buildings to hotels outsideof the City core.The general conditions of high vacancy and oversupply are much less significantin the submarkets preferred by law firms. In fact, due to the absence of new PRICING AND incentivescompletions, the choice for law firms of Grade A vacancy decreased slightly to 8.1%over the last quarter. The decreasing Grade A vacancy level could cause problems Overallover the medium term for law firms that are looking to expand or relocate. Our Prime rent (sq m per annum) €335expectations are that the amount of available incentives will be stable or decreaseslightly during the next year. 10-16 months rent- Description of available incentives free on a standard lease term Grade A vacancy rate 6.3% Overall vacancy rate 10.2% OUTLOOKTop 3 challenges for law firms1. Limited new construction over the next three years will force law firms with near-term lease expiries to renew in place or consider second-generation space.2. High fit-out costs will continue to influence relocation decisions.3. Adapting to emerging trends in flexible working.Top 3 opportunities for law firms1. General conditions of oversupply within the Amsterdam office market means that if law firms are willing to renew or relocate then they do have leverage.2. Opportunities to drive efficiency and productivity in the workplace.3. Limited competition anticipated in the market in the short term. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 35BrusselsLocational preference: Most the law firms in Brussels are located in three majordistricts: Decentralised, Leopold and Louise. The eastern part of the Pentagonis an alternative location, especially at the border of the Leopold and Louisedistricts. Large international law firms tend to concentrate in the Decentralised 2.0% Percent of market occupied by 12 Number of law firms occupyingdistrict where availability is higher, the Louise district gradually decreasing in law firms > 5,000 sq m in the marketimportance and attracting smaller size and local law firms.2012 has been a relatively quiet year for law firms in Brussels, due to the weak Recent Law Firm Completed Transactionseconomic climate and the fact that several of the largest international law firmshave already renegotiated their lease terms in 2010-2011. Other large law firms Loyens & Loeff approaching a lease-break are exploring options in their occupation, moving to a Neerveld 101 - 1200 Brussels smaller cheaper office building or renegotiating and improving the terms of their 7,605 sq m existing lease contract, with a 20% rent reduction being possible for a long-term Renewallease. Most larger legal practices are generally right-sizing their occupation inBrussels or keeping their portfolio size unchanged, with only smaller players,administrative and European law firms seeing growth. Orrick, Herrington & Sutcliffe LLP Rue d’Idalie 9-15 - 1050 Brussels Vacancy is high at 11.1% and rental values are under pressure, offering 292 sq m opportunities for law firms in the best districts, however the development pipeline New deal to the markethas dried up significantly as a result of tighter development financing conditions.Although headline vacancy levels remain high, the proportion of high-quality officesavailable does remain relatively low, and Grade A vacancy is considerably low at2.7%. The market is currently tenant-favourable, and conditions should remainrelatively favourable in 2013. PRICING AND incentives Overall Prime rent (per sq m per year) € 285 12% average rent Description of available incentives free on a five -- year term Grade A vacancy rate 2.7% Overall vacancy rate 11.1% OUTLOOKTop 3 challenges for law firms1. Existing lease commitments could limit the ability to benefit from current market opportunities (several law firms active in the market have breaks only in two years time.)2. The office development pipeline has dried up; there are a limited number of high-quality opportunities in the districts favoured by law firms.3. Despite the current slowdown in tenant demand, the market could be undersupplied by 2013 due to the lack of new construction, which could drive rents higher in 24 to 36 months.Top 3 opportunities for law firms1. Currently high vacancy rates in some districts implies more incentives and lower rents.2. Tenant-favourable market: landlords ready to discuss lease terms to keep their existing tenants.3. Consolidation and upgrading will be portfolio quality. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 36 Law Firm Perspective • Global • 2012 Jones Lang LaSalleDubai & Abu DhabiLocational preference: Dubai. Most of the international law firms are located inthe DIFC (Dubai International Financial Centre) or in nearby locations within theCBD such as Emaar Square and along Sheik Zayed Road. While DIFC is a freezone, these other locations are on shore locations and therefore require firms to 5-10% 2 Average percent of market Number of law firms occupyinghave a local sponsor. occupied by law firms > 5,000 sq m in the marketAbu Dhabi. The recently-delivered Sowwah Square development has becomethe location of choice for international law firms in Abu Dhabi. This landmark Recent Law Firm Completed Transactionscomplex of commercial towers features column-free floorplates and the first fulloffice floor of each building starts 110 feet above ground level. A landscaped Al Tamimiplaza connects the four buildings and the new Stock Exchange at ground level. Sowwah Square, Abu Dhabi 1,600 sq mMost legal practices entered the UAE market at a time when space availability was Relocationlimited. Over the past three years, large volumes of new space have been deliveredwhich has resulted in greater choice for the tenant. The market has seen law firmsmove to better quality buildings at lower rents with consolidation being the primary Hadef & Partnersdriver of law firm demand. Although the large-scale expansion and growth by law Emaar Square, Dubaifirms in the UAE has slowed in the wake of the Global Financial Crisis, demand for 2,600 sq mtop-quality space remains high. RenewalProximity to clients and competitors has driven many of the location decisions in Chadbourne & Parkethe region. In Abu Dhabi much of the legal market has been focused on the energy Boulevard Plaza, Dubaisector and sovereign wealth, whereas in Dubai the focus has been much more on 1,000 sq mfinancial services. Average requirements usually range from 10,000 to 20,000 sq ft Relocationin Dubai, falling to 2,500 to 5,000 sq ft in Abu Dhabi.Overall market conditions are tenant-favourable in both Dubai and Abu Dhabi,however headline statistics often belie the actual conditions that law firms will find on PRICING AND incentivesthe ground. Competition is markedly higher for appropriately located, prime space Overallfavoured by law firms. Despite this fact, given current availability of better qualityspace, the time is right for law firms to review their long-term occupation strategies 1,615-2,368 / Average prime rent (AED per sq m ) (Dubai / Abu Dhabi) 1,600in the UAE. At least one month rent free for each Incentives year of the lease commitment Grade A CBD vacancy rate (Dubai/Abu Dhabi) 35%/30% OUTLOOKTop 3 challenges for law firms1. Finding appropriately located, single ownership, prime office space.2. Attracting legal talent to the Middle East.3. Increasing competition in the market place.Top 3 opportunities for law firms1. Greater space availability.2. Increasing landlord incentives.3. Tenant-friendly leases. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 37GermanyLocational preference: Law firms are concentrated in prime CBD locations suchas near the Alte Opera in Frankfurt, the city centre districts of Hamburg andMunich, the CBD or Hafen in Düsseldorf, and in Mitte 1A or Potsdamer Platzin Berlin. 2-7% Percent of market 60Number of law firms occupying > occupied by law firms 5,000 sq m in the marketWhile Frankfurt is normally regarded as the main legal centre in Germany, there ismore happening beyond this important financial center. Munich has more attorneysthan Frankfurt; the largest deal in 2012 was in Stuttgart; Hamburg is seeing Recent Law Firm Completed Transactionsthe highest rate of growth among law firms; and, as the capital city, Berlin is animportant legal centre, even if operations are smaller than in Frankfurt or Munich. Dierks + Bohle Kurfürstendamm 195, BerlinIn contrast to other countries, the legal industry in Germany is stable and strong. 2,594 sqmMoreover, Germans are taking on more prominent EMEA or global roles in topinternational firms. Germany has become a centre for IP litigation, with a number ofheadline-making cases in the last year. German firms, such as Luther and Noerr, Gleiss Lutzclearly have ambitions to expand overseas. Many firms are growing, often poaching Bülow-Carré, Stuttgartsenior rainmakers or teams from established outfits. New firms, notably British firms 10,000 sq msuch as Pinsent Masons and Berwin Leighton Paisner have established operationsin Germany. Many firms already in Frankfurt or Munich have opened new offices,particularly in Düsseldorf and Hamburg. Heuking Kühn Lüer WojtekThis stable business growth has translated into steady demand for prime offices One Goetheplaza, Frankfurtacross Germany. While there are isolated cases of the subleasing of space in 2,958 sq mMunich and Frankfurt, demand here is mostly stable. Hamburg and Düsseldorfhave seen increased demand. While not at acute levels, availability at the top endof the market is dwindling. Construction levels are generally low; for example only Reed Smithtwo major projects are under construction in prime area of Munich, while Frankfurt Ludwigstraße 6-10, Munichwill only witness more supply in 2013/14. Larger firms with requirements above 2,575 sq m10,000 sq m are looking at new project developments or build-to-suit options. Rentsare up in some cities, Munich particularly, although we do not expect any dramaticincreases. White & Case, LLP Dammtorwall 15, HamburgLaw firm workplaces often spark an interesting discussion, but operations in 5,950 sq mGermany tend to be traditional (e.g. cellular) and efficient and have not adoptedsome of the innovations seen in places like London. With relatively few good optionsfor larger operations, and the investment required to be made into any law firm Epping Hermann Fischerspace, many firms are electing to restructure leases and restack, or make cosmetic Am Hirschgarten, Munichupgrades as lease events force decisions. 4,784 sq m OUTLOOKTop 3 challenges for law firms1. Dwindling vacancy in prime offices. Fewer large, contiguous blocks in quality buildings and limited construction pipeline.2. Potential rent increases, although not severe.3. Tension in strategy where German business is performing well, but pressures overseas impact approvals of any projects.Top 3 opportunities for law firms1. Pre-leasing opportunities exist particularly in Frankfurt and Berlin. For smaller tenants, there are select opportunities to take advantage of subleases with existing fit-outs.2. For larger tenants with leases rolling in 2013-2015, now is a good time to restructure leases in advance of rental increases.3. A more efficient workplace design may yield significant space savings, particularly where a firm has grown organically.
    • 38 Law Firm Perspective • Global • 2012 Jones Lang LaSalleBerlin Cologne PRICING AND incentives PRICING AND incentives Overall Overall Prime rent (sq m per annum) €264 Prime rent (sq m per annum) €264 Description of available incentives 3-5% Description of available incentives 7-8% Vacancy rate 8.6% Vacancy rate 8.1% OUTLOOK OUTLOOK Tenant-favourable market Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market Landlord-favourable marketDüsseldorf Frankfurt PRICING AND incentives PRICING AND incentives Overall Overall Prime rent (sq m per annum) €300 Prime rent (sq m per annum) €396 Description of available incentives 5-10% Description of available incentives 10-15% Vacancy rate 11.4% Vacancy rate 13.4% OUTLOOK OUTLOOK Tenant-favourable market Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market Landlord-favourable marketHamburg Munich PRICING AND incentives PRICING AND incentives Overall Overall Prime rent (sq m per annum) €288 Prime rent (sq m per annum) €360 Description of available incentives 3-8% Description of available incentives 3-8% Vacancy rate 8.2% Vacancy rate 8.9% OUTLOOK OUTLOOK Tenant-favourable market Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market Landlord-favourable marketStuttgart PRICING AND incentives Overall Prime rent (sq m per annum) €222 Description of available incentives 7-10% Vacancy rate 5.7% OUTLOOK Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 39London CityLocational preference: Small to mid-sized law firms, particularly US andinternational, tend to locate in Core City locations, whereas established UK andlarge international law firms (70,000 square feet plus) will locate in peripheralCity Fringe locations or Canary Wharf in order to benefit from discounted rents 14.0% 54 Percent of market Number of law firms occupyingand to hedge against significant rental increases at future rent reviews. occupied by law firms > 5,000 sq m in the marketThere has been steady demand from law firms for office space over the first halfof 2012, which has resulted in 14 transactions, totalling 227,833 square feet (sq ft)of floorspace. This is well below the long-term half-year average of 361,000 sq ft, Recent Law Firm Completed Transactionsalthough it is close to three times higher than the same period one year ago andalready equates to 76% of the total floorspace taken in the whole of 2011. Overall The Practical Law Companylaw firm activity accounted for 11% of total take-up in the City office market in the 157 Blackfriars Roadfirst half of 2012, which compares favourably to 9% of overall take-up in 2011. The 8,226 sq mlargest transaction in the first-half of 2012 was to: The Practical Law Company who Relocation and expansionacquired 88,546 sq ft of second-hand space at Friars House, SE1 at an initial rent of£35 per sq ft. Another significant transaction is in the pipeline; Nabarro is reportedlyunder offer for 130,000 sq ft at 125 London Wall on a sublease from JP Morgan. Latham & Watkins 99 BishopsgateAt the end of the second quarter there were 24 active and potential law firm 2,189 sq mrequirements. Of the larger requirements, there were four in the 50,000 to 100,000sq ft bracket and three in the 100,000 to 200,000 sq ft bracket. Looking ahead, Renewal and expansionthere are over 20 US law firms with lease events between now and 2015, which willgenerate further demand. Bindmans LLPActivity in the legal sector is currently driven by a combination of lease events and 222 Gray’s Inn Roadincreasing levels of merger activity. A selection of recent activity includes: Herbert 1,951 sq mSmith’s merger with Freehills, the Pinsent Masons and McGrigors merger, and the Relocation and expansionprospective forthcoming mergers of Ashurst with Blake Dawson, Dickinson Deeswith Bond Pearce (not signed), and Field Fisher Waterhouse and Osborne Clarke(not signed). PRICING AND incentivesMid-tier firms such as Eversheds, SJ Berwin, Addleshaws and Field Fisher OverallWaterhouse have now realigned occupational space with their operations, havingsublet or disposed of 15% - 20% of their space. Prime rent (sq m per annum) € 708There is a growing trend to outsource low grade legal work, with many corporates 24 months rentlooking to hand over routine legal work to lower-cost suppliers. Some big Description of available incentives free assuming acorporations, including Rio Tinto, are outsourcing routine legal tasks, fuelling growth 10-year leaseamong providers of outsourced legal services. Grade A vacancy rate 4.60% Overall vacancy rate 6.60% OUTLOOKTop 3 challenges for law firms1. Achieving greater space efficiency without impacting on working practices or the need to attract and retain talent.2. Minimising capital expenditure without compromising growth trajectory or opportunity (eg renewal of leases, acquiring fitted-out space etc).3. The ‘squeezed middle’ facing a choice between building scale (merger) or value through specialisation.Top 3 opportunities for law firms1. New growth opportunities in the BRICS, Far East and Africa.2. Opportunity to build a new operating and funding model as permitted by The Legal Services Act.3. Driving further efficiency through outsourcing and nearshoring. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 40 Law Firm Perspective • Global • 2012 Jones Lang LaSalleMadridLocational preference: In Madrid, a significant majority of law firms, regardlessof their size, are located in the CBD submarket, specifically on CastellanaStreet and its borders; towardss the east, in the Salamanca submarket; and onthe western side of the axis, in the areas of Almagro or Zurbano. Smaller firms 3-5% Percent of market occupied by 4 Number of law firms occupying Percent of law firms comprisingare frequently located in mixed-use buildings. As firms become more significant law firms active tenantsin the market > 5,000 sq m in the marketin size, they look for representative buildings to support their marketingstrategies and reinforce their ‘brand image’. Of the top 25 law firms, 96% arelocated in or around these areas. Recent Law Firm Completed TransactionsThe current macroeconomic environment, and favourable real estate marketconditions, are pushing law firms of all sizes to consider their strategic decisions Mazarsregarding their real estate portfolios in Madrid. Present market conditions are Alcalá 63perceived as an opportunity to relocate head offices, not only reducing rents, but 2,373 sq mgaining access to formerly ‘unattainable’ highly representative locations. RelocationThe activity observed throughout the year has been focused on renegotiatingleases, undertaking serious refurbishments (Uría Menéndez) or completing fit-outs Chávarri y Muñoz Abogados(Cuatrecasas). The Linklaters Madrid office is about to close a transaction of over Emilio Vargas 15,000 sq m but most of the legal activity transactions are smaller than 2,000 sq m. 730 sq mWhile maximum rental levels continue to trend downwards and rent-free periods Relocationremain unchanged in general, the actual transactions vary significantly on theindividual situation of each company. Linklaters Almagro 40Restrictions on available credit are holding tenants back. Another factor that makes 5080 sq mmovements in the market difficult is the fact that the legal sector has very high Relocationfit-out costs: law firms in Madrid have not fully embraced the trend of adopting openworkplaces and clear areas. Highly compartmentalised offices are still preferred,as well as above average fit-out qualities and furnishings. In the current market,landlords are very keen to retain occupiers, offering tempting concessions to PRICING AND incentivesensure renewals. Overall Prime rent (sq m per annum) €297 4-12 months rent- Description of available incentives free on a standard term Grade A vacancy rate 8.5% Overall vacancy rate 11.21% OUTLOOKTop 3 challenges for law firms1. Relocation and fit-out costs may not be fully recovered if, over the medium term, prices start to increase sharply and tenants lose their negotiation strength.2. Significant difficulties within the present market conditions to obtain the capital required to undertake relocation and fit-outs.3. Tough macroeconomic environment and impacts of the broader business environment.Top 3 opportunities for law firms1. Landlords of vacant buildings are offering very attractive conditions in order to fill their properties.2. Tenants find themselves in a very strong position to negotiate renewals, as landlords want to avoid vacant properties by all means.3. Rental falls in the CBD are brining opportunities for tenants to improve locations at low rental levels. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 41MilanLocational preference: Law firms in Milan remain attracted to prime office spacein locations that ensure proximity to their client base. The major law firms inMilan are located in the Historic Centre (comprising the very central area ofMilan around Piazza Duomo, Piazza San Babila and delimited by Via Senato 3.0% Percent of market 4Number of law firms occupyingand Via Fatebenefratelli to the North), the CBD (including the area to the north occupied by law firms > 5,000 sq m in the marketof the Centre, divided from the Historical Centre by Via Fatebenefratelli/ViaManin and Via Solferino and including the sub-district previously known asGaribaldi Centrale) and the Centre (comprising the area partially delimited by Recent Law Firm Completed TransactionsCerchia dei Bastioni city-ring-road and by Via Bertani, Via Pagano, Via Ariosto,Viale di Porta Vercellina, Viale Papiniano and Viale D’Annunzio). White & Case Piazza Diaz 1H2 2011 and H1 2012 saw law firms taking up just under 7,000 sq m across five 1,070 sq mdeals, representing a decline in floorspace by approximately 23% on the previous 12 Relocationmonths. The moves have contributed 3% of the overall 12-months take-up and areconcentrated in traditionally prime central locations of the city: the Historic Centre,the CBD and the Centre. Eversheds Bianchini Via Maria Teresa 4The legal sector is being affected by the uncertain macroeconomic backdrop, 960 sq mtranslating in unclear market dynamics which make it difficult to assess whether Relocationthe time is right to move or whether further reductions in rents are yet to come.This in turn induces a more cautious approach in tenants, as they wait to seewhether better lease conditions can be achieved; this could well be the case, as theincreasing vacancy and weak demand reported in Q2 seems to suggest.Furthermore, the completion of the Porta Nuova scheme in the newly-defined CBDboth offers an opportunity and poses an additional challenge to law firms. On onehand, it provides Grade A space in a highly-accessible location; on the other, it is anot yet fully consolidated office location and, as such, may be a risky choice for the PRICING AND incentivestraditionally conservative law sector. Overall Prime rent (sq m per annum) €530 6 - 9 months Description of available incentives rent free Vacancy rate in Historic Centre 7% Overall Vacancy rate 11% OUTLOOKTop 3 challenges for law firms1. Uncertainty in the economic environment translating into uncertain business performance: is it the right time to grow/ change?2. Uncertainty in the evolution of rental levels: is it the right moment to sign a new lease?3. Uncertainty in the potential of a new geographic location: will it be a successful CBD or not?Top 3 opportunities for law firms1. Release of traditional office space in the Historic Centre.2. Growth in supply in the CBD.3. Law firms negotiating positions strengthened by investors’ appetite for law firms among their tenants. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 42 Law Firm Perspective • Global • 2012 Jones Lang LaSalleMoscowLocational preference: The majority of law firms in Moscow are attracted tocentral locations in the city (CBD) with the Kremlin Area and the north westarea inside the Garden Ring being the most sought-after locations. In terms ofoffice space requirements, the majority of law firms continue to demonstrate a 3% Percent of market occupied by 4Number of law firms occupyingpreference for high-profile modern office buildings. law firms > 5,000 sq m in the marketCurrently, law firms occupy a 3% share (around 50,000 sq m) of the modernoffice stock in Moscow. Starting from 2010 and throughout 2011, the legal sector Recent Law Firm Completed Transactionshasrebounded with several new transactions (including Hogan & Lovells, AkinGump, King & Spalding) and renewals (including Noerr, Cleary Gottlieb) concluded Baker & McKenzieon the Moscow market. White Gardens, Lesnaya Ul. 27 7000 sq mThis sentiment has continued in 2012 with one of the largest transactions executed Pre-lease- a pre-let by Baker & McKenzie (7,000 sq m) in White Gardens located onBelorusskaya Square and the renewal of Skadden in Ducat III (1,700 sq m). Manyinternational law firms have seen solid business growth in recent months, stemming Skaddenlargely from their Russian clients, and this is impacting real estate requirements. Ducat III, Gasheka Ul., 6Building obsolescence has also driven a number of requirements among those 1,687 sq mclients who have been in Moscow for a number of years. RenewalSince Q2 2011, prime rents have remained stable at US$ 1,200 sq m/year with theforecast for a slight increase (no more than 2-3% ) during the next several quarters. King & Spalding Legend BC, Tsvetnoy blvd., 2Nevertheless, limited supply in the city centre of Moscow (especially for tenants 1,507 sq mseeking large blocks of space) and a very low pipeline of high-quality buildings for Pre-leasethe next two years, will force more law firms to study pre-lets more closely as well asthe potential for a geographic shift towardss Moscow City. PRICING AND incentives Overall Prime rent (sq m per annum) $1,000-1,200 3-6 months rent Description of available incentives free period + ad- ditional incentives. Grade A vacancy rate 16.3% Overall vacancy rate 14.7% OUTLOOKTop 3 challenges for law firms1. Recent construction restrictions in the CBD are constraining choices for law firms, with many forced to renew their existing space or consider secondary/refurbished space.2. The lack of new office projects coming to the market in the CBD may result in prime rents increasing over the medium term.3. The current euro-zone crisis may lead some law firms to reconsider plans for expansion or may drive contraction.Top 3 opportunities for law firms1. With a very low supply pipeline in the CBD, we expect that Moscow City will become more prevalent as an alternative location for law firms.2. Two Class A developments (White Gardens and Aquamarine III) are forecast to enter the market by the beginning of 2013 and can be expected to generate interest among law firms.3. Although prime rents are expected to rise, this increase should not be as steep as it was in 2007-2008 when prime rents reached $US 1,500-1,900/sq m/year. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 43ParisLocational preference: Law firms are generally located in period buildings, insome of the most prestigious addresses in Paris. These are mostly on the rightside of the river Seine, in the Central Business District (CBD). Within the CBDthe core market for law firms has slowly evolved from the ‘Golden Triangle’ 2%Percent of the market 18 Number of law firms occupying(between Place de l’Etoile and Concorde) to the ‘Financial District’ (towardss occupied by law firms > 5,000 sq m in the marketthe east of the CBD, between Concorde and Place Vendôme). This trend hasbeen confirmed this year, with the top three transactions completed inthis submarket. Recent Law Firm Completed TransactionsThe Legal market in Paris continues to consist of a range of large ‘magic circle’ Hogan Lovellsand US players, as well as some weighty French practices, followed by a sizeable 17 Avenue Matignon 75008 Parisnumber of medium and small-sized practices, providing more niche competencies. 7,000 sq mThe real estate challenges in Paris differ greatly, depending upon the size of the Relocationspace required by a firm.The emerging trend towardss leaving the traditional independent town houses SJ Berwinand period buildings continues, in order to settle in new offices, that provide larger 92 Avenue des Champs Elysées 75008 Parisfloorplates, offering great layout possibilities and accompanied with a wide range of 3,500 sq mservices. Shared buildings are also emerging as new office solutions, among small Relocationand medium practices, although larger players remain attached to the identity andindependence of a more traditional single-tenant building. King Spalding 12 Cours Albert 1er 75008 ParisChange is also being seen in terms of office space utilisation and specification, 2,400 sq mwith traditional walled offices beginning to include more glass and transparency, Relocationand even be replaced by shared desks and semi open-spaces. During the pastmonths, law firms have been more and more concerned with the ‘green’ quality ofthe buildings, and the clear trend is towardss more efficient buildings, enabling an PRICING AND incentivesoverall decrease of the space allocated per person. Larger law firms looking forspace in excess of 5,000 sq m will find a very limited number of large units of prime Overallspace in the prestigious locations required. Smaller, independent units are more Prime rent (sq m per annum) €830widely available in Paris CBD. 15-20% of the Description of available incentives annual headline rent Parisian region vacancy rate 6.8% CBD vacancy rate 5.1% OUTLOOKTop 3 challenges for law firms1. Financial constraints due to tougher operating conditions will put pressure on law firms to speed up workplace transformation.2. Defining the ‘right’ office size: law firms will have to combine higher flexibility with better control of their real estate costs.3. Shortage of high-quality supply in the traditionally-preferred submarkets.Top 3 opportunities for law firms1. Competition for space is relatively low at present.2. Leases can be favourably renegotiated by large tenants, on the condition that they agree on an extension of additional years.3. Incentives offered by landlords can be quite significant. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • 44 Law Firm Perspective • Global • 2012 Jones Lang LaSalleWarsawLocational preference: The major law firms in Warsaw are located in the centrallocations (Central Business District and City Centre). Of the top 10 firms, threeare located in Rondo 1 office building and two are situated in 53 Emilii PlaterStreet (Warsaw Financial Centre), which are the most prestigious buildings 2.0% Percent of market 11 Number of law firms occupyingin Warsaw. occupied by law firms > 2,000 sq m in the marketThe majority of international law firms started to seek opportunities for expansion inPoland and Warsaw after Poland’s accession to the European Union. Before 2004 Recent Law Firm Completed Transactionslaw firms operating in Warsaw comprised mainly of local participants and Warsaw’slegal market remains at a relatively early stage of development, with future growth DLA Piperprospects promising. Only 5 of the 50 biggest law companies in terms of the Warsaw Financial Centre, 23 Emilii Plateremployment, have over 100 employees, and 12 have 50-100 employees. Street, 00-113, WarsawThe recent preference among law firms operating in Warsaw has been to renew in 2,310 sq mtheir current premises rather than to relocate to new buildings, as is evidenced by Renewalthe three major transactions concluded in the past 12 months. Allen & Overy Rondo 1, Rondo ONZ 1, 00-124 WarsawHowever, the amount of choice for law firms in Warsaw is on the increase. Currently 2,,297 sq mover 183,100 sq m of new modern office space is under construction in Warsaw’s Renewalcentral locations, 40% of which should be completed within 12-16 months. At theend of Q2 2012 approximately 8.18% of stock remained vacant (7.77% in theCentral Business District and 8.46% in the City Centre), which corresponds to Squire Sanders100,200 sq m of available space for potential tenants. Due to the large volume in the Rondo 1, Rondo ONZ 1, 00-124 Warsawpipeline, the market is expected to see a slight upward pressure on this ratio in H2 1,600 sq m2012 and especially in 2013. Prime office space in Warsaw City Centre can now be Renewalsecured from €22-25 sq m per month. However, there are some A+ developmentsquoting rents even higher than this. PRICING AND incentives Overall Prime rent (sq m per annum) €300 4 to 6 months rent free Description of available incentives + fit-out contributions OUTLOOKTop 3 challenges for law firms1. Limited availability of office space in buildings considered as top properties.2. Some A+ developments quote rents even higher than prime headline rents in the City Centre.3. Driving greater efficiency and productivity from the workplace.Top 3 opportunities for law firms1. Large number of pipeline developments competing for pre-let agreements.2. Attractive lease conditions available for those willing to sign pre-let agreements.3. Tenant leverage likely to increase going forward as choice increases. Tenant-favourable market 2012 2013 2014 2015 2016 Neutral market Landlord-favourable market
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 45ContactsFor more information contact: Melbourne Germany Research Michael Greene Randall WhiteAmericas brokerage Director Director Tom Carroll Michael.Greene@ap.jll.com Randall.White@eu.jll.com Director – EMEA ResearchThomas E. Doughty Tom.Carroll@eu.jll.com +61 7 3231 1355 +49 69 2003 1216International Director +44 20 3147 1207Thomas.Doughty@am.jll.com Shanghai London+1 202 719 5652 Anthony Couse Richard Proctor John Sikaitis Director Director Senior Vice President - Americas OfficeElizabeth K. Cooper Research Anthony.Couse@ap.jll.com Richard.Proctor@eu.jll.comInternational Director John.Sikaitis@am.jll.com +86 21 6133 5555 +44 (0)207 399 5252Elizabeth.Cooper@am.jll.com +1 202 719 5839+1 202 719 6195 Singapore Madrid Jerome Wright Peter KampChris Murray Director Tenant RepresentationManaging Director Jerome.Wright@ap.jll.com Peter.Kamp@eu.jll.comChris.Murray@am.jll.com +65 6494 3754 +34 91 789 11 00+1 202 719 5010 Sydney MilanPhilip I. Leibow Tony Wyllie Yannis De FrancescoManaging Director Director DirectorPhilip.Leibow@am.jll.com Tony.Wyllie@ap.jll.com Yannis.Defrancesco@eu.jll.com+1 202 719 5765 61 2 9220 8729 +39 02 85 86 86 90Gregory J. McCavera Tokyo MoscowManaging Director Neil Hitchen Kate McMurtrieGregory.McCavera@am.jll.com Director Director+1 202 719 5779 Neil.Hitchen@ap.jll.com Kate.Mcmurtrie@eu.jll.comBella Schiro +81 3 5501 9203 +7 495 969 54 39Senior Vice President ParisBella.Schiro@am.jll.com Simon Williams+1 202 719 5834 EMEA brokerage Director Simon.Williams@eu.jll.com Amsterdam +33 (0)1 40 55 17 10 Pieter van der PeetAsia Pacific brokerage Tenant Representation WarsawAsia Pacific Pieter.VanderPeet@eu.jll.com Jakub SylwestrowiczJeremy Sheldon +31 20 540 7932 Tenant RepresentationDirector - Head of Markets Jakub.Sylwestrowicz@eu.jll.com BrusselsJeremy.Sheldon@ap.jll.com +48 22 318 00 48 Eric Orban+852 2846 5288 DirectorBeijing Eric.Orban@eu.jll.comEric Hirsch +32 2 550 2529Director Dubai & Abu DhabiEric.Hirsch@ap.jll.com Robin Pugh+86 10 5922 1263 DirectorHong Kong Robin.Pugh@eu.jll.comAlex Barnes +971-4-4266966DirectorAlex.Barnes@ap.jll.com+852 2846 5125
    • 46 Law Firm Perspective • Global • 2012 Jones Lang LaSalle
    • Jones Lang LaSalle Law Firm Perspective • Global • 2012 47 The tough economic and operating conditions firms have faced since the global financial crisis of 2008 have forced many businesses to manage operating costs more actively. Law firms have clearly not been immune to ... that pressure.
    • About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated servicesdelivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenueof $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. Thefirm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide.LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estatewith $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.About Jones Lang LaSalle Law Firm GroupOur Law Firm Group’s reach extends around the globe, with knowledge of law firm trends in every major market. With local presence in hundredsof markets around the world, you can feel confident in hiring a single firm for your real estate needs, while having the advantage of tailored localmarket expertise. Our experienced Law Firm Group can oversee your strategy, while giving you access to our integrated network of thoughtleaders, leading research analysts and local real estate experts. Moreover, Jones Lang LaSalle’s global platform provides you with comprehensivesolutions and local expertise that matches your long-term objectives across the nation and around the world. At Jones Lang LaSalle, we take astrategic approach to understanding and solving your challenges and are ready to deliver valuable counsel at every step.About Jones Lang LaSalle ResearchJones Lang LaSalle’s research team delivers intelligence, analysis, and insight through market-leading reports and services that illuminate today’scommercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our 300 professional researchers track and analyzeeconomic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our researchand expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drivessuccessful strategies and optimal real estate decisions.www.joneslanglasalle.com© 2012 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including withoutlimitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior written permission of Jones Lang LaSalle. The information contained in thisdocument has been compiled from sources believed to be reliable. Jones Lang LaSalle or any of their affiliates accept no liability or responsibility for the accuracy or completeness of the information containedherein and no reliance should be placed on the information contained in this document.