Ask any property lawyer what is happening in the sector and the answer will be the same. There is a lot of activity and an overwhelming feeling of optimism, unlike anything seen in the sector for years.
“The market was very buoyant this time last year,” says Linklaters & Alliance property partner Patrick Plant. “But it fell off a cliff in the autumn. There was a huge level of uncertainty, prompted by the uncertainty in world financial markets.
“A lot of people in the property market decided to take a rain check. There were very few buyers prepared to commit to any transactions.
“Then, in the early part of this year, we saw confidence gradually returning and there was a surge of optimism. It fuelled a considerable amount of activity, and there is a feeling that that will continue for the foreseeable future.”
During the recession in the early 1990s, redundancies hit property lawyers harder than any other practice area. The market took a long time to recover and it is only now that lawyers are confident that it will be able to sustain long-term growth.
James Barnes, property partner at Herbert Smith, says: “What we are seeing now is a much more controlled, solid market – people have learnt the lessons.
“Ten years ago, millions of square feet were being built with no tenants lined up, but now we are seeing less speculative lending and less speculative building. If Britain goes into recession, property will be hit hard.
“But we see the economy as more robust and less cyclical. There is more stability than there has been for a very long time.”
The increasing activity has led to an increasing demand for new recruits, and most property departments claim they are finding it near impossible to fill vacancies.
“One of the effects of recession was that people chose not to go into property, and firms weren't training property lawyers,” says Michael Gallimore, managing partner in the property department at Lovell White Durrant. “There is now a dearth of four to six-year-qualifieds. The view that Lovells has taken since the recession is that it is better to recruit at the bottom end on a fairly regular basis,” he says. “We're always on the lookout for good people, and at the moment we do envisage growing.”
Others are not so quick to blame the recession for the recruitment crisis.
Simon Cookson, head of commercial property at Ashurst Morris Crisp, says recruitment is difficult because firms are holding on to their property lawyers. “Firms see they are making more money from property and, as a result, they look after their people better than they did before. Property lawyers are deciding to stay where they are.”
Four of the big property departments have seen recent changes of leadership. Linklaters recruited partner Simon Clark to replace head of property Robert Finch, and Clifford Chance has chosen Cliff McAuley to replace Teddy Bourne, who plans to retire in October.
Lovells has seen department head Robert Kidby hand over management of the London practice to Michael Gallimore, while Laurence Rutman has surrendered power to Simon Cookson at Ashurst Morris Crisp.
Cookson says the change of the “old guard” is not significant, but is a good opportunity for the firms to develop. “The property sector used to have a handful of big names,” he says. “Now that is broadening out and there is more strength and depth in the departments.”
Whether the new-look departments will continue to dominate property law is questionable. It is a highly competitive business, and as a result work is often won or lost on the basis of price rather than quality. Some say that means the sector is not profitable enough to feed the appetites of the big firms.
“Some firms are going global and property doesn't fit the core business,” says Philip Bretherton, a partner in the property department at Berwin Leighton. “Others find the downward pressure on fees makes the sector less profitable, so they move back to core litigation work. There is a possibility that high-quality clientele will be on the market and we will be well-placed to pick them up.”
Not surprisingly, it is not a view shared by everyone. Robert MacGregor, real estate partner at Clifford Chance, sees the future rather differently.
“The proposed merger we've just announced with German firm Punder Volhard Weber & Axster shows we are still committed to real estate,” he says. “One of their strongest areas is real estate. It remains one of our core practice areas and contributes a very significant part to the firm.”
Competition is only a problem in the low-value deals. “There are a large number of players in the market, both in London and regionally, so it is more price-sensitive in the non-specialist areas. There the niche firms are competing quite strongly for the larger number of smaller deals,” says MacGregor.
“The medium firms don't have the range of expertise across broad areas,” he says. “The leading firms increasingly have to offer a very broad range of skills because the deals are getting more complex. The market is starting to diverge between big firms and smaller niche firms. The medium ones are having to face the difficult choice of whether to expand or become more niche.”
It is a view shared by James Barnes at Herbert Smith. “I still maintain that, if done properly and efficiently, good quality commercial property work can be done profitably by the big firms.
“While the bread and butter transactions might be going to small niche firms, the range of skills tend to be in the large firms when it comes to the complex, leading-edge deals,” he says.
Patrick Plant at Linklaters sees the big firms needing to strike a balance to ensure clients get value for money. “Clients don't appreciate their lawyers cherry-picking work,” he says. “But increasingly they expect us to point out to them if there are certain transactions where the value added by us will not justify the fees we charge, and suggest alternatives.
“Firms ought to have more confidence in the relationship they have with their clients – they should be relaxed and let them shop around. At the end of the day it's that relationship that matters.”
But the big firms cannot rest on their laurels, with competition on the horizon from the US law firms.
“The US client is increasingly regarding Europe as a single market, and US development investment companies are spending some serious money here,” says MacGregor. “Their behaviour is quite noticeably different from ever before, they are highly ambitious and highly likely to become significant.”
And the large US clients may look to law firms which know the way they operate. That is when the stateside firms might start to present a threat.
“A number of leading Wall Street firms are starting to advertise for partners,” he says. “They haven't established any significant strength yet, but it is probably about to start.”
Every property lawyer admits to having an eye on potential transatlantic rivals, but few are taking the challenge seriously.
“The American firms are moving into London but not into property,” says Philip Bretherton at Berwin Leighton. “There's no way the size of the teams in the US firms could cope, they won't be able to attract the clients.”
Barnes agrees. “Some US firms have expertise, but I don't detect them attempting to make inroads,” he says. “I don't see them as competitors in the domestic property market. They cover property because it is, by its very nature, a facet of nearly every transaction, but I don't see them specialising in it.”
Clearly, a property lawyer who is not brimming with optimism and confidence is hard to find, and certainly looks likely to remain in the minority for a few more months to come.