Law Firms React to Landlord’s Response to Lease Renewals – Declining Concessions or Renegotiation of the Lease

Resurgens staircase.jpgIn Atlanta, law firms are on the move. They are willing to pay the up-front costs to transfer the entire firm from one office location to a new leased location due to several factors. One of the factors includes the old landlord’s inability to provide incentives for beneficial lease renewal terms and for proving incentives to law firms to stay in the current space. Instead, landlords are often coming up short in providing any type of monetary tenant improvements, and managing partners are seeking law firm offices elsewhere. With the abundance of empty law offices in Atlanta, law firm are lured to seek new Atlanta law offices. Capital outlays have currently been made in the current locations while newly built commercial buildings are offering super sweet deals plus dollar for dollar tenant improvement incentives.
Just recently, the law firm of Fisher & Phillips exited from the classic Resurgens building and has landed in the new 12 & Midtown building located at the corner of Peachtree and 12th Street in the heart of Midtown, Atlanta. The facility is new, shiny and appealing to the broad based clients of Fisher & Phillips, LLP. Roger Quillen, managing partner stated, “the glut of A-plus office space offered an economic incentive we couldn’t turn down”. “The entire cost of the new space, fully built out and outfitted, was less than our expenses and rent at the old space”.
Law firms are in transition all over the City of Atlanta. Law firms are setting up and Atlanta law offices are looking closely at the term of their leases and starting negotiations with landlords. While renewal of a current lease is often a first choice, without the incentive to stay, landlords are losing law firm tenants. It appears that the earlier these managing partners are starting negotiations with landlords the more equipped the law firm is for moving if necessary. For instance, Mr. Finlayson, a managing partner at Mozley Finlayson & Loggins, LLP, a 40-person corporate-law firm in Atlanta, says on the advice of a broker he felt it was the right time to make a deal. After three months of negotiations, he secured a size-year extension at a 20% discount, plus one year of rent at half price, starting in January. Landlords, who retain large to medium sized law firms, such as Ackerman & Co., are pleased not to see a law firm exodus. “We don’t want to see tenants walk out the door, particularly big tenants who have been with us a long time,” says Frank Farrell, a senior vice president for Ackerman in Atlanta. “The costs of a renewal are probably half of what they are on a new deal.”
The bottom line is small to large law firms are seeing opportunities in the soft commercial real estate market trying to renegotiate their office lease for less money. Alternatively, law firms are moving their offices to newly built spaces often just down the street from their old location.
Resources:
Time is ripe for Negotiation
Posted March 3, 2011, Walls Street Journal
Belt-tightening benefits Fisher& Phillips
Posted February, 21 2011, The Daily Report