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Professional Services: Law firms not ready to jump headfirst into risky tech

Artificial intelligence continues to make headway into most industries, as C-suite professionals test AI-powered tools’ potential for cost savings and efficiency. Some people are even asking whether the speed of AI could finally kill off the billable hour.

Not so fast, Siri. Clients often are not fans of the hourly billing model, which averaged $370 an hour for associate lawyers and $604 for partners in 2023, but for law firms themselves, this model often makes sense. In an interview with Virginia Business last year, Williams Mullen Chairman, President and CEO Woody Fowler Jr. opined, “Every 10 years, we hear that the billable hour is dead, but it is very resilient.”

Alternative fee agreements certainly exist, and some firms that specialize in individual clients or small business owners find that flat rates bring in more business. But for now, AI tools are not ready to handle nuanced legal work, and any tool that uses publicly available information — including — can’t guarantee confidentiality, a cornerstone of the legal profession. Another issue: Those pesky AI “hallucinations,” which can (and already have) led to embarrassing situations in courtrooms and boardrooms.

In the meantime, law firms are using AI to come up with boilerplate contracts and marketing materials, but many lawyers say they need to check behind the machines before approving documents.

Over the past year, there was plenty of interest in the Federal Trade Commission’s ban on noncompete agreements set to go into effect in September 2024, but a federal judge struck down the ban in August. With President Donald Trump back in office, the federal body is no longer led by Lina Khan, the force behind the ban, as well as antitrust enforcement targeting Amazon, Google, Microsoft and other tech giants.

In December 2024, Trump tapped FTC Commissioner Andrew Ferguson as chair and Mark Meador to fill Ferguson’s vacancy. Ferguson has spoken in favor of Elon Musk’s argument that advertisers who coordinate to pull advertisers from social media platforms — in Musk’s case, X — should be charged with violating antitrust law.

A graduate of the University of Virginia’s School of Law, Ferguson worked for Attorney General Jason Miyares from January 2022 to March 2024 as solicitor general, handling the state’s appellate litigation before the state and U.S. supreme courts, and he was appointed to the FTC in March 2024.

He dissented on the FTC’s rule banning noncompete clauses.

In other news from the past year, the accounting industry is still struggling to hire new , according to the American Institute of Certified Public Accountants. This isn’t exactly a surprise, as more accountants are retiring and fewer students are entering the industry.

This has led to companies offering higher wages, more flexible work schedules and financial assistance to pass the licensing exam, which takes many people more than one try.

Stephanie Peters, president and CEO of the Virginia Society of CPAs, judged the staffing situation as “critical” but not at crisis level in Virginia. Some of the problem comes down to vibes, Peters said in an interview last year with Virginia Business.

“A major challenge we are working on is the image that the profession is boring. That image isn’t true, and we are trying to counter it with new messaging.”

Philanthropy: Virginians give to higher education, health care

In the last year, philanthropists and foundations in Virginia have made record-breaking donations to higher education institutions and health care systems, with multiple donors continuing their longstanding support for several institutions.

Jane Batten, the matriarch of a philanthropic Hampton Roads family, pledged $100 million to William & Mary in July 2024 — the largest gift in the 331-year-old university’s history — to boost coastal and marine science research into global solutions for flooding and sea-level rise. William & Mary will build out the Virginia Institute of Marine Science site, constructing the Batten School of Coastal & Marine Sciences. In February, Dr. Todd Stravitz, a W&M alumnus, gave $50 million to create a scholarship fund for the Batten School, which will offer a bachelor’s degree in coastal and marine sciences.

About a year prior, in March 2024, W&M received a $30 million gift from an anonymous alumna to support the renovation and renaming of a building in honor of former U.S. Secretary Robert Gates, who’s serving his second term as the university’s chancellor.

In May 2024, Hampden-Sydney College and Shenandoah University both announced $20 million gifts. Hampden-Sydney said it would put Richmond-based Endeavour Legacy Foundation’s pledged $20 million — the second largest gift the college has ever received — toward renovating its former science center into an academic facility housing two departments. Shenandoah University will use Wilbur and Clare Dove’s pledged gift — the largest individual donation in its history — toward building a performing and visual arts center on its Winchester campus. The Doves have been supporters of the university before, previously creating an endowed scholarship and donating toward the of residence halls.

In Southwest Virginia, the University of Virginia’s College at Wise announced an $11.2 million donation from The Bill Gatton Foundation in November 2024. The gift from the Bristol-based foundation of the late Carol Martin “Bill” Gatton, a businessman who owned the Gatton Automotive Group with dealerships in Kentucky and Tennessee, will create six endowed funds.

George Mason University announced in May 2024 a $5 million donation from the Peterson Family Foundation (the family behind development firm Peterson Cos.) to support its Center for the Arts improvement project. The Fairfax public university planned to rename and renovate its Concert Hall auditorium. In 2015, the foundation gave George Mason $10 million.

Additionally, the Peterson Family Foundation donated to health care causes in 2024. Inova Health System announced a $20 million gift from the Peterson foundation in April 2024, including $15 million to support the Inova Life with Cancer program. The remaining $5 million is going toward the expansion of Inova Fairfax Hospital’s emergency room. The Peterson family have been ardent supporters of Inova, contributing more than $50 million over the past 30 years. In 2014, the family donated $10 million, the health system’s first eight-figure gift.

The Falls Church-based regional health system had received another generous gift a month prior. Inova announced a $10 million planned gift commitment from Win Sheridan, co-founder of Apex Systems, in March 2024. The gift supports Inova’s Greatest Needs fund, which was being applied toward the expansion of Inova Fairfax Hospital’s emergency room.

Last year, Carilion Clinic received its largest ever donation: $25 million from former Advance Auto Parts CEO Nicholas Taubman, also a past U.S. ambassador to Romania, and his wife, Jenny, to help establish the Carilion Taubman Cancer Center. The Roanoke-based nonprofit health care system announced the donation in July 2024. The seven-story facility will be located at Carilion’s Riverside Campus.

Virginians’ donations to education and health care entities over the last 12 months continued trends from previous years while growing to break single-gift records for multiple organizations.

 

Real Estate and Construction: Stagnant with some silver linings

Realtors slogged through another sluggish market in 2024.

Pollyanna types will point out that the commonwealth did see 4,000 more home sales in 2024 than in the previous year, according to Virginia Realtors data. On the other hand, the 102,509 homes that sold in Virginia in 2024 were down 18.8% from 2019 sales.

Mortgage rates remained historically high in 2024, averaging around 6.7%. That led to fewer homeowners putting their homes on the market, pushing up home prices.

But back to the bright side: Realtors did enjoy an uptick in activity in December 2024, when Virginia had 7,907 home sales, a 14% increase over December 2023.

“The surge we observed at the end of 2024 indicates buyers are coming to terms with mortgage rate levels which, while still elevated, are lower than a year ago,” Virginia Realtors President Lorraine Arora said in a January statement.

Last year also saw a landmark $418 million settlement by the National Association of Realtors over allegations that its members colluded to raise commissions, violating antitrust laws.

In August 2024, NAR policy changed, requiring agents who use a Multiple Listing Service (MLS) to enter into written agreements with buyers before touring a home and includes “a specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined.”

Many predict the new policy could give buyers more power to negotiate commissions, which could impact Realtors’ bottom lines.

Virginia’s industry also faced challenges in 2024, but the year did offer bright spots.

The office segment continues to limp along, failing to recover from the pandemic, when more workers started working remotely. Nationally, the market has lost 23.3% ($740 billion) of its aggregate value since 2019, according to the Brookings Institution, a nonpartisan research organization.

Virginia’s office vacancy rates were at 13% for the fourth quarter of 2024, a smidge higher than the previous year, according to data from Virginia Realtors.

About 17.8% of the available office space in Northern Virginia was vacant in that last quarter. Richmond’s vacancy rate was 8.6%, while Hampton Roads was 7%. Vacancy rates in Harrisonburg, Roanoke and Lynchburg hovered around 4%.

Demand for space, on the other hand, remains high in Virginia. Statewide, the retail vacancy rate was 3.7% in the final quarter of 2024, according to Virginia Realtors.

employment increased 6% in Virginia from November 2023 to November 2024, according to an analysis of government data by the Associated General Contractors of America. Nationally, Northern Virginia added the second most construction jobs (9,000) over that period, trailing behind the Houston region, which saw 16,100.

Hampton Roads saw one of its biggest commercial real estate projects celebrate a milestone in 2024. In September, the Rockefeller Group, a New York real estate developer, and Matan Cos., a Maryland real estate investment firm, broke ground on the first phase of Port 460 Logistics Center, a massive industrial campus that will offer direct access to the Port of Virginia’s terminals. It has been estimated to cost around $420 million.

The same month, workers broke ground in Richmond at the site of the future home of the Richmond Flying Squirrels, a $117 million-plus baseball stadium dubbed CarMax Park. The 67-acre, $2.44 billion Diamond District project is also expected to include two hotels, 2,800 residential units, 935,000 square feet of office space and 195,000 square feet of retail and community space.

A highlight of Northern Virginia’s year in commercial real estate came in February 2024, when the CoStar Group, a global real estate data and analytics company best known for its Apartments.com and Homes.com brands, announced plans to relocate its headquarters to Arlington County from Washington, D.C. The company purchased the Central Place Tower at 1201 Wilson Blvd. for a reported $339 million, with plans to invest $20 million in the move.

“CoStar Group’s strategic move to Arlington reinforces our attractiveness as a hub for innovative global businesses,” Libby Garvey, former chair of the Arlington County Board, said in a statement.

Related charts:

General contractors in Virginia

Virginia architectural and engineering firms

Virginia commercial real estate firms