Disbursements
Clients looking to cut costs are placing increased pressure on firms to bear the cost of disbursements. Take the mundane matter of photocopying for example. "Larger firms producing in excess of five million copies per annum absorb 20-50% of the photocopying disbursements that might have been on-billed to their clients. This cost can quickly have a negative impact on their profitability," said Val Pitt, director of LitSupport, a company that provides firms with outsourced print and copy services.
Clearly, improving print room and copy centre efficiency is a priority - but are firms in a position to make such an investment at a time when expenditure on 'non-core' internal functions is being increasingly deferred?
Firms such as Corrs that have outsourced their copy and print functions avoid this particular problem. While print centres are still located on Corrs' premises, the operations are managed by LitSupport. The result is a saving in staff recruitment, training and management costs for Corrs, as well as access to additional off-site resources when greater capacity is needed for urgent deadlines.
Rents down?
The latest figures from the Property Council of Australia showed a dramatic rise in the vacancy rates for office buildings across Australia - in fact the sharpest six-month jump in 17 years. The national vacancy rate for CBD properties was 5% last month, up from 3.4% six months ago. All these statistics bode well for firms due to renegotiate their leases.
AAR in Melbourne recently signed a 12-year lease on office space at a planned development at 567 Collins St, Melbourne. The bargaining power of the respective parties was perhaps demonstrated by subsequent rumours that the development was on the verge of being cancelled owing to a lack of prospective tenants - rumours which are now understood to have been scotched by the securing of more tenants. But it does not follow that firms are picking up
Melbourne and Brisbane
"Melbourne was never as tight a market as Sydney or Brisbane," said one partner. "Certainly if your firm's lease is coming up for renewal in either of those cities, you'll get a better deal than 12 months ago, but Melbourne is coming off a lower base." Another market where firms cannot expect much relief is Perth - still the tightest Australian market for office space, with a 1.3% vacancy rate.
One firm that will be keeping a close eye on the market is HWL Ebsworth, which currently operates its Brisbane practice out of two offices - the legacy of an earlier merger which was never consolidated in one place because of the notoriously tight Brisbane CBD property market. With vacancy rates recently rising to 4% - the highest level since early 2005 - the firm may now be in a position to consider shopping for a new home and saving some overhead costs along the way.
Meanwhile, vacancy rates in the Auckland CBD are also continuing to rise, partly due to a number of office developments coming online. Some commentators are predicting vacancy rates of up to 10% by the end of the year.
Debt
Clifford Chance recently took steps to shore up its finances by calling for capital contributions from its partnership. DLA Piper also looked at partner contributions as part of a raft of measures to minimise the firm's exposure to bank debt. But is debt an issue for firms in Australia and NZ? "There are some firms that I'd imagine should be having a very close look at their debt levels," said one partner. "You must manage cash flow well and keep debt low to be financially secure."
Another partner disagreed: "Apart from when a firm expands beyond its means, I don't see [debt] as a major issue for the industry. If anything, the banks should be wanting to see more of us." ALB
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