For major law firms, how their cost structures compare to those of their competitors is an important consideration. As they make their real estate decisions, there are a number of metrics they consider, one of the most important of which is what their annual rent is as a percentage of revenue.

The Savills Legal Tenant chose a sample of Am Law firms (Am Law 25-45) to analyze what they were experiencing. The Legal Tenant found that rental costs were, on average, 6.1% of revenue, with the middle 50% ranging from 5.1% to 6.8%.

The underlying data includes: (a) self-reported figures from The American Lawyer (e.g., headcount, revenue) and (b) Savills data, drawn from market lease comparables. These metrics do not include the amortization of tenant improvements paid for by the firm beyond landlord-provided concessions. The only real estate cost factor included was annual rent which does not include build out costs, FF&E (furniture, fixtures, and equipment), etc.

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