High costs of a standard leased office space is often the primary drawback for many firms and a firm’s time may be better spent in a shared office space rather than getting in over their heads.
When you lease your own office space direct from the landlord, it can definitely be very exciting. It’s confidence boosting to see your name on the building; you have free reign to really do anything you want with the office. You could decorate extravagantly or use monochromatic frames to serve as the backdrop for the truth of the moment. It’s really up to you and that can be very rewarding.
That is, of course, if your firm is willing and able to pay for the privilege.
Standard commercial leases are a big time commitment for anyone and if your firm is located in a major city like New York, Chicago, or San Francisco, you should expect your expenses to be as high as they can get because of the strong markets.
In addition to acquiring a space, your firm needs to have adequate services like electricity, pro-grade internet, office equipment, and so forth just to have the office function. No matter how many people work for the firm, it is likely that any provider will charge the same if there is 10 or 100 lawyers working in that office.
Small firms should really go with a sublet office or an executive suite.
In the sense of business, a firm must always keep their bottom line in mind. What option is going to be the most cost effective in the long run?
In a shared office space where costs to run the space are fixed, it is typically spread out over several tenants. This is a better option for small firms in urban areas where the market is plagued by colossally high rents that may be out of reach for a smaller firm.
At Law Firm Suites, we’ve incubated a number of law firms from one man armies to 8-person + firms. Fairly consistently, we’ve see that a firm grows to a certain point where their own lease office space may better fit their needs than in our executive suite for law firms.
Some firms end up staying over an extended period of time even as they grow because the hassles of keeping an office running are taken care of by staffers provided by Law Firm Suites. Costs to do so are also much lower than if the firm had their own space.
So, the big question: How big should a firm be before it makes sense to lease their own office space?
If a firm has more than four lawyers and at least one administrative professional employed by them it is really time to seriously consider a standard commercial lease. It makes financial sense because you have the revenue coming in to handle such a feat.
At four attorneys, a firm should be financially stable enough to justify the risk of taking on the long-term commitment required by most commercial landlords. Plus, the administrative person on staff can handle most of the administrative burden of running an office space minimizing an attorney’s billable time lost to office management.
Even when a firm grows to four attorneys and one assistant, it will still be less expensive to sublet office space or rent from an executive suite. However, the firm may comparatively get more space by leasing directly from the landlord.
Having that extra space may even benefit the firm as it expands rapidly. It gives liberty to hire more staff and fill the space without having to acquire more as one would in a shared office space of executive suite.
The problem with leased office space: The equipment needed for 5 can support 50.
When your firm grows it is only going to be better for you. However, in the beginning stages, you’re going to have a limited number of people. Having 20 employees as opposed to 5 employees in an office space is much better because you really get the true value out of any office equipment used in your leased space.
Costs are looked at per attorney and when you can minimize the costs per attorney, it means a lesser impact on your wallet.
Next to cost, the biggest consideration for the four-lawyer/one admin firm should be whether it wants to deal with the hassles of branching out and managing an office space, or whether it’s just easier to continue to rent from someone else who does it for them so they can continue doing what they do best: practicing law.
The firms that typically stay in shared office space, even at four or more attorneys.
At Law Firm Suites, we see both situations. Newer firms that are still growing tend to move on as soon as their financials stabilize a bit. While on the other hand, older, stable multi-lawyer firms that, at one time had their own leased office space, tend to truly understand the value of renting an office in shared office space.
From our perspective, this seems to be the natural evolution of law firm office rentals.
An additional caveat about firm size.
When one thinks about the location of their firm, it may not be feasible to even lease the space with just four attorneys. There may not be availability of spaces with adequate space for you at that time or in your price range. Downtown Manhattan typically has more spaces but if you take a train further up into Manhattan to an area like Penn Station, Grand Central, or even Union Square, smaller spaces that are adequate in size for a small firm are typically not in as high abundance as in an area below Canal Street. This means a move to Midtown needs at least twice as many attorneys to justify such a decision.