While enjoying property industry bash Party Near the Park last week, following a few wines one client thought it would be amusing to start making fun of his lawyer. Not that that’s unusual, but bear with me for a moment.
“Why don’t property lawyers look out of the window in the morning?” asked the client.
“Because they need something to do in the afternoon,” he cackled, obviously out to impress with his rapier-sharp wit.
Yes, we’ve all heard it before. An oldie, but quite frankly, not a goodie, and in the current market it just doesn’t hold true.
In fact, it is the corporate, not real estate, partners who have done their fair share of window-gazing this year. And real estate partners – in many firms regarded as the bastard children when compared with their big-billing corporate brothers – are finally having their day. It might not have been the best year ever in the real estate market, but in comparison with corporate, things were decidedly peachy.
For a change, complex joint ventures and property finance work saw real estate partners sending work along to keep their corporate and finance colleagues busy. The worm, for this year at least, has certainly turned.
Clifford Chance still continues to hold its number one spot. Big deals such as the Millennium Dome and the Spitalfields development saw a constant flow of income, and meant that the real estate team, in London anyway, outstripped its corporate counterpart in terms of turnover and profitability per partner.
Linklaters proved that, despite all the talk in the market, it still had a solid year in real estate, with turnover increasing marginally to around £52m. In essence, the firm achieved what it set out to do – make the department more profitable, cut back on partner numbers and focus on high-end work. What is key now is for the firm to hang on to those top-end clients.
Allen & Overy (A&O), although not as big as its magic circle brothers in terms of property, also had a great year, increasing its total turnover by around £3m to £25m. There have also been some big client wins for the firm – including a place on the Land Securities Trillium panel and, more recently, BT. A&O also poached Nomura’s favourite Linklaters associate after it had already nabbed its real
estate work in the process. Ouch.
The positions of Dechert and new entry Mayer Brown Rowe & Maw both prove that transatlantic mergers don’t just benefit the corporate department. Dechert, although down slightly to £35m in terms of total turnover, has increased its revenue per lawyer and has enjoyed good client wins such as GMAC. But it was just beaten by Mayer Brown, which brought in £38.6 m. In the UK, the real estate team claimed the prize for the largest number of chargeable hours per head, and consequently beat the average profit and revenue per partner figures. Key clients introduced to the UK through the merger have included biggies such as AT&T and US fund TIAA. The firm also edged Linklaters out of its total hold on German open-ended fund iii, completing a large acquisition for it in the UK last year.
The City firms had a more mixed showing. Nabarros saw a drop in turnover of 8 per cent, and consequently a drop in average revenue per partner to £930,000. While the department held its own against the firm average, the figures show that the tight grip it had on key clients such as Land Securities has loosened somewhat in the last few years.
This is in no small part due to the economic climate, and the fact that clients, which have been tightening their purse strings, have been looking outside London to get some work done cheaper. Hyped maybe, and criticised by other property lawyers certainly, Mr Kidby’s Mexican Wave nevertheless looks to have a certain logic to it.
Berwin Leighton Paisner proved, however, that it wasn’t all bad news for the City – it was just a matter of being in the right line of work. A whopping leap in turnover to £41m was helped along nicely by the fact that the firm advised on over £900m worth of shopping centre sales and purchases.
But despite this, City firms are feeling the heat from their regional and national adversaries, despite the fact that such firms bring in noticeably less revenue per partner.
Powerhouse Eversheds continued to rise, this year bringing in just over £60m in the UK alone. Joined by the likes of DLA and Wragge & Co, these firms are out to prove to clients that quality can be found outside the M25 – and that it comes at a significantly cheaper rate.
This shift by the large firms away from anything other than high-end work has left the mid-market wide open for such regional players. Over the next couple of years, in a depressed market, such firms will happily take a large chunk of property work away from the City.