Olswang reshapes practice” />News that Olswang plans to cull 10 from its real estate department harks back to the uncertain times of the early 1990s for the mid-tier world, when firms were sending letters by courier to staff on the Friday saying: “Don’t come in on Monday.”
For many years that prospect seemed a remote possibility for real estate lawyers, given a buoyant decade of year-on-year growth in the market. Olswang responded to conditions through an aggressive recruitment drive, swallowing up a succession of specialist property practices. DJ Freeman came on board in May 2003 and boutiques Julian Holy and Kanter Jules in June 2005 and May 2006 successively.
However, the no-holds-barred approach to recruitment led to some excess capacity once market conditions changed. The 20-30 per cent hike in associate salaries over the past four years has led these associates to become what one real estate partner at a rival firm refers to as “jolly expensive commodities”. (Let’s not mention that average profit per equity partner has increased by almost twice that over the same period.)
“I can see where Olswang is coming from,” says a recruiter. “If the associates are each being paid £100,000, that’s £500,000 you can cut easily. The department had a bad year: too many people cost a lot of money.”
Mark Devereux, senior partner at Olswang, emphasises that this was not the case. “This is an isolated issue, not a sign of ill-health,” he stresses.
The firm has not yet released half-year figures, but a glance at recent transactions suggests that the firm’s real estate sector has been managing fine. For example, last month saw it advise former Kanter Jules client Reit Asset Management on the £400m acquisition of an Evans portfolio. Olswang says that investment in the department will continue. The practice has been making a modest one lateral hire a year for the last three years while planning to continue “to recruit in real estate at all levels”, according to Devereux.
But if the investment squeeze has impacted hardest upon the commercial property team, where discussions with the five associates and five secretaries are underway, other practice areas are less vulnerable.
Planning and regeneration will have a stream of work heading its way. The lateral hire three weeks ago of Speechly Bircham‘s Richard Keczkes to head the planning and regeneration department was an example of strategic confidence. Keczkes has considerable experience on compulsory purchase order work for the 2012 London Olympic site and the long shelf life of major infrastructure projects such as the Olympic Games, and Crossrail shores against the fragility of the market.
Devereux affirms the importance of real estate as a key practice area, along with the media and technology areas for which Olswang is best known. In 2006 former chief executive Jonathan Goldstein stated the objective that real estate should contribute “20 per cent” of total revenue. And the redundancies are presented as an “internal restructuring” rather than as a strategic rethink of the roles of core practice areas.
But for those affected directly and for some onlookers, the job cuts are undoubtedly significant. The legal profession has enjoyed relative job security as compared with, say, peers in investment banking; but events such as these reveal that perhaps the two sectors are not so far apart. With the same zeal in which it gobbled up some premium practices, Olswang is shaving them off when the going gets tough.
Nobody knows whether come next year it will be inundated with work and will need to embark on a major recruitment drive once again.
If this is a sign of the times, then come Fridays real estate lawyers across the mid-tier and silver circle may start tweaking the Venetians for signs of the courier coming up the garden path.