GLOBAL CORPORATE SERVICES ASIA-PACIFIC Law Firm Review 2013 LAW FIRM SURVEY Page 5 REVIEW OF KEY ASIA- PACIFIC LEGAL SECTOR MARKETS Page 9 - 15 CONTENTS 3 Executive summary 4 INTRODUCTION 5 LAW FIRM SURVEY 9 BEIJING 10 SHANGHAI 11 HONG KONG 12 KUALA LUMPUR 13 SEOUL 14 SINGAPORE 15 SYDNEY EXECUTIVE SUMMARY International law firms are reacting to market opportunities and changing regulatory environments to expand their presence in the Asia Pacific region. Proximity to clients is the most important consideration for firms when opening offices and determining office location, although prestigious offices are considered important for establishing and maintaining the brand. China, Korea and Singapore are markets that are seeing significant numbers of new law firms arrive due to changes in regulation, economic activity and new trade agreements allowing foreign law firms greater access to the market. Law firms continue to adopt predominantly enclosed office layouts. Although firms are increasingly cost conscious and new ways of working have been considered, this is unlikely to change the approach of mainstream firms dramatically. A number of trail blazers are embracing more progressive workplace requirements that address the growing importance of ‘soft’ assets—flexibility (remote working), technology in enhancing productivity and employee performance. With pressure on profitability and operational costs, law firms are increasingly focused on containing real estate spend whilst reviewing accommodation requirements. ASIA-PACIFIC Law Firm Review INTRODUCTION With Asia Pacific continuing to be the Additionally, as with any international law firm growth engine of the world economy, it is no who may be looking to expatriate lawyers into surprise that many international law firms are a new market, we have included details of enlarging their footprints across the region. prime residential rents in the various markets, The increasing opportunities in various types an important real estate cost and useful for of law practice have been met at the same international benchmarking. time by decreasing regulation in a number of Knight Frank, part of the NGKF Global Network countries, offering international firms access has dedicated law firm practice groups across to new markets. all regions of the world. Our understanding of Given the ongoing challenges in Europe and the legal sectors, the stakes involved and the the US, there are added incentives to increase changing regulatory environments, makes us exposure in the region. However, while on an ideal real estate partner, whether looking the one hand, opportunities are there for at the cost benefits of existing space, looking expansion, on the other, ongoing uncertainty at new markets or optimising your workplace in the world economy is leading to firms strategy. becoming more costs conscious. Whether We hope you find this report informative and opening offices in new countries or expanding thought provoking. within a market where there is already a presence, law firm decision makers are increasingly scrutinising outgoings as long Alex Hill as some grey clouds on the global economic Head of landscape remain. Global Corporate Services, Real estate is one of the largest costs on any Asia Pacific firm’s accounts, and effective management of these fixed costs can help balance securing the best space, utilising it effectively, ensuring the best productivity of staff and enhancing “Law Firms across Asia the firm’s bottom line. Pacific are unique in This timely report provides not only a review of the property and regulatory trends in Asia their office requirements Pacific with regard to the legal sector, but with client proximity and also includes our exclusive survey of key international law firms across the region. The prestige being at the survey, carried out via one-to one interviews forefront. We are however with key decision makers in the legal industry has provided some valuable insight into seeing seeds of change as office locations and workplace strategies. profitability, performance This in turn gives an understanding into the way international law firms are trending, the and occupancy costs come perceived risks of entering new markets and into greater focus.” attitudes towards different work practices. 04 LAW FIRM SURVEY Knight Frank conducted a number of Figure 2: Why did you choose to open offices in your city? interviews with international law firms of various sizes across key gateway cities of Asia Consideration Pacific in late 2012. Only international law firms were selected and interviews conducted with senior partners who were involved in 1 Proximity to clients Most important property and workplace decisions. 21 1 The interviews were based upon a survey to 23 Ease of doing business understand a company’s motivations for office 1 21 location, workplace strategy and how this was 243 evolving over time. 23 Connectivity 453 Office location 43 645 Costs Our survey shows us that the choice of 5 64 location (in terms of countries and cities) 5 6 for international law firm offices is defined 65 Lifestyle Least important6 by market opportunities and regulation. 6 Assuming a country’s regulations allow 6 foreign law firms to practice, proximity to Source:6 Knight Frank Research clients came top of the list of considerations when deciding whether to open offices in a city. The decision to open new offices is factors on the bottom line. always driven by business and fee earning A number of respondents made mention to opportunities. changing technology as a driver in terms of Figure 1: The regulatory environment and ease with office location. For example changes and Country of origin of firms surveyed which companies can set up new offices is advances in communication and IT have also noted as a serious consideration for law added the capability for law firms to deliver firms. The transparent and straightforward services across geographic borders. As legal regulatory environment of Singapore was cited services are very much knowledge intensive, for example, as a key reason for locating in the changing face of communication makes the city by a number of law firms. The ease of working with clients cross-border easier from doing business was also seen as a relevant a regional headquarters. Connectivity and the consideration for firms when looking at ease of travelling out of a central location that markets across the region. served clients across the region was also seen as important, depending on the type of law The costs of establishing an office in one city practice. can be very different from another. With the importance of establishing brand and being Finally, with many international firms able to serve international clients in these setting up in the region, lifestyle could be markets, costs were not seen as the primary a consideration, whether it is schools for children, air quality or activities, although it US UK/US concern for many firms entering a new market. AUS UK Real estate costs along with labour costs and rated as least important by the firms surveyed. taxes are however undoubtedly important Source: Knight Frank Research 05 ASIA-PACIFIC Law Firm Review Figure 3: based out of Hong Kong and Singapore. The What are the most important considerations when choosing an office location within a city? resource rich countries of Indonesia and Mongolia were also on many international law Consideration Most important in... firms’ radars with the boom in commodities and related business providing significant fee 1 Proximity to clients Singapore, Sydney earning potential. Most important 21 1 Figure 4: 231 Prestige Beijing What countries are you looking to expand in? 21 243 Top 6 cities chosen 3 Cost Shanghai, Hong Kong 24 53 China 43 645 Proximity to partners 45 Korea 65 6 65 Minimise commute Least important6 Australia 6 6 Indonesia Source:6 Knight Frank Research Japan With regards to selecting office location, Expansion plans different considerations were given different Mongolia weightings depending on the city in question. We asked the law firms interviewed which Although all of the international firms we markets they were looking to expand in. interviewed were located in the CBD (or Although the results are not exhaustive and Source: Knight Frank Research equivalent), prestige was more important in are maybe only an indication of opportunities China, with a number of interviewees having in the region, the results are interesting. chosen to locate themselves in iconic “Grade China came out on top, with a number of Workplace strategy: A” office buildings. Certainly for law firms who firms looking either to expand or to open were opening for the first time in a country, a for the first time in what will become the Cellular versus open-plan largest economy in the world in the not too prestigious address was seen as important in Asian offices tend to be very traditional, distant future. Second tier Chinese cities introducing the firm’s brand. with hierarchy respected and considered were also mentioned by numerous firms, important. This undoubtedly reinforces such as Chengdu - as they look to establish the cellular office layout and resists more themselves across China’s geography. contemporary, predominantly open plan Korea, which has already seen a significant “When you are new (in the offices. Although we are seeing a move by number of firms opening offices since trade some law firms in the US and the UK towards market) and no one really agreements with the EU and US allowing open plan, only one of all the firms in Asia foreign law firms to operate was also part of knows how good you are, Pacific interviewed (who was new into the the expansion strategy of a number of firms they take their cue from region) was looking to adopt an open plan layout. the surroundings.” Otherwise, the importance of privacy and UK Law Firm, Singapore “We will be opening confidentiality for lawyers, who also need quiet reading time, meant that lawyers were in Korea in 2013.