Sacramento Business Journal - by Kathy Robertson

McDonough Holland & Allen PC signed a lease Monday for a new headquarters in the 25-story 500 Capitol Mall, ending months of speculation about a move from its current office across the street.

Sacramento's second-largest law firm will take "at least" three floors -- 68,000 square feet -- in June 2009. The firm is still assessing space needs and the final lease is likely to be larger, said managing partner Edward Quinn.

The 15-year lease with renewal options is probably worth at least $39 million, industry sources said, and is a coup for owner and developer Tsakopoulos Investments.

The decision could leave a gaping hole next year in the law firm's current home base, 555 Capitol Mall. Downey Brand LLP, Sacramento's largest law firm, also plans to move from 555 Capitol, to the U.S. Bank Tower at 621 Capitol Mall late this year.

"They let us know quite a while ago, so it's not a surprise," said Fred Teichert, assistant to the management committee for 555 Capitol. "We lost the attorney general and other large tenants, and that made room for smaller tenants like Downey Brand and McDonough to expand. This may provide an opportunity for smaller to medium-sized tenants."

McDonough is the first law firm to sign a lease in 500 Capitol. Bank of the West will open a branch in the building's lobby.

McDonough had 14 attorneys when the firm moved to 555 Capitol in 1973. Twenty-five years later, it has 77 attorneys in the Sacramento office and 18 in Oakland.

The firm currently has 68,000 square feet, so the new lease won't be much bigger, but the new building offers the chance to plan more efficient use of space, Quinn said.

There appears to be a reshuffling on Capitol Mall and few net leasing gains, corporate real estate broker Chris Strain said.

"They're just robbing each other," he said. "It's a bit of musical chairs."