Demand for large law firm legal services was, on average, up slightly for the first quarter of 2012, according to a recently released report by the well-known legal business consulting firm, the Hildebrandt Institute. Its quarterly Peer Monitor Index Report contains information about key law firm business metrics.
We’ve regularly blogged about the Peer Monitor system before, but to refresh you , it is a service that allows law firms to access their peers’ financial data (in the aggregate) in exchange for supplying their own data to the system for others to access (on a normalized and aggregated basis). There are 35 Am Law 100 firms, 35 Am Law 200 firms and 30 NLJ 250 firms in the system. You can find more information about the Peer Monitor system here.
While demand is up, the report sounds several cautionary notes:
First, demand is not up across the board. Employment and IP litigation are up modestly, but corporate work is slightly down.
Second, firm expenses have increased by a higher percentage than demand, which has an effect on profitability.
Third, the replenishment ratio for associates is up slightly (to 1.4) in anticipation of increased demand that has “not materialized at a pace that fully utilizes the talent that is being added.”
The increase in demand for large firm legal services was highest in Silicon Valley (up 4% as a result of a concentration of IP-related work). LA was next highest, with a 3% increase in demand (NY and CHicago were up 2%).
Looking at all these factors together with the lingering uncertainty in the larger economy led the drafters of the report to conclude that “2012 could be one of the most challenging years in recent memory for law firms.”