An overview and expert insights of the office market for key geographies in Asia Pacific and recent activity in the legal sector for the first half of 2022.
Markets to highlight:
Law firms are sharply focused on recruitment and retention of top talent to keep up with exponential growth in client demand and strong deal flow in the M&A space.
Law firms adapted particularly well to the changing way of work heralded by COVID-19 with lawyers demonstrating an aptitude for performing their roles from home with productivity and continued billable output.
Throughout 2021 firms with practice groups in litigation, insolvency, M&A, and business disruption sectors performed well and propped up revenue for quieter parts of the firm. The beginning of 2022 has brought a sharp increase in recruitment activity to meet growing client demands and firms are using their office space as an important part of their staff attraction strategy.
The emphasis on encouraging a return to the office for at least 2 days per week has also informed the ‘flight to quality’ trend where firms are considering higher quality office space as compared to existing premises. Firms adopting this strategy are capitalising on strong market incentives and reducing their office footprint to offset the increase in occupancy cost.
All firms have been grappling with crystalising what the future of the office will look like, and some opted to renew and refit or negotiate an extension at existing premises while they work through their return-to-work policies.
Law firm activity in Melbourne:
- Herbert Smith Freehills committed to 10,300sqm at Dexus’ new 80 Collins Street development, relocating from 101 Collins Street
- Allens is currently in the market for approximately 10,000sqm – 12,000sqm of Premium/A grade office space in Melbourne central business district (CBD) and Colin Biggers Paisley is also looking for 2,000sqm – 2,600sqm in Melbourne CBD
- Holding Redlich are currently in the market for approximately 5,000sqm of Premium/A grade office space in Melbourne CBD
- Russell Kennedy lawyers are currently in the market for 4,500sqm – 7,000sqm of Premium/A grade office space in Melbourne CBD
Law firm activity in Sydney:
- Corrs Chambers Westgarth are relocating from 8 Chifley Square to Quay Quarter Tower in late 2022
- Ashurst recently renewed at 5 Martin Place and have handed back a floor with rumours of bringing partners out of offices into open plan
- Allen & Overy is relocating from 85 Castlereagh Street to levels 14 and 15 at 33 Alfred Street
- Colin Biggers Paisley is in the market for approximately 4,500sqm of Premium/A grade office space
- Clifford Chance is relocating from 1 O’Connell Street to Wynyard Place
- Arnold Bloch Leibler recently refurbished their space and renewed at 2 Chifley Square
- TressCox Lawyers have moved into HWL Ebsworth’s offices at Australia Square following the merger
- Clayton Utz has handed back two floors at 1 Blight Street
- Maurice Blackburn Lawyers are in the market and looking to relocate out of 201 Elizabeth Street
For more expert insights and recommendations for occupiers in the legal sector in Australia, contact Hannah Kimber.
Greater China | Beijing
The Beijing real estate market is showing moderate recovery among the ongoing uncertainty from COVID-19.
Overall Grade A leasing activity, rentals and occupancy rates are approaching pre-pandemic levels driven primarily by large transactions of local financial sector occupiers. Medium-term uncertainty remains due to the ongoing resurgence of COVID-19 variants and the local government’s conservative approach to its pandemic management.
Owners of projects with high occupancy rates remain confident in the ability to retain existing tenants. China’s overall economic slowdown combined with COVID-19 related limitations on inspections and construction, especially in Chaoyang District, are putting pressure on new leasing pipeline, creating opportunities for high-quality occupiers.
Legal sector activity has been strong and driven primarily by consolidation and business scope expansion of emerging China-based firms.
Law firm activity:
- Da Cheng 达成 Dentons has completed a relocation to Zhaotai International Center in Chaoyang District for approximately 15,000sqm gross
- Hylands 浩天 Law firm is said to have expanded in Fortune Financial Center in Chaoyang District’s CBD by an additional 2,600sqm gross to a combined size of approximately 8,000sqm gross
- Cooley LLP is said to have completed an expansion and upgrade to China World Tower A in Chaoyang District’s CBD to a combined size of approximately 3,100sqm gross
For more expert insights and recommendations for occupiers in the legal sector in Beijing, contact Yevgeny Bam.
Greater China | Hong Kong SAR
An increasing number of international and regional law firms anticipate headcount expansion, particularly for middle to senior-level legal professionals and fee earners in 2022.
Despite political uncertainties and a global pandemic, both the public and private M&A markets remained incredibly active in 2021. Hong Kong serves as a tax-efficient hub for international firms active in the ‘Greater China’ market. The work is frequently led locally with support from Beijing and Shanghai offices, as well as alliances with PRC law firms.
Law firms that exhibited agility and were able to predict what was needed during the pandemic (i.e., generating more business by strengthening ties with current clients, looking at strategic hires and partnerships, prioritizing certain areas of practice and restructuring the firm and its resources) were well-positioned to gain market share. Those firms who were unable to ‘get out of the red’ either scaled down or exited (including Osborne Clark, Orrick, Vinson & Elkins, and Locke Lord to name a few). Having said this, several international law firms seemingly ramped up their Asia presence during this same period.
Although the headcount and demand for legal services is increasing, new letting activities will remain slow as most international firms have already renewed or restructured a long lease, and the closure of the mainland China border is preventing PRC firms from establishing a physical presence in the city. ‘Flight to quality’ has been the main factor in driving new letting activities.
Law firm activity:
- White & Case have upgraded and relocated to York House
- F Zimmern & Co have upgraded and relocated to The Hong Kong Club Building
- Charles Russell Speechleys have upgraded and relocated to Two Pacific Place
- Sullivan & Cromwell have upgraded and relocated to Alexandra House
For more expert insights and recommendations for occupiers in the legal sector in Hong Kong, contact Richie Lau.
Greater China | Shanghai
While the long-term effects of the Shanghai April-May lockdown are still to be seen, areas of the market with the highest concentration of law firms exhibit particularly low vacancy rates and rising rents.
After a highly active Q1 in the core CBD, Shanghai entered Q2 under a city-wide lockdown which halted most, if not all leasing activity. Although the duration and severity of the current measures will determine the effect on the market’s leasing activity, at present buildings with a high concentration of law firms show unchanged rents and vacancy levels.
Strategic location considerations along with the lockdown’s impact on law firms’ revenues and potential relocation / changes in their upper management and key staff will be determinant in the industry’s short to long term real estate decisions.
Potential immediate cost-saving efforts such as rent reliefs will need to be assessed after both tenants and landlords can resume operations under somewhat normal conditions, with results varying according to tenants’ negotiation power, landlords’ policies and the after-lockdown health of their portfolios.
Law firm activity:
- An Jie Law Firm expanded in K Wah building in Q1, for a total of 1,900sqm.
- Qiaowen Law relocated to SK Tower, leasing a total of 900sqm.
- JNT Law renewed and expanded in Jin Mao Tower, expansion area is 400sqm.
For more expert insights and recommendations for occupiers in the legal sector in Shanghai, contact Aliro Franco.
Legal firms are optimistic for the year ahead but face the issue of a tight labour market, and limited good-quality office space for expansion and relocation.
The legal sector in Singapore performed well in 2021, and firms are optimistic for the year ahead.
One of the biggest issues is executing expansion plans given the tight labour market, therefore limited office space expansion and relocations were carried out in 2021 and early 2022.
Even more pronounced is the focus on the workplace as a key differentiator in the fight for talent. Numerous firms are implementing flexible working arrangements and looking to provide modern, inspirational work environments in their offices.
Leasing demand for CBD Grade A continued on its positive trend in Q4 2021, driven by the expansion of technology and selected professional services firms. CBD Grade A rents increased by 0.5% QOQ to SGD9.64 per sq ft in Q4 2021, supported by resilient net absorption. We expect CBD Grade A rents to grow about 4.4% in 2022, compared to the 0.8% growth in 2021. Vacancy rate is also expected to tighten to just under 4.0% by end 2022.
Colliers recommends occupiers proactively conclude final plans for their office footprints as the window of opportunity for rental negotiation starts to close.
Law firm activity:
- White and Case have upgraded and relocated to a new development in CapitaSpring
- Watson Farleigh Williams have also moved to CapitaSpring
- Lee & Lee have moved into 25 North Bridge Road
- Clifford Chance restacking its 30,000 square feet office at Marina Bay Financial Centre Tower 3.
- Latham & Watkins handed back half a floor out of its 2 floors at Republic Plaza