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The Legal Services Sector 12 Months on Occupier Services

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The Legal Services Sector 12 Months on Occupier Services Occupier Services Your Future, Now The Legal Services Sector 12 Months On Your Future Now | The Legal Services Sector - 12 Months On page 1 Contents • Foreword 3 • Overview 4 • The five trends shaping your FUTURE 6 • Trends in action: 12 months on 7 • The Knight Frank view: Outlook for the year ahead 17 • Legal services office transactions 2017 18 • Key contacts 19 Your Future Now | The Legal Services Sector - 12 Months On page 2 Foreword It is 12 months since we published our first Legal Services Sector Profile. The report identified the five most disruptive trends shaping the legal services sector over the next five years. It also reported on how those trends were playing out in the market via major news stories, top transactions and real estate market gossip. Given the sheer pace of change, a lot can happen in just over a year. This interactive report provides an update on how the trends are manifesting within the market, providing you with full exposure to both the forces of change and evident market responses. We hope you find this report informative. If you would like any further information please contact: Jennifer Townsend Associate, Occupier Research T: +44 (0) 20 3866 8028 E: [email protected] Richard Proctor Head of Central London Tenant Representation T: +44 (0) 20 7861 5159 E: [email protected] Your Future Now | The Legal Services Sector - 12 Months On page 3 Overview 1 2 3 LawTech: Things are heating up but The mid-tier: Consolidation Efficiency 2.0: Evolved nearshoring, there is still some way to go and re-engineering global shared services centres & AI A greater number of law firms made significant investments in technology, and Consolidation activity continued with a number of mid-tier firms swallowed up by We have witnessed an expansion in the remit of nearshored operations, while particularly in relation to robotics, automation and artificial intelligence (AI). acquisitive UK rivals. 2017 saw the rise of the law firm consolidator with the likes certain global law firms also expanded their shared services centres across the This was evidenced by new partnerships, the recruitment of different in-house of Gordon Dadds, Redkite Solicitors, Knights and Metamorph Law making world. AI technology is being used by a small number of leading firms to drive the expertise and greater funding through venture capital. However, such activity multiple acquisitions. next wave of efficiency improvements, with some remarkable results. was heavily concentrated amongst the sectors larger players. At the same time, some mid-tier firms reported strong growth, having The past 12 months also brought a greater adoption of mobile technology and significantly rebooted their operations. These firms were in expansion mode cloud computing, and this, in turn, is enabling law firms to introduce and broaden leading to new property requirements. agile and flexible working practices, potentially impacting on the quantum, quality and function of future office space requirements. Your Future Now | The Legal Services Sector - 12 Months On page 4 4 5 The emerging new face of law: Agile, Forward looking law firms are non-hierarchical and tech-savvy upgrading their office spaces A range of law firms are fundamentally changing their business models. Whilst driving efficiency, forward looking law firms have also recognised that Actions included launching technology led business divisions and flexible legal in a fast changing operating environment they have to restructure for growth, offerings, moving from LLP to PLC status and removing structural hierarchy. innovate and drive enhancements in productivity. Attracting and retaining top Such restructuring was supported by more compelling recruitment and retention talent is key to achieving these goals. As a result, there is clear evidence of law strategies, cultural change, rebranding and investment in modern workplaces, firms investing in higher quality office space within vibrant city centre locations. which conveys that cultural change, support new organisational structures and These firms are moving away from the binary choice of open plan or cellular aligns with new ways of working. space, towards creating workplaces that offer a variety of working environments, promote a sense of community, impress clients, maximise productivity and inspire employees. Your Future Now | The Legal Services Sector - 12 Months On page 5 The five trends shaping Winners will be those who best respond to disruptive technologies your FUTURE In partnership with insight and innovation consultancy FreshMinds, we undertook 1 extensive research into the medium term future of the legal services sector. The The competitive threat to the mid-tier will scale and impact of sector change is summarised in the following five trends. intensify Navigation: To find out how each of these trends are playing out in today’s market, click on the trends to reveal a summary of operational and real 2 estate responses over the past 12 months. New market entrants: A driving force behind 3 sector efficiency Radical changes in organisational structure will 4 bring talent further into focus Competitiveness is a function of skill, 5 productivity and innovation rather than scale Your Future Now | The Legal Services Sector - 12 Months On page 6 Trends in action: 12 months on The past 12 months saw some big technology investments by law firms. Much example, was quoted as saying that innovation and the more widespread use of the buzz was around AI and, in particular, robotic process automation tools. of technology will end up increasing its staff numbers. It is becoming clear that However, most of these investments came from larger players, illustrating that robotics and AI is not about achieving large scale job reductions, but rather the widespread uptake of technology in the legal sector is still at an embryonic how you can combine the best in technology with the best in humans to drive stage and highly concentrated on the scale players, particularly when compared efficiency and differentiate. Law firms will need to create the right physical to other industry sectors. Indeed, in a recent study, Altman Weil found that 91%(i) spaces to make this happen. of US law firms with over 1,000 employees were either already beginning to make use of AI or had begun exploring the opportunities to do so, but when assessing A monitor of the legal sector over the past 12 months also shows the greater law firms of all sizes that figure dropped to just 38%. Cost is a potential inhibitor adoption of mobile technology and cloud computing, and this, in turn, is enabling to technological transformation, despite the clear evidence of the value it law firms to introduce and broaden agile working practices. The PwC Annual Law provides in terms of productivity gains, cost savings and client servicing. Firms’ survey found that 70% (v) of firms surveyed have delivered or embarked on remote and mobile working initiatives. This is encouraging given one in three Much of the debate around these technologies centres on the impact it will millennials said they would prioritise device flexibility, social media freedom and have on jobs. Anecdotal evidence from the past year suggests that we are work mobility over salary in accepting a job offer (vi). seeing a slight recalibration of the workforce, with these technologies enabling a small reduction in the number of support staff. Again, the impact remains Allen & Overy is trialling a “remote hub” (vii) in Vauxhall that provides more concentrated amongst larger firms. The Law Society Research Unit’s Annual flexible working arrangements for those commuting. Vauxhall was chosen due to Firms’ Survey found that 38% of large firms in their 2016/17 (ii) survey reported its strong transportation links. This case study illustrates how some law firms are that some functions previously carried out by non-fee earning staff have been starting to be more sophisticated and bold in their real estate decisions in order replaced with automated/IT based systems during the last three years. This to respond to changing workplace preferences. compared to 6% for small firms and 12% for medium firms. However, we are not seeing the adoption of new technologies triggering mass redundancies. In fact, there is evidence of robotic process automation and of the UK’s top 100 law firms have delivered or AI in some cases creating jobs. For example, Clifford Chance (iii) announced embarked on remote and mobile working initiatives. 1 the creation of a dedicated team to develop its Kira systems AI software. 70% Winners will be those who best Looking forward a number of law firm leaders have suggested that AI will create (iv) respond to disruptive technologies more work and roles. Joseph Andrew, Global Chairman at Dentons , for Source: PwC 2017 Annual Law Firms’ survey Your Future Now | The Legal Services Sector - 12 Months On page 7 Trends 1 2 3 4 5 Trends in evidence June 2018 The following law firms launched agile and flexible working initiatives: Barclays launched a new LawTech incubator in Notting Hill. September 2017 The incubator is being run in partnership with the Law Society. It is backed by a number of law firms including Allen & Overy, Clifford Chance and Baker Ashurst launched its “smarter” working initiative in its Glasgow and London McKenzie as well as Legal Geek, UCL and the University of Liverpool. It will offices. The initiative outlines a range of flexible working options available for provide co-working space and support for up to 100 people. all staff. These include working from home, working from client offices and Source: Legal Futures changing working hours. December 2017 June 2017 Clyde & Co launched its data analytics lab. Weightmans announced plans to relocate its 140 staff to No.1 Spinningfields in The new lab will undertake data analysis for clients, including predictions of the Manchester.
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