What will the law firm of 2040 look like? PwC identified key trends, which CBRE thinks could have noticeable real estate implications:
- Globalisation – with international clients demanding increasingly complex full-service provision; law firms will need to decide what location strategy they should adopt to ensure they can provide this – how many people in which cities?
- Technology – as with many other services sectors, the rise of information technologies holds out the prospect of efficiencies and productivity improvements. Examples (which we return to below) include Artificial Intelligence and online legal services – which of course don’t necessarily need to be co-located with the firm’s employees
- Workforce needs – law firms need to attract skilled talent to remain competitive, in multi-disciplinary teams. They’ll need to offer flexible working options, and an attractive and flexible real estate environment
- Client demands – clients will increasingly use fewer, bigger law firms and will want to outsource day-to-day legal work under longer term contracts.
CBRE’s annual Law In London survey, has found similar trends over the six years it has been running, as has our research on legal firms outside London in our 2016 Law In the Regions report.
Our 2018 London report finds, for example, that 89% of law firms in the capital were already using artificial intelligence (AI), or had plans to do so (Figure 1). Currently, AI applications for law focus mainly on automating tasks typically carried out by paralegals and support staff.
However, as demonstrated by Legal Services Link, launched in 2018, legal services technology is beginning to expand to mobile-based services, following the example set by ‘fintech’ where there is now a wide range of personal finance apps. Legal Services Link customers to choose from a choice of legal representatives across a range of price points, dependent on their level of experience. While Legal Services Link allows the user to connect to a human lawyer, apps like DoNotPay provide access to ‘virtual lawyers’ which can address simple tasks such as appealing against parking tickets and utilising legal loopholes to rebook flights if they drop in price after booking.
Figure 1: Law firms in London have embraced AI
Source: CBRE Research, 2018
Ultimately, AI in its current form is unlikely to threaten the jobs of trained lawyers, but it could help to make the legal process more efficient. In terms of employment, almost half of firms interviewed in our 2018 London report envisaged a reduction in headcount at junior level (43%) and support level (45%), but only 7% believed headcount would fall at senior levels.
So by 2040, the legal sector will be reshaped by technology. However, the demand for highly trained legal professionals who work on complex legal cases seems unlikely to fall. Instead, those professionals will be using technology to drive greater efficiency when delivering their services.
And technology is just one example of big influences on legal firms’ real estate needs in the next twenty years. But what might these changes mean for real estate? To remain competitive against this backdrop of rapid evolution and transformation, more waves of real estate activity are likely. Firms will seek to maximise property assets and rationalise their estates to account for new ways of working, chase the talent, and adopt new technology. Although the key driver is to reduce operating costs, there is also a focus on adding value to the core business through strategic, selective investment.
CBRE finds that this will be achieved by positioning the right people with the right skillsets in the right place, for particular parts of a project in optimum locations (cost effective with access to talent). Continuing the trend of recent years, key regional cities such as Birmingham, Manchester and Belfast will attract big corporate law firms. Bristol also seems likely to continue to do well given its leading position to date. But, as we write elsewhere, the fortunes of legal services firms in our big cities will depend on cities’ ability to attract and retain the right talent.
Finally, we shouldn’t forget the influence of the forces of change on the city court estate. The UK Government has recently announced some court closures, including two in London, and reported research that showed that during 2016-2017, 41% of court and tribunal buildings were used for less than half of their available time. Court processes are also going online, including applications for divorce and probate. So, by 2040 we expect a rather smaller court estate than we have now. The jury’s out on the uses to which they might be put, though in the case of Horseferry Road Magistrates Court, the answer was 120 new homes.