AI was supposed to fire the lawyers. Instead, it bought them new offices.
Lawyers and AI
I have been thinking a lot, and posting a little, about artificial intelligence and lawyers a few times over the past few years. My thoughts on the subject continue to evolve. In 2023, people were raising concerns that AI would eliminate lots of lawyers (Will AI Kill All the Lawyers). A few years later, I wondered whether AI would eliminate the billable hour (Law Firms Are Not Dead Yet!).
Since then, legal AI has boomed as law firms pour money into deploying it. In March of this year, Harvey raised $200 million at an $11 billion valuation,[1] and Clio raised $500 million at a $5 billion valuation[2]. We seem to be in a legal technology arms race. Last year, law firm spending on technology and knowledge-management spending increased about 10%.[3]
Not all law firms are on board with AI, but clients have noticed the firms that have embraced AI and have been asking to share in the savings. Major financial clients are now pushing firms to share the economic benefits of AI efficiencies by quantifying AI-generated savings and moving toward competitive bidding and alternative fee arrangements.[4]
The Unfolding Paradox
Two years ago, the thinking seemed to be that the combination of remote work and AI would reduce the number of lawyers, reduce overhead and reduce billable rates. But the opposite seems to have happened.
Firms are Hiring. Notwithstanding previous dire predictions, legal employment reached an all-time high in Q1 2026.[5] AI may be impacting the bottom of the pyramid; document review, initial research, due diligence, first drafts, and routine analysis. So fewer junior lawyers per partner and fewer billable hours to produce the same output. So, while hiring of new lawyers may be down, [6] lateral hiring of more experienced attorneys has increased significantly.[7]
Rates are Increasing. Billable rates are increasing, with average top-tier Am Law 100 associate rates climbing toward $800 an hour [8] and most top-tier partners north of $1,000.
Firms are Training. If AI eliminates much of the grunt work through which young lawyers traditionally learned the profession, law firms have a new problem: how do new lawyers learn? Recognizing that law firms will still need lawyers, Ropes & Gray recently launched a new program that allows first-year associates to devote 20 percent (approximately 400 hours) of their billable time to learning artificial intelligence tools.[9] I would expect that other firms will likely follow suit.
Office Expansion. Law firms are also adding office space. Lots of it.[10] Reuters recently reported that U.S. law firms leased 12.2 million square feet in the first half of 2026, up 17%, with Q2 setting a record at 7.3 million square feet.
Prestige office space appears to be part of the talent acquisition strategy. Most major firms now require regular in-office attendance, generally at least three days in-office per week, significantly higher than requirements in other industries.[11] Interestingly, the law firms that are moving aggressively on AI are often the same firms continuing to invest in premium office environments, collaboration space and talent development. If you are expecting your lawyers to spend time in the office, it had better be a damn nice office.
The newest buildings in Denver, such as 1900 Lawrence, include outdoor terraces, golf simulators, a fitness center and a rooftop pickleball court. And not surprisingly, a law firm was the first tenant.[12]
What Are Law Firms Betting On?
Large law firms appear to be simultaneously betting that they will need fewer hours to produce legal work, can charge more for those hours, need expensive offices in which to perform the work – and can convince lawyers who prefer working from home to come back to those offices.
Whether all of those bets can pay off at the same time remains to be seen.
There may also be another model emerging. AI may strengthen the competitive position of smaller, lower-overhead firms and at the same time larger firms are investing heavily in technology, salaries and trophy offices. AI potentially changes the equation for matters that don’t require scale and specialized expertise and staffing or the institutional credibility and risk transfer that only large firms can provide.
We are beginning to see what firms are betting on today. Whether clients and lawyers make the same bets in the future may be the more interesting question.
[1] https://www.harvey.ai/blog/harvey-raises-growth-round-at-dollar11-billion-valuation-co-led-by-gic-and-sequoia?utm_source=chatgpt.com
[2] https://www.clio.com/about/press/clio-completes-landmark-1b-vlex-acquisition-series-g-5b-valuation/?utm_source=chatgpt.com
[3] https://www.thomsonreuters.com/en/institute/articles/legal-market-report-2026-analysis-ai-bubble?utm_source=chatgpt.com
[4] https://nypost.com/2026/09/01/business/wall-street-banks-tell-big-law-to-cut-fees-as-ai-speeds-up-legal-work/
[5] https://www.abajournal.com/news/article/legal-hiring-increases-for-fifth-straight-month-government-data-shows
[6] https://www.reuters.com/legal/government/entry-level-hiring-large-us-law-firms-declined-first-time-decade-data-shows-2026-08-05/?utm_source=chatgpt.com
[7] https://www.nalp.org/0526research?utm_source=chatgpt.com
[8] https://www.ft.com/content/5240a6ac-b2e8-4897-a0a4-cbc7fc283bc9?utm_source=chatgpt.com
[9] https://www.ropesgray.com/en/news-and-events/news/2025/12/amy-ross-and-megan-baca-discuss-how-ai-is-changing-law-firm-training-strategies
[10] https://www.jll.com/en-us/insights/market-perspectives/us-law-firms?utm_source=chatgpt.com
[11] https://www.cushmanwakefield.com/en/united-states/news/2026/06/law-firms-drive-office-growth-for-premium-space?utm_source=chatgpt.com
