City law firms could face a collective refurbishment bill estimated at £240m if expansion plans to take on an additional two million sq ft of office space over the next three years come to fruition.
The office refurbishment and fit-out costs estimated at £240m leap further to £326m if rental costs are also taken into account for the three-year period.
The figures are based on research by property consultancy Atisreal, which found that City law firms are looking to create almost 7,000 additional jobs over the next three years.
According to the survey of the City’s top law firms, 88 per cent are expecting to grow headcounts over the next three years, while 64 per cent expect the proportion of lawyers to support staff to increase.
International firms in London are targeting the most growth, with 80 per cent projecting at least a 20 per cent increase in headcount within the next three years.
Atisreal claimed that, based on an average density of 220sq ft per person, firms would require an extra two million sq ft of office space over the next three years (or 670,000sq ft each year) to accommodate the projected 6,750 new roles.
A surveyor for the company calculated that, based on current average rental costs for firms in the City of £43 per sq ft, the expansion would cost the legal market a collective £28.8m a year, or £86m over three years.
This figure increases dramatically if the average fit-out cost of £110-£140 per sq ft, as estimated by a property partner, is taken into account.
For example, Eversheds is estimated to face a £20m bill for the fit-out of its new 165,000sq ft office close to St Paul’s Cathedral.
However, the surveyor said that most large firms were currently still able to negotiate rent-free periods to help offset the refurbishment costs. “Two years is the average rent-free period offered on a 15-year lease, but that’s rapidly disappearing,” he said.
The need for financial services and capital markets expertise is driving the majority of firms’ growth plans (40 per cent), followed by M&A (30 per cent) and commercial property (24 per cent).