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Bright Insight Dallas Bright Insight Dallas

Dallas-Fort Worth Legal Sector Evolving Amid Corporate Boom

Ryan Hoopes • 11/27/2023

What three trends are legal occupiers capitalizing on in Dallas?

  1. Dallas-Fort Worth is a unique legal market that bucks national trends on some fronts and aligns with others. Single-sized and interior offices are anomalous, but existing legal tenants have seen lease sizes decrease 10.4% on average
  2. Legal leasing activity has historically waxed and waned in Dallas-Fort Worth. However, 2023 leasing has been strong so far and gradual, consistent growth is expected in the future
  3. Major law firms continue to establish a presence in Dallas-Fort Worth, following the corporate relocations and business expansions of their clients. Within the metropolitan area, 13 NLJ 500 law firms have at least two locations.  

Dallas-Fort Worth is unique, but national trends are present

While other markets are seeing a downward trend in attorney-per-square-foot ratios driven by universal office sizes, hoteling and shared workstations for support staff, legal tenants in Dallas-Fort Worth attribute the decrease to more efficient designs of their office space. Attorney-per-square-foot ratios aren’t necessarily top of mind to legal occupiers in Dallas-Fort Worth, but efficient use of their space is. Major law firms have been incorporating design elements that keep perimeter offices for attorneys, ignoring universal office-size trends and optimizing core space. 

Though the motivations and attitudes of legal occupiers in Dallas-Fort Worth differ, the result is strikingly like many other major legal markets across the U.S., which are seeing compression in lease sizes. Since 2020, legal occupiers in Dallas-Fort Worth have seen a 10.4% average reduction of square footage in, which is slightly below the national average of 11.4%. Also, like the rest of the nation, a portion of this reduction in space is correlated with the digitization of law libraries and file rooms, and newer Class A buildings shifting toward smaller and more efficient floorplates. Notable firms that have recently downsized include Haynes and Boone (28%) and Godwin Bowman PC (43%).  

Even though downsizing is the prominent trend among legal occupiers in the Dallas-Fort Worth market, there are enough firms expanding that it warrants mention. Motivations for expansions vary across firms, but usually the expansions are due to increased headcounts, expectations to increase headcounts in the future, or establishing the practice in a different part of the Dallas-Fort Worth metroplex. Notable expansions in 2022 include: Munsch Hardt; O’Melveny & Myers; Weil, Gotshal & Manges; Dykema Gossett; and Winstead PC. 

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Previously fluctuating legal leasing activity is expected to be consistent in the future

Since 2017, legal leasing activity in Dallas-Fort Worth has rhythmically increased, then decreased year-over-year (YOY). The first year of the pandemic saw leasing at its highest, with 736,000 sf, followed by 238,000 sf in 2021 and 671,000 sf in 2022. So far, this year has bucked the trend, with occupiers committing to lease 344,000 sf through the first half of the year, which suggests the beginning of a gradual shift toward more consistent leasing activity going forward. The first half of 2023 also saw the legal sector constitute 6.5% of overall leasing in Dallas-Fort Worth, which is its highest recorded share. This further underscores the economic resilience of legal occupiers and their commitment to traditional office utilization in the wake of widespread hybrid work strategies deployed in other sectors.  

  

The Uptown/Turtle Creek submarket has been the top choice for legal occupiers in Dallas-Fort Worth; since 2020, 28.1% of legal leasing activity has been for space within its boundaries. The Dallas Central Business District (CBD) is another choice submarket, capturing 25.3% of legal sector leasing activity over the same period. The Dallas Arts District, which captured 10.4% of leasing activity, has been the third most popular submarket for legal sector leasing since 2020.

  

It is likely that law firms, with their seemingly universal desire for upscale space, will opt to relocate to newer buildings in the market as lease expirations and new construction deliveries begin to overlap in the coming years. In the Uptown/Turtle Creek submarket, there is currently 2.3 msf of Class A office space under construction, and it is expected to be complete by December 2025. However, Kirkland & Ellis’s move to Weir’s Plaza in the Knox/Henderson area—which is just a few blocks north of Uptown/Turtle Creek—could be an early sign of legal tenants’ willingness to relocate slightly north along U.S. Highway 75, if available space on the market meets their requirements.

Dallas-Fort Worth—America’s Boomtown? 

Dallas-Fort Worth has done exceptionally well in terms of its business recruitment and expansion efforts, and the area has seen a number of corporate headquarters relocations as a result. According to Axios, 265 businesses have either relocated to Dallas-Fort Worth or expanded there since 2020.1 The north Texas metropolitan area has a strong and diversified economy, with no corporate income tax, competitive incentives, high-quality infrastructure and plenty of commercial real estate. For office occupiers, inventory levels in Dallas-Fort Worth are nearing 250 msf, with an average rental rate of $34.14 per square foot (psf) in the second quarter of 2023. 

The corporate migration to Dallas-Fort Worth isn’t only enticing to major corporations, it also attracts the companies that support them—and major law firms that recognize the strategic advantages of a growing business hub are quick to follow suit. In 2021, Duane Morris, an Am Law 100 firm, opened its first office in Dallas and then opened a Fort Worth location just 18 months later. Blank Rome, another Am Law 100 firm, announced the opening of their first office in Dallas—the firm’s second in Texas—in July of this year. 

Within the Dallas-Fort Worth metropolitan area, there are 108 law firms that are part of the NLJ 500. Collectively, the firms occupy 122 individual offices and employ 4,369 attorneys. Of the 108 firms, 13 have at least two offices in the metro, and one firm has three.2

 

1 Axios, ‘How Dallas Fort-Worth Became America’s Boomtown’, 2023
2 National Law Journal, NLJ 500, 2023

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