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Many firms are weighing the added short-term costs of moving to a new office against the long-term benefits of increased productivity, lower rents and a work space that better suits their needs.

Law firms keep on move in Twin Cities

Mark Olive, a partner at Sieben, Gross, Von Holtum & Carey, cleans out his ninth-floor office to prepare for the firm’s move a few blocks away. (Staff photo: Bill Klotz)

Space dance continues as office vacancy stays high

After more than 30 years at the corner of Marquette Avenue and Eighth Street in downtown Minneapolis, the Sieben, Gross, Von Holtum & Carey law firm is moving.

But not very far.

The firm is moving Nov. 19 down the block to 15,000 square feet on the fifth floor of AT&T Tower at Ninth Street and Marquette Avenue.

Sieben’s lease expired this year, and managing partner Jim Carey said the firm started studying its office situation about two years ago. It decided there were two options: stay and renovate or move.

Moving won out in part because the new place is a bit bigger and the can be custom-tailored to the firm’s needs. The seven-year lease is also an improvement, and a move gives the firm the opportunity to encourage attorneys and staff to get rid of stuff.

“We got a very good offer at [AT&T], and it’s a newer building that had a better space for us,” Carey said. “We are looking forward to getting settled, and we hope it will be good for morale.”

Sieben is just the latest firm to pick up and move in the Twin Cities, and others continue to mull their office options as well. Many firms are weighing the added short-term costs of moving to a new office against the long-term benefits of increased productivity, lower rents and a work space that better suits their needs.

Julie Yeazle, the director of business development at RJM Construction in Minneapolis, said as many as seven large law firms have leases set to expire in the next 12 to 24 months, the timeframe for tenants to start looking to see what is available.

“One of the factors is if once these bigger firms decides to move, they leave a big chunk of office space behind that can trigger a domino effect,” she said. “Suddenly there is the big open space and a law firm that might not have thought about moving [when the lease comes up] now has an option they would not have considered.”

She said it is rare to have a big group of law firms with leases coming up at the same time. She expects a few to renew leases at their current space and a few to move to new locations.

Earlier this year, the Oppenheimer Wolff & Donnelly law firm moved from the Plaza VII office building in downtown Minneapolis into about 100,000 square feet in Campbell Mithun Tower at 222 Ninth St. S. In August, Greene Espel moved from U.S. Bank Plaza to 23,000 square feet in Campbell Mithun Tower.

Laura Broomell, the firm administrator at Greene Espel, said the decision to move was not easy. In fact, the firm first planned on staying put.

Representatives from the firm started exploring options 18 months before the lease expired and toured 15 possible locations before deciding on Campbell Mithun. She said the firm ultimately decided a renovation would be too disruptive to the day-to-day work. The firm was able to offset some of the added costs of moving in to a new building through a better financial deal, tenant improvement dollars for upgrades and increased productivity in the new office, she said.

“We purged about 55,000 pounds of paper when we moved,” she said. “The workrooms are now workrooms, and not just storage. We have space for trial rooms now, and we were able to add three new attorneys.”

According to the third-quarter report by commercial real estate firm Cassidy Turley, the overall vacancy rate for office space in the Twin Cities is 17.4 percent, down only slightly from 17.7 percent at this time last year.

Steven Chirhart, a tenant representative with TaTonka Real Estate Advisors in Minneapolis, said several law firms are “reaching out a bit sooner” in the life of their lease than they usually would to look at the market. He said there is disconnect between tenants and landlords right now in the real estate market that is making it harder for deals to get done.

“On the one hand you have landlords trying to paint the perception that the market is improving and that rents are going up, but the reality is, of the recent transactions that have gotten done, tenants are taking less space on the renewals, creating more vacant space on the market,” he said. “I would say we are in a static market for the foreseeable future. There is not going to be much new inventory created, but vacancy rates aren’t necessarily going to drop either.”

Personnel and economic decisions among law firms have prompted the downsizing. Many firms are transitioning to a smaller footprint. New office designs don’t feature the large, corner offices that were once a sign of prestige among senior partners. And the ratio of support staff to attorneys has also changed. Today, one legal administrative assistant could work for three or four attorneys rather than the 1-to-1 ratio of 20 years ago. Space on the interior of the office floor is being used for different purposes in newer designs.

Chirhart’s firm has helped several law firms find offices in the Twin Cities, including Barnes & Thornburg, Chestnut & Cambronne, Halleland Habicht and Messerli & Kramer. He described the market as “as close to equilibrium as I have seen in 27 years.”

The Best & Flanagan law firm is located on two-plus floors at 225 S. Sixth St. in downtown Minneapolis in Capella Tower. The firm’s lease is up in 2015 and discussions have already started about what the law firm will look like and the space it will need for the life of the next lease, said the firm’s managing partner Bob Maher. He said every option is on the table.

“We pay a premium to be in the upper floors of one of the three tallest buildings in downtown,” Maher said. “I’m not convinced the majority of the firm sees the value of upper-floor rents as part of our business plan. Frankly, we are looking forward to see what is available. I know other people are paying a lot less than us.”

The firm recently hired Cushman & Wakefield as tenant representative.

“We are identifying areas where we will add people as good business practice as part of a strategic plan, and that affects the space we need,” Maher said. “At the same time, like everyone else, our baby boomers are retiring and won’t be full-time with us when our next lease expires. And, like all businesses, our use of space is changing through technology and work arrangements that don’t involve everyone being in the office all the time. Our next office space needs to accommodate all of those factors, no matter where it is.”

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