Image building -- many prominent law firms have recently moved or announced their intention to move offices, but how big is the so-called commercial property boom?

COMMERCIAL PROPERTY: THE FACTSIn March 1998, property prices per square foot were highest in the west end of London at £50.

In the City, they were £45, still short of their March 1998 high of £62.50, though a substantial improvement on March 1993 when they fell to £32.50.The average price of property across England, Wales and Scotland was £20.13, compared to £15.50 in March 1998 and £16.58 in March 1993.

Watford and St Albans topped the chart for predicted retail growth between 1998 and 2003, at the bottom were Northampton and Manchester.(These figures taken from 'Office Rent Review Survey: Spring 1998' by chartered surveyors Weatherall Green & Smith.)ROBERT VERKAIK LOOKS AT TH E CURRENT STATE OF THE COMMERCIAL PROPERTY MARKET IN LONDON AND THE MAIN REGIONAL CENTRESThe commercial property market has reached a significant point since in its recovery from the downturn of the early 1990s.

According to the most recent surveys, only London and Edinburgh are expected to continue to make any serious gains in property investment.

Research carried out in June by the Royal Institute of Chartered Surveyors (RICS commercial property survey of England and Wales) shows that whereas 42% of RICS members were confident about the commercial property market at the end of last year, only 30% could express such confidence six months later.The sectors hardest hit are retail and industrial property.

Confidence in the industrial market is at its lowest since 1995, while the retail property market has been hit by a combination of a hike in stamp duty, high interest rates and increasing rental levels.Despite all this, the office rental market has remained largely stable throughout the regions and is booming in London.

RICS spokesman Graham Chase explains: 'The dichotomy of the market is that, although confidence has ebbed in the last quarter there is still strong activity in all commercial property sectors throughout the UK.'The RICS figures are backed up by more recent work undertaken by the Confederation of British Industry (CBI) in conjunction with international property advisers, GVA Grimley, which looked to the future of the commercial property market.

This survey of 334 companies across all sizes of firms in the UK private sector and published on 15 June, showed that during the next six months, more businesses (7%) planned to decrease their property holdings than those which planned to increase them.

This was a significant reversal of the position in January, when a similar survey found that more businesses (11%) planned to increase their property holdings than those looking for a decrease.Sudhir Junankar, the CBI's director of economic analysis comments: 'The property market appears to be at a turning point .

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companies seem set to cut back their investment in property.'The eighth bi-annual survey with the CBI showed that transport and communication and banking and finance companies had reported the most 'pessimistic' outlook.Stuart Morley, head of research at GVA Grimley, added: 'Finding suitable property is now the major constraint on planned expenditure for property, and is particularly difficult for the private service sector.

Absence of suitable property in the banking and finance sector has increased markedly since the last survey.'RICS also identifies the lack of 'good quality modern space' across all sectors as the most significant restraint to major expansion.The Royal Institute of British Architecture (RIBA) is keen to find new ways of overcoming the dearth of city centre property.

A RIBA spokeswoman said the institute had set up a special working group to find ways of releasing brownfield sites for commercial use.

This solution, although strongly supported by the government, has been hampered by delays in the implementation of the Environment Act 1995, which has been postponed until next year.

Under the legislation, where the polluter cannot be found, the liability for the contamination falls on the owner of the property.The RICS survey also highlights the plight of the UK's manufacturers who have been hit by the current strength of sterling.

As their export order books become more difficult to fill with competitive deals, few manufacturers want to commit to expansion projects.Michael Mercer , of the Manchester-based office of property consultants Hillier Parker, says his region is particularly hard hit.

Manufacturers who had considered looking for suitable additional space took one look at the prevailing economic conditions affecting the industry and put their plans on hold, says Mr Mercer.

The most damaging impact on these manufacturers -- who rely heavily on their ability to export -- is the strong pound which continues to force factories to cut costs.

Graham Chase says the regions most noticeably characterised by a more pessimistic commercial property outlook are the north, East Anglia, the south west and the west midlands.According to Mr Morley, it is areas such as Yorkshire, Humberside and the west midlands that have the least to look forward to.He explains: 'Generally the north is showing weaker economic growth on official statistics.

So I suppose that is being reflected here, although it's hard to tell which sectors are contributing to this.'What is now apparent is that there is a growing gap in the office market between the regions and London.

Mr Morley adds: 'We've noticed in the last three years that they have all been much weaker than London.

There has been a high take-up of office space in London and a considerable reduction in vacancy levels which hasn't occurred in the provincial cities.'In fact, rents in provincial cities such as Bristol, Birmingham, Cardiff, Leeds and Manchester have hardly moved at all, whereas in London they have shot up by 30% or 40%.According to City chartered surveyors Weatherall Green & Smith, take up for offices in the first quarter of 1998 was more than 3 million sq ft -- the highest on record.

Weatheralls says these figures match those last seen in the 1980s and attributes it to the high level of merger and acquisition activity and to large occupiers seeking the benefits of pre-let bespoke buildings.This is the case across the City, Weatheralls claims.

In the west end, overall supply has fallen by 10% while between the west end and the City supply is 40%.In the Docklands, supply has fallen by more than 45% in the last year alone.

Keith Harris, a partner at Weatherall Green & Smith, said: 'The London office market has experienced unprecedented activity in the first quarter of this year.

We predict this activity will continue.'Demand for office space is being led by the banking and finance sector and the professional services sector, particularly law firms, which now account for 58% of the total take-up.

There has also been a continued level of interest from foreign investment -- most notably from some of the sizeable German investment trust funds.

By contrast, the central government demand for office space continues to fall as departments are under pressure to acquire space from their existing property portfolios.The only other area to show growth comparable to that of the City is along the M4 corridor.

Office property take-up in towns such as Reading has been particularly enthusiastic, and demand in the region far outstripped supply last year, according to figures released by Hillier Parker (Central London office market: the first quarter 1998).

This observation backs up RICS's claim of lack of space being the major constraint in this sector.Nevertheless, the final quarter of 1997 saw a dramatic increase in speculative development, and with many construction periods lasting as long as 18 months, demand is only expected to be met by the end of this year, or into 1999.

It would seem, then, that the health of the commercial property sector, at least along the M4 corridor, is assured.EVER SINCE THE MARKET EMERGED FROM RECESSION IN 1996, CITY PROPERTY LAWYERS HAVE BEEN ON A ROLL.

MIKE YUILLE REPORTSProperty lawyers in the City are riding high, having rediscovered their Midas touch.

As the big firms are now completing their end of year audits, the profitable performance of property departments during 1997 will be cause enough for the champagne corks to fly.'We had our best year ever last year, and have been working flat out,' says Herbert Smith property partner Shelagh McKibbin.

'Previously, our best year was right at the end of the 1980s boom, in 1989-1990.''We are extremely busy, and have been consistently so since the market finally emerged from recession at the end of 1996,' says Patrick Plant, a property partner at Linklaters.In terms of activity, City firms are still on a roll this year, advising on a variety of major property sales, investment, tenant leasing, and property development work.

The shortage of lawyers with two to five years post qualification experience, after trainees in their droves eschewed careers in property law during the early 1990s slump, means that many young property lawyers are able to name their price.

'Certainly there's more development work around.

Confidence levels are high, and there are a lot of spin-offs into other types of work,' says Ms McKibbin.Big, complex projects have been a major factor in the current boom.

For instance, last year Herbert Smith completed the £300 million merger of three London hospitals (Guy's, St Thomas's, and King's College) which included a £400 million sale of four properties to developer Godfrey Bradman.

And while the shortage of quality City office space has stimulated activity in London, City firms are working on major projects in other commercial centres.

In Birmingham, for instance, Herbert Smith is acting for developer Hammerson in its 1.2 million sq ft retail redevelopment of the Bull Ring centre.

Commenting on trends, Chris Morris, a property partner at Freshfields, says: 'Compared with the 1980s boom, our practice is reliant on getting the work from a smaller number of larger and more complex transactions.' These larger deals are marked also by the fact that they tend to demand a high input on other areas of legal expertise, notably tax and finance.City firms also find a greater amount of work stemming from clients of their other departments -- especially from the corporate market -- than before, says Ms McKibbin.

With bigger projects, this can mean teams from property, construction, banking, corporate, and tax departments working together more regularly.Large office development sites in London continue to provide a steady flow of major tenancy work, particularly when a firm already has a strong record of dealing with a particular site.

Freshfields, for example, with strengths in both banking and property, acted for Citibank when it took 51,000 sq m in Canary Wharf last year.

The firm was then appointed by the bank Credit Suisse First Boston for its own move to Canary Wharf, and is now strongly tipped for advising banking group HSBC and other banks who may relocate there.Having a good client base in certain corporate sectors is helpful, of course, and Freshfields may find its strong reputation in banking has come in handy for its property work.

But as Chris Morris says, the firm regards property as a core practice, too: 'We think we get this type of work because we have the right property-related skills.'Lawyers are less fearful of another major recession in the current property cycle, partly because of underlying changes in the property sector that may make it more recession-proof.

After the damage caused during the last recession, the market is more cautious and more diverse.

These market changes include a move away from the ostentatious developers of the 1980s to more careful property professionals, risk-averse investors, and specialist funds.Simon Cookson, head of property at Ashurst Morris Crisp, says a new factor in the market is clients looking to make increasingly sophisticated financial use of property: to make property work better for them as an investment asset.

For example, this can mean big companies handing over their property for someone else to manage.

'I'm seeing it all changing,' he says.

'That's where the City firms are much better-placed than the pure property firms.

We can lay on a complete service to cover all possible needs in a transaction.

Property securitisation and capital markets-driven lending -- all this is just starting to take off,' he adds.The clients involved in this added-value approach inhabit both the private and public sectors.

In the public sector, the government's private finance initiative, after a slow start, is finally proving a good source of work, as is another, newer, private-public sector scheme: the private sector resource initiative (referred to as project PRIME).

A good example of this was when Freshfields acted on one of last year's biggest deals: the sale and leaseback of 700-odd dole offices, worth £4 billion in terms of asset value, run by the Department of Social Security (DSS).

Lovell White Durrant acted for the DSS, while Freshfields acted for two property funds managed by bankers Goldman Sachs, which took on the properties in exchange for a 20-year commitment to manage them and provide specific property-related services.

'It was a complicated and novel deal, creating new types of documents,' says Mr Morris.But while property now presents a wider range of specialist work for City firms, the core areas remain the same.

After all, a landlord and tenant relationship is much like any other, no matter how big the floor plate.So, City property lawyers often compete with a wide range of other firms, and are often engaged in 'bread and butter' deals as well as giant projects.

Patrick Plant at Linklaters adds: 'Property clients expect their lawyers to work across a range of values, maybe as part of a bigger portfolio, so it's incumbent on firms like ours to provide an efficient service across the board.'Berwin Leighton and Nabarro Nathanson remain the pre-eminent firms for property work, arguably having a greater cross-section of property specialisms than any other.

David Taylor, head of Berwin's property department, says the days for general property work for many City firms may be numbered.

He maintains that moves by the growing number of specialist property companies such as property management businesses to provide, for example, simplified leases, will reduce the work for lawyers in the longer term.'There was a time when lawyers wrote every rule there was,' he says.

'There will be a change in the nature of property work for City firms.

If you're not a specialist, you may not have any reason to exist.'TOP CITY FIRMS ARE MOVING PREMISES IN RECORD NUMBERS.

PAUL ROGERS REPORTS ON THE ISSUES THEY FACEJonathan Haw began his career with Slaughter and May in its original Victorian building on Austin Friars in the City.

It was, he recalls, 'dark, dank and Dickensian,' a far cry from the £310.5 million, purpose-built offices on Chiswell Street where he plans to end his t ime with the firm.The new building, scheduled to open in 2001-2002, will boast two large atria, probably linked by a central lobby equipped with glass-fronted lifts.

The property is also being designed specifically for the needs of solicitors, in sharp contrast to most of the City's available office space, which was built with financial institutions in mind.Top City firms are moving premises in record numbers.

Among those that have relocated recently, or plan to do so soon, are Simmons & Simmons, Linklaters, Nabarro Nathanson and Lovell White Durrant.

Of the 570,000 square metres of demand for office space in the Square Mile, the legal profession is looking for 120,000, according to Nick Axford, head of business space research at Hillier Parker May & Rowden, an international property consultancy.

During 1997, the legal profession leased 36,500 square metres.

In the first quarter of this year alone, 32,000 square metres were let.There are several reasons for the burst of activity.

During the 1990s on average, City firms have been growing by 7% to 14% a year, resulting in partnerships that are dispersed around several buildings, or lawyers who are doubled up in the small offices.

'The most important thing we need from a premises is that it should be conducive to communication and teamwork between our lawyers,' says Charles Pollock, a partner at Simmons & Simmons, adding that new premises can also help to attract business.' Clients want to have a feeling for the size of the law firm they're dealing with,' he continues.

'If you're in five buildings over the City it's hard to do that.'Simmons & Simmons now has 12 buildings, but in 2000, all staff will be moving under a single roof at City Point -- a 1960s skyscraper that is being redeveloped with two flanking eight-storey buildings and a pair of atria.Mergers between law firms are also driving the commercial property market as the newly formed firms seek to relocate on one site.

Arguably, this is a good time for solicitors to look for new space.During the speculative boom of the 1980s developers erected square buildings with large, open plan floors designed to attract the trading activities of the financial sector.

Now developers are looking to pre-let their buildings, which gives solicitors a chance to influence their design.The requirements of solicitors in the City are unique.

Firms need lots of individual offices, ideally each with natural light.

Partitioning a large, square, floor plate would lead to too many windowless rooms.Slaughter and May's new building is being built to a standard measurement of 1.35 metres, rather than the more common 1.5 metres, to give more flexibility in the laying out of partitions.

Firms also need to provide modern facilities to attract the best new lawyers.

Air conditioning, catering and usually a gymnasium are now expected.Modern buildings are also better suited to the extensive under-floor cabling which is required as lawyers follow their clients in moving to a more intensive use of information technology.

Some firms have gone even farther.

Robert Finch, head of the property department at Linklaters, says his firm's new 40,000-square metre space in Broadgate includes two or three bedrooms so that staff working late on a project can get a few hours sleep rather than take an expensive, late-night taxi to their home in the shires.

'A tired lawyer is a bad lawyer,' he says.However, not everyone agrees with this solution.

Chris Hinze, head of corporate communications at Nabarro Nathanson, says his firm's new office in Theobalds Road will have showers but not sleeping quarters.Perhaps the most noticeable fashion in the design of solicitors' premises is the atrium.

While these open areas do serve a function -- bringing sunlight to offices that do not face the street, they are also the most obvious outward sign of the partnership's success.

The trick, admits everyone in the business, is to avoid displaying too much opulence.Mr Pollock is proud that his firm's new building -- designed, in part, by a noted international architect, who left the project after his plan for a cantilevered tower fell foul of opponents to high-storey buildings.

Nonetheless, says Mr Pollock, the building will be a 'spectacular landmark'.

But he is quick to add that the plan is not for clients to find themselves thinking 'oh my God, now I know what I'm paying the bill for'.Atriums can be a mixed blessing in another way.

The shared open space below the offices of US law firm Weil Gotshal & Manges featured a 'pool of tranquillity' which was so placid that some 40 visitors mistook it for highly polished floor.

'They had to put a fountain in to remind people it was water,' says Maurice Allen, head of the London office.Moving premises can have other pitfalls, most noticeably because of the status of law firms as partnerships.Philip Perry, regional managing partner for Dibb Lupton Alsop in London, arranged a deal to move into the old TSB building, bringing in a developer and a landlord, only to see it fall apart on the issue of whether all parties should guarantee the lease.Mr Perry is adamant that landlords should accept the leasee on the basis of its underlying business, with perhaps four tenant partners and a dozen or so guarantors.

But landlords today are demanding that every member of the firm, including lateral recruitments, puts their name to the deal.

'Firms are reluctantly acquiescing to this,' says Mr Perry.

'But I wasn't prepared to do so, even reluctantly.'Another demand being made by developers is for longer leases, at a time when firms no longer look on their offices as a permanent home.

A few years ago, five-year leases were common, today it is hard to find one below ten years.

However, some firms are happy with more fixed contracts.

Mr Hinze says Nabarro Nathanson's rent is set until 2014.Strangely, the oldest rule in property -- that the three most important factors are location, location and location -- does not seem to apply to law firms.

Several are locating on the east side of the square mile with an eye on covering Docklands, though most admit that the distance to the advisor's office is well down the list of things that clients consider when selecting a firm.Firms can also take advantage of the fact that the Corporation of London offers significantly lower rates -- with a consequent price difference of between £5 and £20 a square foot -- in some locations within the Square Mile which are believed to be particularly vulnerable to the IRA bombing campaign.PROPERTY LAW: RECENT DEVELOPMENTSIt used to be enough to say that the law is an ass.

Recently, however, pride of place in the legal bestiary has been taken by Mrs Malaprop's 'allegory on the banks of the Nile'.

An equally significant role has been played by a talking egg -- Humpty Dumpty.

Both of these creatures have found their way, via Lord Hoffmann, into the House of Lords to support a shift in the interpretation of commercial contracts.

It is this shift which may well prove to be among the most significant developments in commercial law over the past year, creating uncertainty and encouraging litigation.

Lord Hoffmann in ICS v West Bromwich Building Society [1998] 1 AllER 98, restated the principles of contractual interpretation.

He emphasised that the meaning of words as they appear in a dictionary and the effect of their syntactical arrangement, is only part of the material used to understand a speaker's utterance.

Another part is knowledge of the background against which the utterance was made, and this background can include 'absolutely anything' which might impact upon the way in which those words were understood by the reasonable recipient.

However, he acknowledged that the law excludes from the admissible background the previous negotiations of the parties and declarations of subjective intent.Lord Hoffmann's overall approach contrasts with the traditional position whereby the meaning of words was to be found from the document itself.

In effect, unless the result of detailed semantic and syntactical analysis was manifestly absurd, the parties were taken to have said what they meant and to have meant what they said.The implications of Lord Hoffmann's approach were seen in Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57 when he argued that insistence on the literal meaning of words is based on an 'ancient fallacy' that descriptions and proper names can somehow inherently refer to people or things.

Rather, he argued, words do not in themselves refer to anything; it is people who use words to refer to things.Consequently, it is necessary to look for the meaning intended to be conveyed by the words used -- it being 'a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words'.

No-one, he asserted, has any difficulty in understanding Mrs Malaprop's reference to an 'allegory'.The conventional and literal meaning is rejected; we use our background knowledge of things likely to be found on the banks of the Nile which sound like 'allegories', and we arrive at 'alligators'.

The question, therefore, is not the literal meaning of the words used but what a reasonable person would understand to be the meaning of those words.In Mannai, a tenant served notices to terminate its two leases.

Both leases contained provisions allowing the tenant to break by serving not less than six months notice to expire on the third anniversary of the term commencement date.

There was no dispute that the third anniversary fell on 13 January 1995.

However, the tenant's notice referred in error to 12 January.

The question was whether the technical defect of referring to the wrong date invalidated the break notices.The House of Lords, by a majority, held the notices to be valid.

The tenant had made a mistake, but the mistake was immaterial.

Lords Steyn, Hoffmann and Clyde agreed that a reasonable recipient would have understood the tenants' intention to serve a valid notice to break.In their dissenting speeches, Lords Goff and Jauncey mounted a cogent and closely reasoned defence of the authorities under review -- in particular Hankey v Clavering [1942] 2KB 326.

In that case, a notice to determine mistakenly referred to 21 December 1941 rather than 25 December 1941.

Tempting though it might have been to assist the party who had made the mistake, the result was that the notice did not comply with the agreed specification and was ineffective.

To use Lord Goff's phrase: 'The key does not fit the lock, and so the door will not open.'The majority decision of the House of Lords in Mannai ditches this harsh, but clearly defined, assumption.

In future, where a mistake is made, it will be worth going to litigation with the argument that the error would not have misled a reasonable recipient of the notice.So where does Humpty Dumpty come in? He starred in Lord Hoffman's speech in ICS v West Bromwich Building Society.

Lord Hoffmann referred to the exchange between Alice and Humpty as to whether the word 'glory' means 'nice knock-down argument', which concludes with the egg's scornful response: 'When I use a word it means just what I choose it to mean -- neither more nor less.' Lord Hoffmann was clearly impressed by the egg's fairness in acknowledging that Alice could not be expected to know what he meant by the word 'glory' until he told her; but once she had been told, then the word no longer bore its dictionary definition.

In this context 'glory' meant what Humpty chose it to mean.What background factors should the court take into account? 'Absolutely anything' except evidence of the negotiations preceding the contract and declarations of subjective intent.

Logically, where does this leave Humpty? Surely his explanation -- which amounts to a wilful misuse of words -- is nothing more than a statement of his subjective intent and not something which the reasonable man would objectively know.Lord Hoffmann's approach has subsequently been criticised for uncertainty.

In Scottish Power PLC v Britoil (Exploration) PLC (1997) The Times 2 December, Staughton LJ expressed concerns as to the uncertainty and doubted the basis in authority of this approach.

However, having been approved by the House of Lords, it must be taken into consideration by the lower courts.

The aim seems to be to do justice; the price is certainty; the result could be a field day for the litigators -- or perhaps the alligators.