‘Rebound’ In Demand For Legal Services Places Southeast Among Top 3 Regions In U.S.

Law firms in the Southeast are on track for a “strong year” in 2024 as a new survey showed increased revenue and demand increasing above the national average at this year’s nine-month mark.

They also saw increased productivity despite also adding head count, which often lowers such gains, said Michael McKenney, a senior specialist with Citi Global Wealth at Work Law Firm Group Advisory Team.

Demand was up 3.4% at the nine-month mark of the year—above the national average of 3.2%—for the 22 firms in the Southeast he surveyed. As a result, the region had the third highest increase in demand in the U.S. among 11 regions nationwide—behind only Southern California and New York City, McKenney said.

The increase in demand also reflected a “rebound in performance” after the Southeast placed ninth in the same category when demand dropped 1% in 2023, McKenney said.

Revenue in the Southeast increased more than 11%—fourth highest behind only Southern California, New York City and Chicago—while productivity rose 2% at the nine-month mark of the year, he said.

“All in all, I think for [surveyed firms] in the Southeast, it’s a favorable setup for a strong year,” McKenney said.

But he also said the average billing rates in the Southeast increased 8.2% this year after rising 7.8% in 2023. The rate increase combined with the demand increase of 3.4% to create the 11% revenue increase, he said.

He said the 22 firms surveyed in the region were getting “strong results” in demand for their litigation and energy practices. They also were seeing a rebound in demand for liability restructuring services as lawyers in Southeast firms were taking advantage of falling interest rates fueled by the Federal Reserve’s decisions to decrease rates.

The Southeast region was defined as states south of Washington, D.C., and east of Texas, with the surveyed firms concentrated in Atlanta and Miami.

Inventory was up 9.7% after the Southeastern firms were able to shorten their collection cycle, he said.

He said firms also were putting “new work” into their inventories, and the mix of inventory was skewed toward invoiced work—placing it closer to becoming cash—compared to work not yet invoiced. “The quality of our inventory seems to be improving,” McKenney said.

That bodes well for year-end results, he noted.

The surveyed firms also were staffing up, as head count increases of 2.2% of salaried attorneys drove the region to be second highest in the nation among the 11 evaluated.

“Our firms seem to be adopting the view that the demand environment is improving, that the macro [economic] conditions are going to be strong, and they’re staffing into that environment,” McKenney said.

In addition, he said the same firms were “being careful in the way they’re doing” staff increases after the survey recorded a 2% increase in productivity.

“Quite often when we see those staffing gains, we expect to see a slight erosion in productivity,” he said. “[Southeast] firms seem to have correctly calibrated both the size of the head count increase and the timing of the increase.”

Senior specialist Gloria Gomez of the Law Firm Group noted they were seeing the same level of increases on a national scale.

“All things put together sort of showcase how we’re seeing a very strong year build up and, if firms are able to collect on those strong inventory levels, they will have a very, very strong year,” Gomez said.

She said demand was seen for work in litigation, regulatory and funds investment practices, though they also saw “corporate transactional work return, specifically large cap M&A” that benefited many Am Law 50 firms. Large cap M&A generally is considered deals over $10 billion.

She also noted head-count growth nationwide of 1.3% but increases in income partners totaled 4.4%.

McKenney said firm leaders in Atlanta told him the growth in income partners in the Southeast was “very intentional” as firms were “playing defense” with the position.

“They’re trying to recognize their senior, most experienced associates and give them a partner title so that they don’t take that recruitment call,” he said. “The reason senior associates move is they’re trying to get that partner title.

“Nobody knows who’s an income partner and who’s an equity partner. You just go to market with a partner title on your card,” he said.

McKenney said most lateral attorneys move into Big Law firms at the income partner level but, “over time and across the Am Law 100, we’ve seen very mixed results with the performance of that income partner category,” McKenney said.

“It could be a highly productive population,” he said. “But, to the extent that there are individuals in there that have either been de-equitized or have not worked like they are trying to for a full equity, then that category is often characterized by disappointing productivity.”