By Aaron Jodka | JULY 2019
Morgan Lewis recently renewed its lease at 1 Federal Street, adding 12 more years. As is the case for other law firms, its latest deal is for less space, 200,000 SF; its initial lease was for 300,000 SF when it bought Bingham McCutchen (which originated in Boston as Bingham, Dana & Gould). Over time the firm has subleased four floors, but its lease wasn’t up until 2023. Moving might have allowed even more efficiency, in the neighborhood of 150,000 SF, so why renew now? It simply made more sense, for both the tenant and the landlord.
Typically, a lease expiration of 2023 for 150,000 SF–200,000 SF wouldn’t prompt a renewal or fully active space searches this far out, unless the tenant planned to occupy new construction. But market conditions in Boston are tight, and large blocks of space are not readily available in existing buildings. Future construction and relocations may change the market in unpredictable ways, but as of now, tenants cannot find large blocks in Boston. Morgan Lewis also had three lease expirations in the same year in multiple markets. In order to avoid a massive capital expense, it spread out that cost risk, renewing its Boston lease early.
For landlord Tishman Speyer, the building had substantial lease expirations before and during 2023. Renewing Morgan Lewis and going direct with the subtenants spread out Tishman’s risk and locked in a tenant for the long term.
Clearly, this deal made sense for both parties. And it also removes a major player from the list of future tenants in the market that is closely watched by both landlords and developers.