Tech developments, evolving client demands expected to drive legal industry change

The rising use of tech and the costs that come with it, along with client demand and competition for talent are expected to be major forces of change for the post-pandemic legal industry, according to a recent legal industry survey.

And, digging deeper, factors impacting the industry also include fee compression and lawyers leaving the industry, according to the 2023 National Legal Sector Benchmark Survey – Bright Insight, conducted by Cushman & Wakefield’s Legal Sector Advisory Group and ALM.

Looking ahead to the coming years, 51% of respondents said they anticipate shifting client demands will most impact the future of the legal industry, followed closely by retention and recruiting, at 50%.

The report, which is based on surveys of law firm partners and associates conducted during the first quarter of this year, also maintains that shifts in law firm business models could be a major proponent of change in the industry in the coming year. However, the report continued to note that the bedrock partnership structure is unlikely to change, with about 10% of firms expecting no changes to the partnership arrangement, and 75% anticipating only slight changes.

Technology, however, will be certainly a driver of change for the industry, and its costs will continue to hit firms’ bottom lines, according to the survey.

“Survey results from 2023 indicate that the legal sector has continued to lay the framework needed for evolutionary change as the industry continues its transition into an increasingly digitally-enabled world,” according to the report, which was released this month.

Among the firms included in the survey, 59% are using or intend to use artificial intelligence. Of those firms, 61% are using AI for legal research, 38% for expertise and 17% for document analytics and generation.

But these developments come with a cost.

Technology costs are expected to continue to increase, as firms spent an average of 5.3% of their 2022 gross revenue on technology, and the cost is expected to grow to 6.8% in 2024. According to the report, 82% of firms expect to spend more on IT security, 53% on artificial intelligence, and 50% on knowledge management.

Back to the Office

Amid navigating these external factors, law firms are also still figuring out how to navigate their return-to-office plans, with hybrid work policies and workspace design needs constantly evolving.

Part of that is figuring out how to deal with a hybrid workforce that is not always in the office, said David Smith, head of Americas Insights for Cushman’s Global Think Tank, who authored the report with senior research analyst John McWilliams.

Smith said firms are trying to find the right balance between in-office and remote work.

“Most law firms are finding that some in-office work is valuable. Not five days a week necessarily, but in the office three or four days a week,” he said.

Law firms are overwhelmingly anticipating making changes to their office workplace, with 10% expecting to keep their pre-pandemic workplace, 16% expecting to make drastic changes and 75% expecting incremental changes.

While demand for office space has weakened, that’s not the case in the legal sector, where law firm leasing activity is back to pre-pandemic levels. However, remote work that began in 2020 has created opportunities for firms to make changes.

“The work-from-home ‘experiment’ of 2020 has created an opportunity for occupiers across all industries to rethink the nature of work and to make changes to office layouts, footprints, and portfolios,” the survey notes.

One accelerating trend is the movement away from private lawyer offices and toward open floor plans and/or hoteling. In 2023, 40% of survey participants said it will be common for firms to move away from private lawyer offices, while only 22% said the same one year ago. That transition is supported more broadly, by more than 50% of Global 100 and Am Law 50 firms, but only 15% outside of the Am Law 200 expect that to happen within five years.

The use of hoteling is uncertain, according to the report, with more firms providing nondedicated space for support staff than for attorneys.

Before deciding on a layout in a new office, firms should decide what kind of culture the office is aimed to create, what are in-office attendance expectations, whether people have individual offices and whether the office should include space to host clients, the report said.

Workplace strategies, the report said, include flexible space, space efficiency and “relative normalcy” of remote work. While efficiency has improved, workplace design and technology must support “productivity, collaboration, connectivity, and mentorship,” the report said.