Wisconsin law firms that are considering relocating from their current office spaces have a rare opportunity to benefit from a bad economy.
Office broker Matthew D. Hunter of C.B. Richard Ellis Inc. said it remains a “soft market” for commercial leasing and firms are taking advantage by shopping around, even if they ultimately decide not to vacate their current space.
“They can end up getting a better deal and use the market to beat up and negotiate against their current landlord,” he said.
Hunter is the listing broker for the downtown office building at 411 E. Wisconsin Avenue that currently houses von Briesen as well as Quarles & Brady LLP.
Last year, von Briesen, which rents a total of about 53,000 square feet on three floors, began testing the market for when its current lease expires in 2013.
Managing partner Randall D. Crocker said the firm is looking for an additional 20,000 square feet of space for more than 100 attorneys and staff, as well as room to grow.
At this point, he said the firm has received five proposals from a mix of existing office buildings as well as developers. But Crocker delayed a planned Sept. 30 announcement on the future home of the firm to further explore locations.
“There are a lot of dynamic opportunities right now,” he said. “We’re reviewing our options as to where to house our major corporate office in Milwaukee for the next 10 years.”
In this economy, landlords are aggressively pursuing long-term tenants to fill vacant office space. That can give law firms, which are desirable clients, leverage in negotiations.
Sheldon Opperman, vice president of Milwaukee-based Compass Properties, said the company has offered months of free rent as well as “turnkey space,” meaning the company offers to do any building-out of office space at their expense.
He said depending on credit worthiness and lease length, commercial tenants can move into a space at no up-front cost or even increase their current space without increasing overhead.
Compass manages 750,000 square feet of property throughout Wisconsin and many buildings house law firms, which tend to be attractive, secure investments as tenants, said Opperman.
“Although they tend to hold our feet to the fire, in the end they always honor their end of the commitment,” he said.
Milwaukee firm Simpson & Deardorff SC found that moving in the current climate can have its advantages when it solicited proposals last year.
After 10 years in an office at 7th Street and Wisconsin Avenue, the seven-attorney firm relocated to an available space in the trendy Third Ward in August.
Partner Stuart R. Deardorff said that several proposals included months of free rent or moving assistance.
Ultimately, the firm took advantage of some rent concessions at its new location and moved into an area it may not have considered five years ago.
“I would say the market allowed us to get into space that may not have been within our price point earlier,” he said.
In researching new locations, Axley Brynelson managing partner John C. Mitby has seen a 20 percent decrease in rental rates per square foot in Madison since 2008.
The mid-size firm’s current lease at 2 E. Mifflin St., on Capitol Square, expires in 2013 and Mitby said he is reviewing proposals from five different offices on or around Capitol Square.
Many are using modern amenities such as videoconference rooms, updated common areas for employees and increased on-site storage as incentives, beyond discounted rent.
Mitby said the firm is also negotiating to stay put for another 10 years, but only at a reduced rate.
“If we can save money on rental costs, we intend to pass that along to clients,” he said. “A reduction in those costs certainly will impact the fees we charge clients.”
Crocker agreed that opulence is not the objective, despite it being a renter’s market.
He said in this economy, clients are not interested in “paying for lawyers to look out at the lake from the top floor.”
That is not to say firms are looking to downgrade the appearance of their office, but some are willing to look outside a city’s commercial center, where they can stretch a dollar even further.
Simpson & Deardorff researched locations in West Allis and at the Pabst Farms Development in Oconomowoc.
“I think what a lot of places are trying to do is make it worth your while to move out of the city,” Deardorff said. “In our case, it came down to a convenience factor for us and clients.”
Crocker said ideally, he would like to see a new office structure built in Milwaukee.
He noted the possibility of a becoming an “anchor tenant” if a new mixed-used office structure were built, especially in the downtown area.
Discussions are ongoing about the future of the O’Donnell Park garage, which could be sold by the county and re-developed. Another emerging effort is the Harmony Initiative, which is a joint proposal by the Milwaukee Ballet Company, the University of Wisconsin-Milwaukee Peck School of the Arts, and the Medical College of Wisconsin to secure 70,000 square feet along Water Street.
While he hasn’t ruled out a lease renewal, von Briesen’s Crocker expressed a desire to move, given that when Quarles & Brady renewed its lease in 2005, a 13-foot tall promotional sign was placed on top of the 30-story building that both firms inhabit.
“There’s no incentive to stay here when you look at the skyline and see a large sign for one of your competitors,” he said.
Jack Zemlicka can be reached at [email protected].