• Major firms are rethinking growth strategies, closing offices in various markets, according to a Law.com analysis.

• Market demand alone isn't enough to sustain expansion without strong financial results.

• Firms need to avoid stumbling into markets where they don't belong.

• Law firms should focus on integration, client base, and profitability to thrive in new locations.

Several leading law firms have recently closed high-profile offices in underperforming markets, citing financial pressures and strategic shifts. The closures highlight that merely entering a hot legal market is not enough to ensure long-term success, according to a Law.com report.

Major domestic and international office closures include:

• Armstrong Teasdale closed three offices, including London, Boston, and Salt Lake City, over a period of three months

• Hogan Lovells shuttered its offices in Johannesburg, South Africa, Warsaw, Poland, and Sydney, Australia

• A&O Shearman also left Johannesburg

• Dechert abandoned Chicago

• and several law firms severed their connections to Beijing throughout the year, including Reed Smith and Perkins Coie 

‘Hot Market’ Fallacy

According to Major Lindsey & Africa consultant Jennifer Moss, whether a market is “hot” is not enough of a reason for a firm to have a presence there, unless they have some kind of overlap with its client base and service or industry offerings.

"For example, Boston has become a very hot legal market. It's been very competitive in the past several years, but for many of the firms that are trying to open or grow offices there, it doesn't make sense for all of them to actually be here when you look at their client base, the industries that they're strong in and the industries that are strong here in Boston," Moss explained.

Other key areas a firm should consider when opening a new office include: 

• financial performance

• rates

• governance

• compensation

• talent mix

• partner understanding

Success in a New Location

To ensure the success of a new office, firms need to communicate clearly and integrate all parties involved so as to move in the same direction and support the overall expansion strategy.

"Law firms can be famously disjointed. They are really focused on their expertise and what they can provide to clients, justifiably so," said Roxanne Jensen, founder of EvolveLaw and former managing partner of Morrison & Foerster's Denver office. "But as far as running a business, we know that communication between practice groups is important to have a shared understanding of where the firm is heading." 

Additionally, firms need to determine how to sustain the momentum of the move and gain traction in the new location. This can be achieved by:

• investing in internal business development and marketing resources

• advertising themselves to clients and talent in that new market 

• bringing in new business 

• bringing in new hires 

• cultivating a reputation that helps them stand out amongst the competition

With the proper investment and strategy, firms will certainly start seeing revenue growth and profitability, as the final determinants of the success of a new outpost, dictating if its doors will remain open or shutter, the Law.com analysis concludes.