Hong Kong

By Nick Ferguson


Berwin Leighton Paisner recently became the first international law firm in Hong Kong to open an office in Quarry Bay, possibly marking the start of an exodus from Central.As law firms face competition from a host of new entrants to the industry, they are increasingly looking at ways to reduce costs and improve their efficiency, driven by clients who are being asked to “do more with less”.

Sky-high rents represent an obvious opportunity to cut costs. International law firms in Hong Kong are almost exclusively located in the prestigious and high-rent Central neighbourhood, while many of their clients have already moved out to Island East or, heaven forbid, off the island completely.
The subject even came up during the plenary session at the recent Hong Kong In-House Congress — in which a panel of senior corporate counsel discussed how legal teams should strike the right balance between cost, quality and value — with Lara Lightbody, BT’s head of legal for North-East Asia and Japan, questioning the need for law firms to maintain expensive office space in places such as Central.

And law firms are starting to pay attention. BLP has signed a six-year lease with Swire Properties to relocate out of Central into its 15,000sqft office on one floor of Dorset House.

“Law firms are increasingly looking at their costs and workplace strategy,” said Alex Barnes, head of Hong Kong markets at JLL, which helped BLP with its office search. “Tight vacancy and high rents in Central will only encourage further moves to nearby districts like Quarry Bay where a cluster of their client base is located.”

Part of the problem for firms in Hong Kong is that their dogged refusal to leave Central has typically meant compromising on quality, with firms moving to older, less desirable buildings and saving money elsewhere.

Yet with office rents still continuing to edge higher in Central, driven mostly by an influx of mainland financial services players, this approach is becoming untenable as the advantages are being rapidly outweighed by the cons.

Consider, for example, that the average office rent in Central is US$13.80 per square foot, compared to US$6.10 in Island East, according to JLL. For an office the size of BLP’s, that would translate into a saving of more than US$1.3 million a year, or US$7 million over five years — for the sake of a few extra stops on the MTR. And those savings can be then be put to use to create a customised office space that is more suited to the provision of modern legal services.

Law firms are among the last professional services players to accept this. Banks such as Morgan Stanley, Deutsche Bank and Credit Suisse have relocated almost all of their operations away from Central, while most others have at least moved some of their operations to Hong Kong East, Kowloon East and even the New Territories. As of the end of 2015, nine of the city’s 10 largest banks (by floor area) already had more than 50% of their Grade A offices outside of Central, according to JLL. Insurers have also largely left the city’s CBD.

Staff are often the first to complain about the prospect of a longer commute, or any change at all, but the reality is that other parts of the city offer the possibility of much more pleasant working environments.

BLP’s office, for example, is a far cry from the typical dreary law firm office in The Landmark or Exchange Square. As well as moving its staff out of Central, the firm has also moved them out of individual offices and cubicles, into a fully open-plan space that has created a much lighter, brighter environment. Most law firms claim to be “collegial”, but this is a space that actually turns that rhetoric into reality. Design firm Circa has included a host of clever touches, such as cupboards that double as whiteboards, neat sit/stand desks, plenty of common spaces as well as private work rooms, and conference rooms that have moveable walls but which still feature next-level soundproofing.

Ince & Co will soon join BLP, having committed to move from Citibank Plaza in Central to One Island East in Quarry Bay. Others are sure to follow. BLP says that it has taken several rival law firms on tours of its new office and expects a wave of new arrivals in the future.

Even so, the move out of Central is unlikely to translate into lower fees.

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