Asia Pacific Legal Sector Trends
Transcript of Asia Pacific Legal Sector Trends
ASIA PACIFIC LEGAL SECTOR TRENDS
2017
Asia PacificLegal SectorTrends
Demand from international firms remains subdued
Challenge growing from domestic firms
Strong focus on cost containment
Relocation driven by right-sizing and cost saving
Office design shifts to hybrid of open plan and enclosed spaces
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INTERNATIONAL LAW FIRMS
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Macro trends impacting international law firms
Aligning real estate strategy with market conditions
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Demand is being led by domestic firms
*Data related to the increase in the number of lawyers including partners is based on the top 50 international law firms and top 50 Asian law firms mentioned in Asia Legal Business, November 2016
Source: CBRE Research, June 2017.
Rents Increasing
Cautious expansion
-2% +23%
Rents Peaking Rents Declining
DOMESTIC LAW FIRMS
Cost optimisation
Flight to quality
Relocation
Improving space utilisation
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01 Beijing 11
02 Shanghai 12
03 Hong Kong 13
04 Tokyo 14
05 Seoul 15
07 Singapore 16
08 Sydney 17
09 Melbourne 18
10 Auckland 19
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ASIA PACIFIC LEGAL SECTOR TRENDS
Table of Contents
PART 2. Major Legal Market Trends
Overview 4
PART 1. Legal Sector Overview
Occupier Trends 7
Workplace Strategy 10
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ASIA PACIFIC LEGAL SECTOR TRENDS
Overview
-5 0 5 10 15 20 25 30
International law firms
Asian law firms
+ 6735 lawyers
- 149 lawyers
+23%
-2%
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-20
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China Singapore India Japan South Korea
Change in the number of lawyers (LHS) % change (RHS)
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0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013 2014 2015 2016
Increased Remained Decreased
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Occupier Trends
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Relocation Renewal Downsize Expansion New Set Up Others
% o
f lea
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trans
actio
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ASIA PACIFIC LEGAL SECTOR TRENDS
Market Company From: Building To: BuildingSize
(sq. ft.)
Sydney, Australia Baker McKenzie 50 Bridge Street Tower Barangaroo T1 100,000
Hong Kong,
ChinaFreshfields Two Exchange Square One Island East 40,000
Auckland,
New ZealandDLA Piper* 205 Queen Street
PwC Tower at
Commercial Bay 22,000
Shanghai, China Clifford Chance Bund Centre HKRI TaiKoo Hui 20,000
Beijing, China Linklaters China World Office 1 China World Tower B 14,000
Market Company BuildingSize
(sq. ft.)Purpose
Sydney, Australia Henry Davis York 60 Martin Place 75,000 Relocation
Melbourne, Australia Gadens 447 Collins Street 54,000 Relocation
Auckland,
New Zealand Minter Ellison Rudd Watts PwC Tower at Commercial Bay 42,000
Relocation
& pre-
commitment
Seoul, South Korea APEX Law Frim Wooduk Building 40,000 Relocation
Shanghai, China Han Kun LLP HKRI TaiKoo Hui 12,000 New lease
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Workplace Strategy
17% 22%
75%
0%
20%
40%
60%
80%
100%
Large(>25,000 sq. ft)
Medium(10,000 -25,000 sq. ft)
Small(<10,000 sq. ft.)
Celluar Open Plan Hybrid
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OVERVIEW
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Beijing
Geographical trends / domicile of
organisation
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OUTLOOK
Leasing demand will continue to be driven bydomestic law firms as they expand their officefootprint. International firms will remaincautious due to the economic slowdown andgeopolitical uncertainty.
Q1 2017 YoY
Vacancy Trends – Grade A
Overall Beijing 9.3%
CBD 5.2%
Rental Trends – Grade A
Overall Beijing RMB 502/ sq. m. /month
CBD RMB 524/ sq. m. /month
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
Prediction in next 12 monthsCurrent status
MAJOR TRANSACTIONS
Mayer Brown JSM
1,200 sq. m.
Renewal
China Central Place
Linklaters
1,300 sq. m.
Relocation
China World Tower B
Akin Gump
400 sq. m.
Relocation
Kerry Center
Morrison Foerster
300 sq. m.
Relocation
World Financial Center
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OVERVIEW
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Shanghai
Geographical trends / domicile of
organisation
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OUTLOOK
Domestic law firms will drive demand whileforeign companies are set to remain subdued.New Grade A buildings providing efficientand flexible space will attract solid upgradingdemand. Vacancy and rents will remainunchanged in the short term.
Q1 2017 YoY
Vacancy Trends – Grade A
Overall Shanghai 14.2%
CBD 9.9%
Rental Trends – Grade A
Overall Shanghai RMB 340/ sq. m. /month
CBD RMB 390/ sq. m. /month
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
Baker & McKenzie
3,700 sq. m.
Renewal
Jin Mao Tower
Han Kun LPP
1,100 sq. m.
New lease
HKRI TaiKoo Hui
Morrison & Foerster
790 sq. m.
Renewal
Bund Centre
Yuan Ben Law Office
780 sq. m.
New lease
The Center
Prediction in next 12 monthsCurrent status
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OVERVIEW
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Hong Kong
Geographical trends / domicile of
organisation
Operational trends
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OUTLOOK
Hong Kong remains the Asian headquartersfor most major U.S and UK law firms. Whileattitudes towards location and space arebeginning to change, the widespreadadoption of alternative workplace strategy bylegal firms in the city remains some way off.
Q1 2017 YoY
Vacancy Trends – Grade A
Overall HK 4.7%
CBD 1.5%
Rental Trends – Grade A
Overall HK HK$69/sq. ft. /month
CBD HK$127/sq. ft. /month
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
JSM Mayer Brown
100,000 sq. ft.
Renewal vs Relocation
Various Locations
King & Wood Mallesons
48,000 sq. ft.
Renewal vs Relocation
Gloucester Tower
Hogan Lovells
42,000 sq. ft.
Rent Review
One Pacific Place
Freshfields
40,000 sq. ft.
Relocation
One Island East
Prediction in next 12 monthsCurrent status
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OVERVIEW
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Geographical trends / domicile of
organisation
Workplace strategy trends
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OUTLOOK
A large volume of new Grade A supply will becompleted in Tokyo between 2018 and 2019.This is likely to encourage foreign law firms toseek opportunities for flight to quality/locationmoves, which will include a strong focus onimplementing workplace strategy.
Q1 2017 YoY
Vacancy Trends – Grade A
Tokyo Core Submarket
4.2%
Marunouchi 3.1%
Rental Trends – Grade A
Tokyo Core Submarket
JPY 35,950 / tsubo/month
MarunouchiJPY 46,000/ tsubo/month
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
N. A.
Tokyo
Prediction in next 12 monthsCurrent status
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OVERVIEW
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Seoul
Geographical trends / domicile of
organisation
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Domestic law firms will continue to driveleasing demand, although increased activityfrom foreign law firms could be witnessed inthe medium term. The CBD will remain as thepreferred submarket. Rents are set to remainunchanged.
Q1 2017 YoY
Vacancy Trends – Grade A
Overall Seoul 10.3%
CBD 10.9%
Rental Trends – Grade A
Overall Seoul KRW 26,898 /sq. m.
/month
CBD KRW 31,079 /sq. m.
/month
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
APEX Law Firm
3,700 sq. m.
Relocation
Wooduk Building
Clifford Chance
624 sq. m.
Relocation
D Tower
Prediction in next 12 monthsCurrent status
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SECTOR OVERVIEW
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Singapore
Geographical trends / domicile of
organisation
Workplace strategy trends
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OUTLOOK
Cost containment is expected to remain a keytrend. The window for opportunistic deals isclosing as availability in new supply hasshrunk considerably. Renewals are likely todominate in the coming months. Demandfrom foreign law firms may pick up slightly asthe past few quarters have seen some firmsfrom U.S. and Europe form alliances withlocal entities.
Q1 2017 YoY
Vacancy Trends
Overall Singapore 6.1%
Core CBD 4.4%
Rental Trends
Core CBD S$8.95 /sq. ft./month
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
Linklaters
25,000 sq. ft.
Renewal/ Expansion
One George Street
Clifford Chance
35,000 sq. ft.
Renewal/Expansion
Marina Bay Financial Centre – Tower 3
CMS Cameron McKenna
8,000 sq. ft.
Pre-commitment/ Relocation
Marina One
Mayer Brown
8,000 sq. ft.
Renewal/Expansion
Six Battery Road
Prediction in next 12 monthsCurrent status
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OVERVIEW
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Sydney
Domicile of organisation
Workplace strategy trends
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OUTLOOK
The end of the mining investment boom, amature local market and an unfavourableexchange rate will continue to slow the rate ofnew legal sector entrants from abroad.
Q1 2017 YoY
Vacancy Trends – Grade A
CBD 6.2%
Rental Trends – Grade A
CBD AUD 1,100/ sq. m. /year
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
Baker McKenzie
9,900 sq. m.
Relocation
Barangaroo T1
Henry Davis York
7,000 sq. m.
Relocation
60 Martin Pl
Hicksons Lawyers
2,300 sq. m.
Relocation
Barangaroo T1
Blackstone Waterhouse
700 sq. m.
Relocation
Barangaroo T3
Prediction in next 12 monthsCurrent status
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OVERVIEW
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Melbourne
Domicile of organisation
Workplace strategy trends
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OUTLOOK
The legal sector is set to face increasingcompetition from Multi-DisciplinaryPartnerships which are rapidly growing theirlegal services teams.
Q1 2017 YoY
Vacancy Trends – Grade A
Melbourne CBD 6.4%
Rental Trends – Grade A
Melbourne CBD AUD 534/ sq. m. /year
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
Prediction in next 12 monthsCurrent status
Gadens
5,000 sq. m.
Pre-commitment & Relocation
447 Collins Street
White & Case
1,500 sq. m.
Relocation
525 Collins Street
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OVERVIEW
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Auckland
Geographical trends
Workplace strategy trends
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With plenty of high quality new supply andbackfill space entering the market, activity isset to pick up over the next couple of years.However, the adoption of new and moreflexible ways of working may result in adecrease in law firms’ overall office footprint.
Q1 2017 YoY
Vacancy Trends – Grade A
CBD 3.3%
Suburban 4.6%
Rental Trends – Grade A
CBD NZD 456/ sq. m./annum
Suburban NZD 344/ sq. m./annum
VACANCY AND RENTS
OFFICE RENTAL CYCLE
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
MAJOR TRANSACTIONS
Russell McVeagh
6,000 sq. m.
Renewal
Vero Centre
DLA Piper
2,600 sq. m.
Pre-commitment
New PwC Tower
Duncan Cotterill
1,000 sq. m.
Relocation
Australis Nathan Building
Minter Ellison Rudd Watts
3,900 sq. m.
Pre-commitment
New PwC Tower
Prediction in next 12 monthsCurrent status
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Rent Definitions
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BEIJING
SHANGHAI
HONG KONG
TOKYO
SEOUL
SINGAPORE
SYDNEY
MELBOURNE
AUCKLAND
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Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
Henry Chin, Ph.D
ASIA PACIFIC LEGAL SECTOR TRENDS
Contacts
Manish Kashyap
Ada Choi, CFA Paul Hubbard-Brown
Jonathan Hills Rohini Saluja
Richard Stevenson
Mukesh Hemrajani
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Cynthia Chan
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